Is it time for a public option in the exchanges?

Echoing a growing number of politicians, Jacob Hacker is back arguing for a public option in the exchanges in a NYT editorial today:

A public plan is attractive in part because it can offer a broader network of providers. As exchange plans increasingly move toward very narrow networks, this would be another enormous draw — especially for more affluent consumers who have so far shunned the exchanges.

The public plan can also improve the overall system. Medicare has pioneered innovations in reimbursement, and it has improved hospital quality by imposing new penalties for readmissions. A public option could build on these breakthroughs and extend them to Americans under Medicare age.

The biggest advantage of the public plan, however, is its greater ability to restrain prices. As rapidly as the insurance market is concentrating, medical providers are consolidating faster, driving up prices and creating huge differentials even within regions. Medicare hospital reimbursements vary much less — and they’re typically much lower. As a result, Medicare has experienced slower per-person cost growth than private plans, particularly in recent years.

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The pricing argument has always been the strongest argument for a public option (though it requires a public option that at least initially gets to tag on to Medicare rates instead of having to negotiate with health care providers like other insurers do). It's predicated on the notion that insurance premiums are high because the negotiated prices that insurers pay care providers for services are too high.

The idea is then that introducing a competing insurer that pays at lower prices would nudge health care providers toward negotiating pricing discounts with private insurers to help them avoid losing all their exchange market share to the public option. Which in turns allows those insurers to offer more competitive premiums.

Provider pricing information is proprietary but indications from back in 2013 do suggest that exchange plans pay the same (high) prices for health care services that other plans and employers pay.

Hospital systems seem to be doing better than expected in rate negotiations with insurers offering plans on the state insurance exchanges in 2014. Analysts and hospital executives interviewed by Modern Healthcare say hospitals will be paid nearly the same rates by health plans sold through exchanges as by plans sold to employers outside them.

Hospital analysts with Fitch Ratings said hospital reimbursement rates offered by exchange plans are mostly similar to those paid by commercial insurers, despite initial fears that rates would be closer to the lower rates paid by Medicare. “The early information has been fairly favorable for hospitals,” said Megan Neuburger, a for-profit healthcare analyst and senior director with Fitch Ratings.

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The exception being the well-known rise of narrow network plans in the exchanges, in which insurers carve out high-priced health care providers and are thus able to offer lower premiums:

But in the case of health plans that have restricted provider networks to one health system, providers in those plans often have agreed to lower rates. Health plans that limit patient choice through such narrow networks are expected to offset the lower rate with more patient volume.

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So is the public option an idea whose time has come?

Unsure this solves the underline problem of those buying on the exchanges requiring more healthcare expenditures than predicted. If the problem with the exchanges is the plans offered did not consider well enough the costs of dealing with that new pool of ensured, are we sure a "public option" does all that much? I doubt the providers themselves are the problem (outside of those that removed themselves from the plans offered through the exchanges.) The problem appears to be distribution of healthcare costs across the new pool of ensured.

Am I reading this wrong?

OrphanSlug said:

Unsure this solves the underline problem of those buying on the exchanges requiring more healthcare expenditures than predicted. If the problem with the exchanges is the plans offered did not consider well enough the costs of dealing with that new pool of ensured, are we sure a "public option" does all that much? I doubt the providers themselves are the problem (outside of those that removed themselves from the plans offered through the exchanges.) The problem appears to be distribution of healthcare costs across the new pool of ensured.

Am I reading this wrong?

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You are pretty much on the right track here, from what I can see.

But I'd still like to see a public option, considering it might be politically viable - vs getting the single-payer/private provider system I would prefer.

I hate all the poll choices. I refuse to give liberals what they want. I also want them to drown in the crap they shoved down everyone's throats.

I'm not straight away against a public option, for a number of reasons, but I am wary of it for a number of reasons as well:

1. Real admin costs aren't really counted on the government side, because another agency handles that. So, billing still has associates costs, unaccounted for in healthcare expenditure.

