By Abe Sutton
But, despite short-term distinctions and differences in services covered between Medicare For All’s single payer and a public option built on the Affordable Care Act, I believe that in the long run, these approaches are indistinguishable. This is because a public option would lead to single payer over time.
In this post, I walk through three ways that many public option proposals would pave the way for single payer.
The public option would take advantage of Medicare rates
Many public option proposals expect to be competitive by piggybacking on Medicare’s network and rates. As many hospitals rely on Medicare to keep their lights on, this gives the public option a negotiating advantage that private insurers do not have. Most hospitals cannot opt to not accept Medicare patients. The public option would therefore have lower medical expenses, not because of efficiencies it introduces, but rather because of its monopolistic market positioning. The public option would also therefore boast wider networks than private plans.
This differential would make the public option more competitive than private options, and make it harder for private insurers to compete. In essence, it would result in a single payer system.
And while the system would at first seem good for patients, it may, over time, pressure hospitals to the point where many rural and low-margin hospitals might find it difficult to keep their doors open. The evaporation of commercial reimbursement as patients shift to the public option would disrupt hospitals’ finances. The model of keeping the lights on with Medicare payments and earning profit on commercial payments would no longer function.
The public option would not need to insure anything
A typical insurer relies on actuaries to assess expected costs and then determines plan prices to cover expected costs. Insurers need to allow some buffer room to protect against downsides, while still pricing competitively to the extent there are multiple insurers competing for enrollees. While underwriting is no longer done on an individual basis, expected costs for an insurer’s panel still need to be projected. In contrast, a public option would have the implicit backing of federal resources.
As such, accurately assessing future costs would not make or break a public option. The public option would therefore be less focused on accurate assessments, and more likely to get them wrong. There is also a reasonable chance the public option would elect to spend fewer resources on actuarial assessments, in accordance with the lower stakes it faces. This would lead the public options to cost less than private options. It would therefore have an edge, helping it drive private plans out of the market over time.
The public option is both a regulator and a competitor
There is an inherent conflict of interest with putting responsibility to regulate in the hands of a competing party. Doing so may create a strong incentive for regulators to favor the government-run option over private payers.
For example, in the education sphere, some advocates oppose parental and student choice on the theory charter schools and voucher programs harm public schools. These advocates focus on protecting the public-school system, rather than increasing quality, increasing choice, or decreasing costs.
In health care, a regulator with a similar motivation may try to adjust the regulations under which plans operate to make it more expensive for them to stay in business and increase the cost differential between the government-run public option and the private plans. Policy makers, like other human beings, wish to see the things they create succeed. I will confess to spending on inordinate amount of time tracking Health Reimbursement Arrangement enrollment, at least partially due to the number of hours I put into the development of the recent regulation.
Similarly, the authors and implementers of the Affordable Care Act spent years promoting exchange enrollment and championing their reform. It would only be natural for the policy makers who institute a public option to act to promote it, even if it comes at the expense of private parties.
Those who oppose single payer should similarly oppose a public option. Instead of trying to reinvent our health care system and eliminate the role of the private sector, we should learn from COVID-19 and prioritize reforms to socialize the cost of containing communicable diseases, empower patients, and deregulate the health supply chain.
While our health system is far from ideal, it is better to work to improve it than to try to undermine it. I believe the public option is merely a stealth attempt to implement single payer. If Congress intends to build on the exchange framework established in the Affordable Care Act, a public option should not part of the conversation.