The Public Plan Is a Cost-SAVER

By far, the most aggravating question I've heard on whether we should give people the choice between private insurance and a robust, government-administered public health insurance option is “How would we pay for it?”  I’ve heard from conservatives who gave me doom and gloom about how it would make the health care package even more expensive (and disingenuous statements like those from Sen. Lindsay Graham attributing all the cost of health care reform on the public plan).  I’ve also heard from progressives who launched into an impassioned argument that it would be worth the cost because what it would do for quality and access.  And each time, I’ve begun whacking my head against the wall.

Because the public plan would not add to the cost of health care reform.  Indeed, it would save money.  And the Congressional Budget Office, according to an exclusive report from The New Republic’s Jon Cohn, has my back on this.

Now the total health care reform package will have to involve new spending the federal government.  Right now the government pays for only a fraction of health care costs.  If the government assumes more of the cost for health care through subsidization, or even just commits to smart investments to improve quality, it can’t do that without raising new revenue or finding cuts elsewhere.  We can – and will – debate whether it is worth the investment to do so (although given that you’re bothering to read a blog entitled “Universal Health Care,” I have a hunch on your likely answer.)

But the public plan within that package will not, in aggregate, add to that cost.  The point of the public plan is that it’s a competitor.  It exists alongside private insurance in the Health Exchange.  It has the exact same subsidies from the Exchange as private insurance.  It charges participants premiums, like the private insurance plans in the Exchange.  But it doesn’t have the same aim as private insurance – instead of focusing on making a profit or satisfying investors, it focuses on making people healthier and making health care cheaper.  By competing against private insurance on cost and quality, so the theory goes, we force private insurance to finally have an incentive to improve on both.  If the public plan costs money from the Federal Treasury to set-up and operate – well, that would be the opposite of its intent.

Our first clue that the public plan would be scored as a cost-saver by the all important “umpires” at the CBO was when the revised Senate HELP bill, with a moderately strong public plan, an employer mandate and a well-defined individual mandate – came in nearly $400 billion cheaper than the initial score of the bill without these provisions.  But the new House preliminary score is even better.  As Cohn puts it, “preliminary estimates from the Congressional Budget Office suggest that a strong public option--the kind that the House of Representatives is putting in its reform bill--should net somewhere in the neighborhood of $150 billion in savings over ten years.”  That is just for the public health insurance option itself – the first time we’ve seen a score on this feature.  As many (including Ezra Klein) will note, that’s not as much savings as we would see if we had a public plan that was open to everyone, not just the uninsured and some businesses, or if we had a public plan that could rely on Medicare rates instead of negotiating rates with providers.  As single-payer advocates will note, that’s also nothing compared to the administrative savings to be gained from a Medicare for All system over that same timeframe.

But it’s worth repeating again, and again, and again:  having the public health insurance option doesn’t cost money.  It saves money.

So the question for those looking to water it down, either with a “trigger” option to delay it, or a health co-op which may take years to net the same savings, or with some other system of compromised state-level or nonprofit plans that won’t achieve the same savings is – how can we afford the extra money for your compromise?

(Photo credit:  Darren Hester on Flickr.)