2. Since reported costs are artificially low, a public option could potentially drive all private insurance out of business. When the public option has no competition, there is no profit motive to keep it serving consumers well. This doesn't mean it will get bad, but it very reasonably could get bad.

3. A public option is a step toward single payer, and the American government has deeply ingrained corruption. I do not trust this government to handle healthcare for its citizens, especially after having been in the military health care system and then the VA.

Other--- Not No, but Hell NO!!!

OrphanSlug said:

Unsure this solves the underline problem of those buying on the exchanges requiring more healthcare expenditures than predicted. If the problem with the exchanges is the plans offered did not consider well enough the costs of dealing with that new pool of ensured, are we sure a "public option" does all that much? I doubt the providers themselves are the problem (outside of those that removed themselves from the plans offered through the exchanges.) The problem appears to be distribution of healthcare costs across the new pool of ensured.

Am I reading this wrong?

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Well, the costs of/expenditures on exchange enrollees are a product of their utilization and the price of those services they use. No doubt the next administration will be looking for ways to get more people buying in the exchanges so that the overall risk profile improves, but at the end of the day insurers are always going to be paying for services. And it's fair to ask if the prices they're paying are appropriate. (One of the major reasons the U.S. pays more for health care than the rest of the world is that our unit prices for services are generally much, much higher.)

What we've seen so far is that since consumers shopping in exchanges are (1) cost conscious, and (2) very willing to switch plans from one year to the next, insurers selling in them have been under more competitive pressure than has generally been the case. One of the ways they've looked to hold down their costs and compete on premiums is by offering products that have narrower networks (presumably those providers participating in the network have agreed to pricing discounts to do so). That's one way to do it, but it suggests they still lack the leverage to negotiate down prices with many providers, even if they have motivation to do so--if they were doing that successfully, we'd likely see more broad network, relatively lower premium plans.

The pricing argument for the public option is that it provides them that leverage. Of course that leads to the questions of 1) would that actually work, and 2) even if it did, would that be desirable?

Greenbeard said:

Echoing a growing number of politicians, Jacob Hacker is back arguing for a public option in the exchanges in a NYT editorial today:



The pricing argument has always been the strongest argument for a public option (though it requires a public option that at least initially gets to tag on to Medicare rates instead of having to negotiate with health care providers like other insurers do). It's predicated on the notion that insurance premiums are high because the negotiated prices that insurers pay care providers for services are too high.

The idea is then that introducing a competing insurer that pays at lower prices would nudge health care providers toward negotiating pricing discounts with private insurers to help them avoid losing all their exchange market share to the public option. Which in turns allows those insurers to offer more competitive premiums.

Provider pricing information is proprietary but indications from back in 2013 do suggest that exchange plans pay the same (high) prices for health care services that other plans and employers pay.



The exception being the well-known rise of narrow network plans in the exchanges, in which insurers carve out high-priced health care providers and are thus able to offer lower premiums:



So is the public option an idea whose time has come?

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There IS a public option in the ACA (that's the exchange). That's what they call it. What kind of option are you talking about?

Gonzo Rodeo said:

I'm not straight away against a public option, for a number of reasons, but I am wary of it for a number of reasons as well:

1. Real admin costs aren't really counted on the government side, because another agency handles that. So, billing still has associates costs, unaccounted for in healthcare expenditure.

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Not the case with the public option, at least as initially proposed.

2. Since reported costs are artificially low, a public option could potentially drive all private insurance out of business. When the public option has no competition, there is no profit motive to keep it serving consumers well. This doesn't mean it will get bad, but it very reasonably could get bad.

3. A public option is a step toward single payer, and the American government has deeply ingrained corruption. I do not trust this government to handle healthcare for its citizens, especially after having been in the military health care system and then the VA.

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Private business also has deeply ingrained corruption.

JumpinJack said:

There IS a public option in the ACA (that's the exchange). That's what they call it. What kind of option are you talking about?

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The exchange is a marketplace, full of private plans. The public option would be a new insurer selling in that marketplace.

