The Left’s Latest ‘Public Option’ Scheme to Rig Health Care Markets

  • Post category:News / US News

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While the campaign to create a health care “public option”—a government health plan designed to compete against private health insurance—may have waned in Washington, D.C., this left-wing project is very much alive in some states.    

Following in Washington state’s footsteps, the Colorado and Nevada legislatures have recently passed laws creating state-based “public option” health care programs.  

Beginning in 2023, Colorado’s new government health plans will enter both the state’s individual and small-group health insurance markets. Required to meet the current federal health insurance rules and benefit mandates, the Colorado program will also impose a premium cap.  

Under this cap, any insurance carrier offering the government health plan must offer a premium rate that would be 6% less than it offered in 2022; in 2024, 12% less than it offered in 2021; and in 2026, a premium increase no higher than the medical inflation rate of the previous year. Presumably, these premium caps—or price controls—will be imposed without regard to the changing conditions of supply and demand on the ground.     

Nevada legislators are giving themselves a longer lead time. Their “public option” goes live in 2026. By law, the Nevada “public option” must then offer premiums  5%  less than the private plans offering coverage on the state’s health insurance exchange. Nevada officials project their government health plan to attract an estimated 55,000 enrollees in the first year, reaching 110,000 enrollees in five years. They also claim the government’s lower premiums will secure an estimated at $464 million in reduced federal subsidies and consumer savings over five years and up to $1.3 billion over 10 years.   

For the savings to be real, the competition must be real. So, can “public option” plans really  compete with private health plans on a level playing field and offer a superior product at lower cost? Real market competition, after all, means that the “public option” would enjoy neither special taxpayer subsidies, nor special advantages in law or regulation.  

Based on the experience thus far, the answer is no.  

Surveying local “public option” experiments in New York, California, and Texas, economist John Goodman and Heritage Foundation analyst Edmund Haislmaier conclude: “When competing on a level playing field, the “public option” offers no silver bullet for reducing health care costs.”  (The Daily Signal is the news outlet of The Heritage Foundation.)

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Likewise, when congressional liberals failed to enact a national “public option” as part of the Affordable Care Act (ACA) in 2010, they created the substitute Multistate Plan Program (MSP), a national system of health plans administered by the U.S Office of Personnel Management and also Consumer Operated and Oriented Plans, the CO-OP program.   

Both federal health insurance programs generally operated under ACA benefit requirements and insurance rules that applied to all other private health plans. Both were monumental failures. The Multistate Plan Program collapsed entirely, and of the 23 original CO-OP plans, despite $6 billion in government loans, only three are still in the market.   

That’s why left-wing champions of the “public option” invariably resort to rigging the market in favor of their government health plans.    

Exhibit A is Washington state. Officials there contracted with private health insurers to offer the standardized government health plan. According to an NPR report, five of the state’s 12 insurance carriers have participated in the program.  

While private plans pay doctors and other medical professionals at commercial rates, Washington state officials pay medical professionals at 160%  of Medicare rates, a payment rate fixed below routine private sector provider payment in the state, which pays 174%  of the federal Medicare payment.      

Despite the lower provider payment rates, Washington state’s program has turned out to be far less effective than state officials expected. Instead of securing a universal state presence, the “public option” coverage was offered in only 25 of the state’s 39 counties. The state’s “public option” enrollment also turned out to be abysmal. By 2021, only 1%  of the folks buying coverage on the state’s health insurance exchange picked the “public option” plan.  

Washington state’s performance on premium costs has also been abysmal. While officials expected their “public option” coverage to have a premium cost between 5% and 10% lower than the standard Affordable Care Act plans on the state’s health insurance exchange, the premium cost turned out to be 11%  higher than the private plans. 

So, Washington state’s experience thus far has been subpar “public option” plan penetration, combined with low plan enrollment and high plan premiums. 

To try to salvage this disaster, Washington state legislators determined the root cause of the poor performance of their “public option” is the lack of cooperation from the state’s hospitals. So, in contrast to the normal voluntary contracting with private health plans, next year the state will force hospitals to participate and accept the government’s payment rates.       

Looking ahead, with the Washington state program on life-support, all eyes will be on Colorado and Nevada. By setting premiums and fixing provider payments below the prevailing market rates, the politicians will attempt to attract larger enrollment by promising lower premiums, giving the state government plans a strong competitive advantage at the expense of private sector health plans.  

These left-wing efforts with “public options” at the state level will be instructive. If they fail, the politicians will likely try to paper over their fiscal shortfalls and any other shortcomings with even more taxpayer funding.  

If these schemes survive, left-wing champions of the “public option” in Washington will surely resuscitate their efforts in Congress.  After all, congressional liberals have already premixed the key ingredients of a “public option” success in several bills languishing for years in Congress: government price-fixing, coercion of doctors and other medical professionals, and more insurance rules and regulations.  

In their view, there is no glitch that cannot be fixed with more mandates, bigger government subsidies, and higher taxes. That’s just the way they roll.  

The post The Left’s Latest ‘Public Option’ Scheme to Rig Health Care Markets appeared first on The Daily Signal.

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