Report: Public Option Added to Private Plans Could Slow Health Costs

By | June 25, 2009

A nationwide health insurance exchange that includes a Medicare-like government option could save $1.8 trillion more than if only private plans are offered, a prominent private U.S. health policy group said Wednesday.

Federal spending on health-related costs would still rise from 2010 to 2020, but they would be less with a plan that pays doctors and hospital rates similar to the Medicare program for the elderly and disabled, according to a report by the Commonwealth Fund.

The New York-based health policy research group compared possible savings a health insurance exchange could bring under three different scenarios. One would include a Medicare-like plan along with private insurance. Another would instead offer a government-run plan with rates somewhat higher than Medicare. The final one would be private insurance with no government plan at all.

Such an exchange would offer a central point for consumers to shop for and compare health plans.

An exchange that instead offered a plan with rates slightly higher than Medicare but below current private plan rates would save nearly $800 billion over one with only private options, according to the Commonwealth Fund’s analysis.

“Offering a public plan choice and the design of this choice makes a difference in the pace of change,” said Cathy Schoen, the group’s senior vice president.

Whether Democrats’ plan to revamp the U.S. health care system and provide coverage to the roughly 46 million uninsured Americans includes a government-run insurance plan is a major sticking point as Congress finalizes its proposal.

Supporters say such an option would offer Americans an affordable alternative. Most people with health insurance in the United Stated get it through their employer or the government. But those who do not have coverage through work and do not qualify for Medicare or the Medicare program for the poor can face a tough time buying a policy.

The Commonwealth fund echoed those sentiments, saying private plans could lower premiums as more people seek insurance and that lower administrative costs with the government-run options may force private plans to streamline.

“It would provide a strong incentive for private plans to innovate and compete,” Schoen told reporters.

Opponents say a cheaper, government plan will make it impossible for private plans to compete and may drive some out of business. It could also encourage employers to drop coverage and make employees buy a government-backed plan, they say.

Overall, an exchange with a Medicare-like plan will save nearly $3 trillion through 2020, saving consumers up to $2,200 per household, Commonwealth found. About $2 trillion of that would come after about five to six years, it said.

In comparison, an exchange including a government plan with higher rates would save $1.97 trillion and a private plan-only exchange would save almost $1.2 trillion. Both options would save a household $1,600.

Still, an exchange won’t keep health costs from rising, the report added.

The increase in federal budget costs from 2010 to 2020 with the Medicare-like public plan would be $112 billion, it found. That is compared to $232 billion under the public plan with somewhat higher rates and $360 billion under a private plan-only exchange.

All three options would help insure nearly all Americans, it said, with the number of uninsured dropping to about 4 million people by 2012.

The group’s analysis assumed other changes would also be made to the U.S. healthcare market. These include payment reforms to the Medicare program, an expansion of existing government coverage and new regulations that would require insurers to cover a wider range of consumers.

Hospitals and doctors would also see their revenues grow with any of the three exchanges but at a slower rate, the report said.

Topics USA

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