JumpinJack said:

There IS a public option in the ACA (that's the exchange). That's what they call it. What kind of option are you talking about?

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Incorrect.

Deuce said:

Incorrect.

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That's what they call it. You only get ins. through the exchange if you're going to use the "public option" and get a subsidy from the fed.

What "public option" is the OP speaking of?

JumpinJack said:

That's what they call it. You only get ins. through the exchange if you're going to use the "public option" and get a subsidy from the fed.

What "public option" is the OP speaking of?

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Sorry, you have your terms wrong.

The exchange is a marketplace for insurance plans. Basically an amazon.com for health insurance. All the providers there are private companies offering a product, but participation in the exchange has certain requirements for the plans to somewhat standardize the benefits and terminology so it's easier for customers to compare apples to apples. An individual or family meeting the requirements can receive a federal subsidy for purchasing one of these plans. This is not a public option. Individuals are not required to purchase a plan from the exchange (and in fact most will still go through their employer)


The "public option" was a proposed idea to provide for more competition in health insurance. It would have operated as its own insurance "company," just operated by the government. It would have been required to operate self-funded through premiums like any other insurance company and would have sold plans only on the exchange. Subsidies could have been used for the public option just like any other insurance plan on the exchange.

However, congress is terrible at their jobs and it was removed prior to the passage of the ACA. There is no public option right now.

Deuce said:

Not the case with the public option, at least as initially proposed.


Private business also has deeply ingrained corruption.

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A business that fails to turn a profit goes under. Poor service will cut into a business's profits. Business corruption needs the government to help it artificially clear the field of competition, or highly illegal accounting tricks that, again, rely on friends in government to get away with long term.

Deuce said:

Sorry, you have your terms wrong.

The exchange is a marketplace for insurance plans. Basically an amazon.com for health insurance. All the providers there are private companies offering a product, but participation in the exchange has certain requirements for the plans to somewhat standardize the benefits and terminology so it's easier for customers to compare apples to apples. An individual or family meeting the requirements can receive a federal subsidy for purchasing one of these plans. This is not a public option. Individuals are not required to purchase a plan from the exchange (and in fact most will still go through their employer)


The "public option" was a proposed idea to provide for more competition in health insurance. It would have operated as its own insurance "company," just operated by the government. It would have been required to operate self-funded through premiums like any other insurance company and would have sold plans only on the exchange. Subsidies could have been used for the public option just like any other insurance plan on the exchange.

However, congress is terrible at their jobs and it was removed prior to the passage of the ACA. There is no public option right now.

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I see. It's called the "publicly funded" insurance in the exchange, not public option.

The public health insurance option, also known as the public insurance option or the public option, is a proposal to create a government-run health insurance agency which would compete with other private health insurance companies within the United States. The public option is not the same as publicly funded health care, but was proposed as an alternative health insurance plan offered by the government. The public option was initially proposed for the Patient Protection and Affordable Care Act, but was removed after Sen. Joe Lieberman (I-CT) threatened a filibuster.[1][2]

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Wikipedia

How about "yes, it will lead to single-payer, which beats ours by a long shot" ?


I'm kind of sick of the freedomz of going bankrupt for overpriced care that is worse in quality than developed countries with single-payer.

Mr Person said:

How about "yes, it will lead to single-payer, which beats ours by a long shot" ?

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It's very hard to see how a public option in the exchanges leads to single-payer. The fears of the right and the hopes of the left on that front have equally little support for them.

Greenbeard said:

It's very hard to see how a public option in the exchanges leads to single-payer. The fears of the right and the hopes of the left on that front have equally little support for them.

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If the relevant persons had sufficient influence, the public option could be tweaked until the private market couldn't compete; at the collapse of the private market, one then introduces single-payer.




I am not saying I hope it goes that way. That is just a way in which it might be accomplished.

Mr Person said:

If the relevant persons had sufficient influence, the public option could be tweaked until the private market couldn't compete; at the collapse of the private market, one then introduces single-payer.


