Health-care reform: What will keep health care affordable if not a public plan?
Dec 18, 2009 2:59 PM
There’s a growing chorus of public plan supporters calling for the health-care reform to be killed if it doesn’t include some kind of public plan option. Some argue that without it there’s nothing to control premiums, so why mandate that most people buy health insurance from the private market? But studies suggest that the average household would save money under the health care bills, even without the public plan.
A study over the summer from the Commonwealth Fund tested three scenarios for health-care reform. One included a “robust public option” that paid providers Medicare rates. Another had a public option that paid providers a bit less than private insurance and a bit more than Medicare. The third had no public plan. The two scenarios with the public plans lowered premiums more and saved households more money sooner. But even without a public option, families would be saving money: $1,576 a year on average by 2020.
That’s not to say that a public health care option is not a worthy policy goal (which is one reason why Consumers Union, our parent organization, supports it). “A strong public plan enables you to move faster and have a competitive dynamic sooner,” says Cathy Schoen, senior vice president of the Commonwealth Fund and author of the study. But even without a public option, the bills would save consumers money in a number of other ways. Ezra Klein, at the Washington Post, tackled some of them yesterday. Important reforms include:
- The individual mandate. Bringing more people into the risk pool lowers premiums for everyone. It’s how insurance works. People who now have no insurance will obviously pay higher premiums—higher than nothing, that is—as will those who are switching from a barebones junk plan. But the coverage they have will be worth a lot more, and over a lifetime that could lower overall health spending (because they get better care, sooner) and also lower their personal out-of-pocket expenses.
- Payment reforms. The fee-for-service system we have now, which pays doctors and hospitals for each service they provide, is an open invitation to overtreatment and waste. The reform plans set up pilot programs to experiment with new payment systems, like bundled payments and pay-for-performance measures. These turn the incentives in the right direction: providers will be paid on how well they take care of you, rather than how much care they give you. The experiments will start in Medicare, but if they’re successful, private insurers will have every incentive to adopt them as well.
- Prudent purchasing. Regulators of the health insurance exchanges—where most people would purchase individual plans—will have the power to kick insurers out of the exchange if they get too greedy or don't follow rules for fair marketing. No health plan will want that to happen, because if they’re not in the exchange, they’ll lose their customers.
- Understandable Insurance Options. It’s almost impossible to understand insurance plans today, let alone compare them. That would change under reform. New transparency rules will require plans to be written in plain English, and consumers will be able to compare them side-by-side before deciding which one to buy. They’ll also have satisfaction surveys and other ratings to help them choose. This helps create better competition and a healthier marketplace. When consumers can meaningfully compare plans, insurers have to provide real value to attract customers.
These are just the highlights. It’s a large bill, after all. We’ll continue to bring you information on what works in the bill, and what we think should be improved.
—Kevin McCarthy, associate editor
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