What a Public Plan Could Do for Health Care

The public option is “an option.” No one would be forced into it. Rather, it would be offered along with other choices in what has been called “a health insurance exchange.” The benefit of an exchange is that it would allow consumers to compare plans and then to choose for themselves.

The plan would also be structured as a nonprofit, government run insurer (similar to Medicare, which is huge and well liked by those covered by it). The nonprofit piece is important because those running the plan would not be working to achieve maximum profit at all times. Right now there are some nonprofit insurers in the United States, but a government plan could be large enough to negotiate prices with pharmaceutical and medical device companies and with physicians; it could compete with private insurers, many of which are large. (Because of an amendment to the House bill made by conservative Democrats and a deal the administration has struck with drug companies, that ability of the public plan to bargain on drugs may have been weakened. But that was the original hope. (In my opinion, Medicare should also have that power, but Congress has not allowed it so far.)

The biggest plus of any public plan is cost savings: with lower overhead and marketing expenses, a public plan could maintain lower costs than private insurers. Its savings would provide incentives for private insurers to cut their premiums, too, or to appreciably increase coverage or service. In that way, even holders of private insurance would benefit from the public plan. For a chart on how well Medicare holds down expenses right now in comparison with private insurers see an article from The New Republic by Jonathan Chait.

Who could buy insurance in the public plan? Not everyone, at least not at first. Since the reform would require every American to have insurance, some 46 million people would be entering the insurance market. The public option would be open first to those uninsured persons in the lower income brackets—those who most need the cost savings. Later, others might be allowed to join, according to some schedule the government would set up.

That means that employers would not rush away from their private insurers to take advantage of a lower cost public option. Notice, that this favors private insurers. It also helps the govt (the taxpayer), which will be subsidizing the insurance of low-income people. It behooves the government to “subsidize its own plan,” which would save taxpayers more money.

One more point. Some areas—and some states, often rural states like North Dakota—have just one main insurer. For example, Blue Cross Blue Shield has 90 percent of the ND market. With a public option such market dominance could change, giving people more choices.

The public option, then, gives more choice, real taxpayer savings, accountability and competition. The goal is that it would eventually be self-sustaining, financed by the premiums paid. The key to making that a reality, however, is lowering costs.