Public Option(al): What Happened to Biden’s Big Idea?

DG: 100 days into his term, President Joe Biden has certainly kept one half of his big health care promise…

Biden: I believe we have to protect and build on Obamacare. That’s why I proposed adding a public option to Obamacare as the best way to lower costs and cover everyone.

DG: The President has spent billions to make insurance plans on the Obamacare exchanges more affordable. 

But that public option he kept hawking on the campaign trail…

Biden: Obamacare with a public option // Biden: provide a public option // Biden: We need a public option, now more than ever

DG: …it’s still just a talking point…at least in Washington D.C. 

Sfx: Carmen San Diego theme 

DG: Today…we ask …where in the world is the public option? 

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein, and this is Tradeoffs.

We decided to start our search for signs of the public option in as good a place as any…New Jersey. That’s where Heather Howard keeps track of the various rumblings of public option activity in state capitals.

Heather Howard: So I wouldn’t say there’s tremendous momentum, but these ideas are percolating.

DG: After spending her early career on the Hill and in the Clinton Administration, Heather now lectures at Princeton and advises states on health policy implementation. 

So we’re talking public option here. Let’s define our terms first. Heather, what is a public option? Because it can mean different things to different people.

HH: The definition of a public option has evolved over time, and we’re seeing it comes in different shapes and sizes. But at its core, it’s the government getting involved in the health insurance markets to make health insurance more affordable and to get more people covered. So that’s the why of it. The how is a couple of options. The state could actually offer its own health insurance plan. Short of that, a state could say to insurance companies, we want to see lower premiums, how you get there is up to you. Or a state could step into the market and set reimbursement rates for doctors and hospitals.

DG: And so let’s go on a bit of a road trip here. Heather, how many states right now in the spring of 2021 are actively considering or pursuing a public option? Give us the rundown.

HH: So one state has a public option. That’s Washington state. And I would say five or six states are actively considering it now. You’ve got Colorado, Nevada, New Mexico, Connecticut and Illinois. 

DG: Colorado lawmakers this week, helped us out with our search, putting a dot down on Denver. 

News clip: Colorado’s rebound will not include a government run public option.

DG: Democrats in the state have been pushing a public option for a few years now, with hospitals pushing back just as hard. 

News clip: Today the group of Democrats leading the push for a so called public option announced they were dramatically scaling back their plans.

DG: So Heather, we’re seeing some action in Colorado. What’s this latest legislation do?

HH: It would require insurers offering plans on the marketplaces in the individual market to offer plans, would standardize benefits, and it would set a target that by the end of year three, those plans would have premiums that are 18 percent lower. Insurance company, work it out with providers. And if you can’t, we’re going to then ratchet up the pressure.

DG: The bill is in flux, moving so fast no one knows exactly what form that pressure is going to take. The original legislation had more aggressive cost reduction goals and gave the state the green light to launch its own public plan if insurers didn’t meet those goals. 

But Democrats removed those provisions earlier this week trying to appease hospitals, doctors and insurers.

News clip:The Colorado Hospital Association, which has opposed a public option in the past, says it is neutral on this proposal. 

DG: This watered-down version now has brighter prospects of passage and Heather says, that keeps momentum moving…at least a little. 

HH: I mean, I think all this is about is this a better option than the alternative? And the alternative is rate setting and maybe that threat out there is a worse threat and this gives us time and let’s work on this. 

DG: That alternative, rate setting, is something that Washington state did try to incorporate into its public option. The only public option on the books anywhere in the country.

Can you walk us through, Heather, what that Washington approach is and whether it’s succeeding?

HH: So in Washington state they’ve contracted with insurance companies and it’s in its first year. So it’s still nascent and we’re learning from it. But there is a public option plan in half of the counties in Washington. Now, what have we seen so far? Well, they’re competitive at a price level with existing plans, but not cheaper, which was the hope, of course, that there’d be low premiums. 

DG: According to Manatt Health, the average low-end premium for those public option plans is $392. A traditional plan runs around $376. On the other hand, deductibles for public option plans are, on average, about $1000 lower.

Still, only about 1% of people had picked a public option plan by the end of the open enrollment period in January.

You have to believe, Heather, that a big reason why was those expensive premiums. Do you have a sense why weren’t they as low as everyone had hoped for?

HH: The initial legislation probably would have achieved that because it would have set reimbursement rates for providers at 100 percent of Medicare rates. Research has shown that commercial insurance reimburses providers, hospitals and doctors at a significantly increased markup over Medicare rates. And so the promise of the public option was to align reimbursement rates to Medicare rates. Well, the final legislation arrived on 160 percent of Medicare rates. As a result, the plans aren’t as affordable as one might have hoped. 

DG: Even with those more generous rates, though, Heather, a lot of hospitals rejected them anyway. And without participating providers, there can be no insurance plan. So ultimately, what that meant is insurers could only offer public option plans in 19 of the state’s 39 counties.

Heather, what’s the lesson there for Washington and also for policymakers in other states who are watching?

