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The Public Option’s Affordability Appeal for Uninsured Populations and Medicare Recipients

Policy Brief

The Public Option’s Affordability Appeal for Uninsured Populations and Medicare Recipients 

EXECUTIVE SUMMARY 

The public option allows Americans to choose between public and private health insurance and employer-based insurance in the marketplace. However, the decreasing number of enrollees attracted a growing interest in the public option. This health insurance offers broad choices to uninsured individuals making less than 400 percent of the federal poverty level (FPL) (Rand Corporation, 2020). The National Association of Accountable Care Organizations (NAACOs) serves Medicare patients who want a comprehensive healthcare provider choice while containing program costs (Brookings, 2020). State provider taxes, enrollees’ premiums, and co-payments cover the administrative costs and benefits. Also, the public option allows the federal government to negotiate provider prices and monitors the insurer market power. 

This brief report addresses the significance of the public option’s implementation from the perspective of Medicare recipients using services administered at NAACOs supported by the synthesis of existing literature. The recommendations provided to strengthen the public option’s health insurance are feasible within the current political climate and are cost-effective. Compared to the baseline forecast, the projected proposal is that the public option may complement the Affordable Care Act (ACA) exclusively on the public’s preference for affordable health care. 

The Public Option Proposal 

The merits of including a public option as part of the Affordable Care Act’s package include strengthening government finances, reducing health insurance premiums through the exchange, and the number of uninsured Americans (Vox, 2020). The Biden Administration promises to implement the public option to reduce premiums and subsidize healthcare across the board for families. The public option plan is significant because the private health industry will be required to provide fair prices, which may be significantly lower than current insurance rates. 

The Biden administration will initiate this program using capital gains taxes from individuals in higher income brackets. Medical providers will be mandated not to charge higher out-of-network costs to patients who cannot choose providers during emergencies. In contrast to the ACA, the public option favors those who either do not have employer-based health insurance or have no existing health coverage. Though the public option aims to reduce costs and ensure nationwide coverage for consumers, it undermines impending hiccups along the way. Congressional Democrats have rejected the public option due to its ambiguity in standing above the fray. Medical providers also agree in not supporting the creation of a one-size-fits-all system funded solely by the national government (Vox, 2020). 

Of equal importance, the health benefits and negotiation prices with hospitals in the public option have not yet been structured in the current political environment. The public option’s limitation is that it is dependent on families choosing the silver rate health plans (Vox, 2021). For these reasons, constituents may be hesitant to enroll in a government-sponsored health insurance plan. Families may feel forced to choose the silver plan compared to other options with lower deductibles, premiums, and co-payments offered in the insurance marketplace. Critics insist that the excessive monetary support from the federal government would increase health expenditures. They also favor ensuring that insurance companies charge premium differentials for the same plan to different patients (Brookings, 2020). However, one of the Brookings Institute’s simulated models (2020) showed that the public option remains more affordable than private health insurance in the market share. The private insurance plans fared better in utilization, risk selection, and the coding of diagnoses in the individual market (Figure 2). Nonetheless, the public option performed well, assuming that the market share was identical for the public and private health insurance plans. 

Enrollees’ Eligibility Requirements & Health Benefits 

Eligible consumers include Medicare recipients who would qualify for the public option. In addition, persons under 400% of the federal poverty level or who do not have employer-based health insurance would be eligible. The enrollment process follows the ACA guidelines. The health benefits consist of general primary care services, dental, hearing, vision, and other essential services covered by the Medicaid program. 

FINDINGS 

Care Coordination and Case Management 

In NAACOs, Medicare recipients strive for reduced medical costs and quality of care in the Medicare program. The Biden Administration is holding pharmaceutical institutions accountable and health providers to promote optimal population health. Medicare patients are fully accounted for in this new health care plan because they will benefit from discounted prices for prescription drugs (Kaiser Family Foundation, 2021). For these reasons, the public option incentivizes Medicare patients to enroll in the plan because they will be well-informed of any unintended out-pockets costs. The probable outcome of implementing this alternative for Medicare recipients would be increased cost savings in the Medicare program for the federal government considering the Brookings Institute’s simulated model (Figure 2). The cost savings would result in diverted spending on other essential components of the U.S. economy, such as education, consumers, and labor. The opportunity cost of managing care for Medicare recipients, the public option would allow the federal government to leverage collective insurance power in the insurance market. The second solution is to maximize equity that captures the mainstream population receiving health services in the public option and the principal outliers to determine the efficiency of the health insurance nationwide. 

Cost-Effectiveness of Prescription Drugs 

In addition to the availability of cheap drugs to beneficiaries, the public option mandates the reduction of generic brands’ prices and the regulation of pharmaceutical companies. Several senators commented on the public option proposal regarding prescription drug prices, which guarantees Medicare beneficiaries three-part D plans, including a national drug plan. The payment rates for Medicare patients under Part A and Part B remain intact in the public option. Retiree health plans would count for the out-of-pocket limit for Medicare recipients’ drug spending (Kaiser Family Foundation, 2021). The benefits to Medicare patients would be the ability to buy affordable generic drug brands, Medicare bulk-purchasing discounts, and buy medication abroad. Again, the federal government’s cost-sharing principle follows ACA marketplace rules. Nonetheless, the monitoring of pharmaceutical companies would permit federal and state governments to understand the cost-shifting implications of the public option on private insurance premiums and hospitals’ profit margins (RAND Corporation, 2020). Consequently, the trade-off for providing affordable drugs would make sure that no differential premiums are based on age (i.e., young populations versus older populations). 