I am not saying I hope it goes that way. That is just a way in which it might be accomplished.

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Even if it drove every competitor out of the market and sucked up all their business, it still exists only in the exchanges. Which currently enroll something like 11-12 million people. That's a very small segment of the market and of the population.

Which is why I answered the poll the way I did--give it a shot but it's unlikely to have much effect. As I said above, I think the argument that it could exert downward pressure on provider prices has always been the best argument for it. But exchange business is unlikely to be a big enough component of a big provider system's business--particularly those systems commanding the highest prices--to have much of an impact. But who knows, might as well see what happens.

Greenbeard said:

Echoing a growing number of politicians, Jacob Hacker is back arguing for a public option in the exchanges in a NYT editorial today:

The pricing argument has always been the strongest argument for a public option (though it requires a public option that at least initially gets to tag on to Medicare rates instead of having to negotiate with health care providers like other insurers do). It's predicated on the notion that insurance premiums are high because the negotiated prices that insurers pay care providers for services are too high.

The idea is then that introducing a competing insurer that pays at lower prices would nudge health care providers toward negotiating pricing discounts with private insurers to help them avoid losing all their exchange market share to the public option. Which in turns allows those insurers to offer more competitive premiums.

Provider pricing information is proprietary but indications from back in 2013 do suggest that exchange plans pay the same (high) prices for health care services that other plans and employers pay.

The exception being the well-known rise of narrow network plans in the exchanges, in which insurers carve out high-priced health care providers and are thus able to offer lower premiums:

So is the public option an idea whose time has come?

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What have we got to lose?

Neomalthusian said:

What have we got to lose?

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It won't do much for Alaska until the state changes the state regulations that require insurers to pay more based on the prices providers set in their chargemasters. A public option wouldn't be exempt from that rule so it wouldn't add price competition to your market, as that's inhibited by your insurance regs.

But in the rest of the country there's an off chance that it might.

Greenbeard said:

It won't do much for Alaska until the state changes the state regulations that require insurers to pay more based on the prices providers set in their chargemasters. A public option wouldn't be exempt from that rule so it wouldn't add price competition to your market, as that's inhibited by your insurance regs.

But in the rest of the country there's an off chance that it might.

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Thanks for the link. Jesus F.C.

I was talking briefly to a city government clerk from another town and this topic came up and, for an initial moment, I thought we both were in agreement that this state has a crisis on its hands, but then the next thing out of her mouth was "yeah, for example my deductible at work just went up two and a half times, to $250 from $100! Can you believe that?!" The conversation ended abruptly.

in other words it would be nice if this weren't so obscured from public understanding. I like to think I know at least a little bit about this stuff, but literally no one I know talks about it or gets it. They whine superficially about their deductibles, don't know or care what anything actually costs, and expect some external entity to quietly pay their way.

Neomalthusian said:

Thanks for the link. Jesus F.C.

I was talking briefly to a city government clerk from another town and this topic came up and, for an initial moment, I thought we both were in agreement that this state has a crisis on its hands, but then the next thing out of her mouth was "yeah, for example my deductible at work just went up two and a half times, to $250 from $100! Can you believe that?!" The conversation ended abruptly.

in other words it would be nice if this weren't so obscured from public understanding. I like to think I know at least a little bit about this stuff, but literally no one I know talks about it or gets it. They whine superficially about their deductibles, don't know or care what anything actually costs, and expect some external entity to quietly pay their way.

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A friend (former boss, actually) of mine used to work at the Mass Connector (the original exchange) back when they were starting up a decade or so ago. He told me they did focus groups early on, trying to gauge people's understanding of health insurance. They'd ask people about auto insurance deductibles and people would explain exactly what they are, a perfect account of how they work. And then the staff would ask about health insurance deductibles and the focus groupees would have no idea what they were or how they worked. My friend's reaction being "THEY'RE THE EXACT SAME CONCEPT."

I like to think we're a bit further along these days and that total paternalism isn't actually necessary. But I guess the jury is still out.