HH: Washington is learning from its experience and is tweaking the public option this year and legislation that’s moving through the legislature has more of a hammer to get hospitals to participate in these plans. And it says to hospitals, if you want to participate in the state employee health plan, you have to participate in a public option product.

DG: Now that you’ve walked us through all these state happenings, Heather, I’ll be honest, the public option still seems pretty elusive and maybe it’s time to call off the hunt! 

Do you think the future of the public option is fading, or would you say it’s more like flickering, but alive? 

HH: I think it’s too early to write the obituary for the public option. States want to keep moving forward. That’s the lesson from Massachusetts and from other health reforms is that states will continue to innovate and there will be that energy at the state level. And of course, they’re in both tension and in a dance with what’s happening at the federal level, too, right? Are we going to get a federal public option? What’s going to happen on federal health policy? So you’ve got you’ve got those two reacting to each other.

DG: After the break, we head to the other Washington to find out why a national public option is nowhere to be found…yet.

MIDROLL

DG: Welcome back. We’ve just left Heather and the state policy scene and turned our attention to the promise of a federal public option, something Joe Biden campaigned on…

Biden: That public option will allow every American regardless of their employment status the choice to get a Medicare-like plan.

DG: A plan that’s been conspicuously missing from Biden’s first wave of big relief bills. So we called up a gumshoe of sorts, a person with her finger on the public option pulse in the nation’s capital.

DG: Okay, Sabrina if you would please introduce yourself name and title and a little bit about yourself. 

Sabrina Corlette: I’m Sabrina Corlette. I’m a research professor at Georgetown University’s Center on Health Insurance Reforms and I study health insurance.

DG: Because you’re crazy. 

SC: I’m a glutton for punishment.

DG: Despite the potential power of a federal public option. It does not look like the Biden administration is going to be moving forward with that proposal any time soon. Instead, the president has been pretty laser focused on the Affordable Care Act, injecting billions of dollars more into subsidies for the exchanges as part of the American Rescue Plan. What’s the goal, Sabrina, of those subsidies?

SC: Well, I think the goals are twofold. One is to try to increase the number of people who have health insurance. And the Congressional Budget Office has estimated that it’s about 1.7 million new people will be coming into the ACA marketplaces because of these new subsidies. But the other goal is to help lower income folks afford their monthly premiums. And so because of these subsidies, about four in five marketplace enrollees will be able to find a plan for ten dollars a month or less, which is a pretty big improvement in affordability.

DG: This is all sort of still Washington speculation but the Biden administration is looking to make these new expanded subsidies permanent. What effect do you expect that to have on the political calculus for state lawmakers, Sabrina, who might have been or are considering a public option?

SC: If the premium tax credit enhancements in the American Rescue Plan are made permanent, that could definitely sort of take out one of the policy rationales for a public option at the state level, right? So a lot of state lawmakers have been pursuing a public option to try to help people find a more affordable source of coverage. Well, if the premium subsidies get you there, then what do you need a public option for? But to the extent that the federal government is stepping up to make premiums more affordable, you’ll start to see states try to look and see where there might be other gaps,  you know, we’ve seen some states look at helping undocumented immigrants who are not eligible for subsidies, find more affordable coverage.

DG: I’m hearing you tell me, Sabrina, that there’s not a lot of interest, there’s not a lot of traction right now for the public option really at the state level or at the federal level. I mean, there’s a little, but not a lot. And we still have 30 million Americans who are uninsured. How do you think about the Biden administration’s efforts to tackle the problem of uninsured in the country?

SC: There is certainly one school of thought that just says let’s amp up the subsidies. Let’s amp up the marketing and outreach and consumer assistance to help people get in the door. Let’s expand Medicaid in every state and we can get pretty darn close to almost universal coverage just on the bones of the Affordable Care Act. But there is also another school of thought that and I think this is just as legitimate, which is, look, if you do a Medicare for all or a Medicare buy-in or a public option, you can get to universal coverage, a far more efficient use of taxpayer dollars, largely because you’re paying providers less than by building on the ACA. 

DG: So simply put, Sabrina, the first path you outlined fixes the problem by throwing money at entrenched interests…the second one relies on taking at least some of that money away.

And that’s why bulking up the ACA is a much smoother path than building a public option or anything else new. Is that right?

SC: Going after vested interests is very hard, not impossible. I mean, there are examples. I think, for example, the recent bill to prohibit surprise medical bills is an example of where both parties were able to agree that the market was failing and something needed to be done. But often that is done more on the edges of things than really going at the heart of the industry profitability.

DG: Really, a public option is a real threat to the status quo, both for hospitals and potentially insurers.

SC: That’s right, and again, a lot of it will depend on how it’s designed, but I think at its core, a public option achieves savings by reducing the amount that’s paid to doctors and hospitals for their services. And that is an existential threat. 

DG: Sabrina, thanks so much for taking the time. 

SC: Oh, it’s always a pleasure.

DG: After these interviews were recorded, the public option was also spotted in Nevada. On Wednesday, lawmakers there introduced a bill compelling insurers who serve the state’s Medicaid program, to also offer a public option plan.

I’m Dan Gorenstein. This is Tradeoffs.