Impact on Health Care Systems’ Efficacy 

Medicare patients might think that the public option will advance organizational strategies across healthcare systems. The public option advocates for lower rates, shift employer coverage costs for employees, and requires a tax increase on the rich (MedicareFaq, 2021). The public option does not strip away health insurance costs. Nevertheless, the public option comes close to Medicare’s single-payer system, where the government covers healthcare costs for Medicare consumers. 

In contrast to Medicare for All, the public option will cost less than the implementation of Medicare for All at $32.6 trillion (MedicareFaq, 2021). It also does not eliminate Medicare and Medicaid or the ACA. Sixty-eight percent of Americans prefer a public option that competes with private insurance (MedicareFaq,2021). Further, employers who purchase health insurance through the public option will spend less on cost-sharing premiums for their employees. Overall, the government’s investment in the public option would not only decrease premiums for Americans but the national government’s health expenditures (Kaplan et al. 2009). 

The administration of the public option also considers projected patients’ challenges to improve populations’ health outcomes for value-based care (Fiedler, 2020). The limits on premium prices in the exchange will also be monitored during the implementation process to identify loopholes for Medicare and Medicaid beneficiaries. The public option on healthcare systems is projected to enforce a culture of continuous improvement, where health institutions will be empowered to scan the environment for signs of opportunity or risks. Based on the evidence outlined for capping prices in the public option (Kaplan et al. 2009), the cost-savings will encourage health systems to improve inspections for health insurance companies’ compliance and develop standard-setting processes. The outputs from these compliance reviews will assist health institutions in determining whether quality standards are met nationwide. 

Policy Scenario Recommendations 

Recommendation on strengthening the public option to meet NAACOs’ goals and policy interests best would first be to evaluate the trade-offs among alternatives presented in the public option’s care delivery system. Setting standards for the public option health insurance stratified by age, county, gender, and socioeconomic status might help the government gauge the public option’s efficiency on health outcomes and other social benefits. 

Medicare patients at NAACO seek transparency of information regarding their health care benefits and costs. Therefore, it might be worthwhile providing vouchers for services so that people can choose from an array of competitive service providers. In addition to vouchers, consolidating two or more service delivery systems might make life easier for consumers. The evaluation of states’ implementation of the public option might potentially reveal the challenges faced and provide windows of opportunity to resolve them (Minnesota House DFL, 2021). The other point of discussion is if there will be an effective balance of centralization and decentralization in the internal budget-making procedures, to structure performance improvement and cost reductions for Medicare beneficiaries and employers. 

Policy options should include changing contract enforcement methods in the public option and private health insurance to incentivize competition nationally between health insurance markets and the Medicare program. The modification of insurance arrangements for individuals with employer-based or private health insurance should also be weighted in the market exchange compared to the public option. Next, finding competent partnerships in local, state, district, and federal government networks should be prioritized to educate communities on the enrollment procedures of the public option. 

CONCLUSION 

The brief underscored the rank-ordering of recommendations for adopting the public option for uninsured populations and Medicare beneficiaries. President Biden’s proposal (2021) states that individuals under the 400% federal poverty level are guaranteed coverage under the public option. Overall, understanding the nuances between labor participation and health insurance coverage can strengthen the public option. Also, Medicare beneficiaries’ state coverage data may inform policies to improve healthcare services nationwide through the public option. 

Acknowledgments: Venchele Saint Dic, saintdicvenchele@gmail.com, (240) 406-2407. There was no funding provided to draft the policy brief on the public option. 

References 

  1. Biden Harris Democrats. (2021). Healthcare. Retrieved from Plan to Protect and Build on Obamacare | Joe Biden. 
  2. Fiedler, M. (2020). Capping Prices or Creating a Public Option: How Would They Change What We Pay for Health Care?. USC-Brookings Schaeffer Initiative for Health Policy. 
  3. Kaiser Family Foundation. (2021). Side-by-side comparison of Medicare-for-all and public plan proposals introduced in the 116th Congress. Retrieved from Side-by-Side Comparison of Medicare-for-all and Public Plan Proposals Introduced in the 116th Congress (kff.org) 
  4. Kaplan, E., & Rodgers, M. A. (2009). The costs and benefits of a public option in health care reform: an economic analysis. Berkeley Center on Health, Economic and Family Security. 
  5. MEDICAREFAQ. (2021). Medicare for all-Pros and cons. Retrieved from Medicare For All-Pros and Cons | MedicareFAQ.
  6. Minnesota Care Public Option Summary. (2021). MinnesotaCare public option. Retrieved from https://www.house.leg.state.mn.us/dflpdf/d6070fbb-05b5-4e7d-a93c-e3ba660c1fad. pdf  
  7. Liu, J.L, Wilks, A., Nowak, S.A., Rao P., & Eibner, C. (2020). Effects of a public option on health insurances costs and coverage. RAND Corporation. Retrieved on Effects of a Public Option on Health Insurance Costs and Coverage | RAND.
  8. Vox. (2020). Joe Biden’s health care plan, explained. Retrieved from Joe Biden’s health care plan: Public option, not Medicare-for-all – Vox. 

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