With the stalled Build Back Better package, President Joe Biden needs to use the State of the Union address to create momentum around a health care policy agenda. He should push for a clear policy that will make health care more affordable for millions of Americans: a public option.
A public option would address many of the goals of the Build Back Better’s health care provisions: providing coverage for those in the Medicaid gap and bringing down the cost of plans available on the exchanges. Furthermore, pushing for a public option is a clear policy that the public understands and wants – which will help bolster Democrats in the midterms.
Over the past year, Democrats pushed for many health care priorities, fearful of when their next chance at the majority would be. But to keep costs down, many of the proposed health care provisions were set to expire after a few years. This was the wrong approach. Democrats have a narrow majority and it’s in peril. Temporary health care programs do not encourage good policy making or an efficient use of public dollars — and are at risk of termination under a Republican-controlled Congress.
Creating a national public insurance option can increase coverage and bring down costs – accomplishing many of the objectives of the BBB. In the 14 Republican-controlled states that have refused to expand Medicaid under the Affordable Care Act, a public option could be fully subsidized for those who would otherwise be eligible for Medicaid. This would help the 2.2 million Americans who currently fall into the so-called Medicaid-gap obtain coverage.
But rather than solely focusing on a narrow program that would only benefit people in states Democrats will be hard-pressed to win in 2022, the public option would also be available on the exchanges nation-wide. Pulling on lessons from Washington state’s experience, the government could use Medicare contracts as leverage to incentivize hospitals and physicians’ groups to contract with the public option plan. Reimbursement rates could be set higher than Medicare rates and lower than average commercial rates to result in a plan that would be more affordable than many exchange plan offerings.
Currently, with the enhanced premium subsidies, plans have had minimal incentives to lower costs in the exchange marketplace. The Affordable Care Act (ACA) provided subsidized health insurance coverage for people with incomes up to 400% of the federal poverty line (FPL) (roughly $54,000 for an individual or $73,000 for a family of three). But because many families still found coverage cost prohibitive, Congress used the American Rescue Plan Act (ARPA) to temporarily expand the subsidies for families above 400% FPL and increase the amount of the subsidy for all income levels. These changes pushed exchange enrollment to its highest levels ever, hitting 14.2 million for 2022 coverage. Making coverage more affordable helped more people obtain coverage. But rather continually increasing subsidies and putting no downward pressure on costs, Biden should push to add a competing product with the leverage of the government to drive down costs across the board.
The Urban Institute modeled the cost of a public option that reimbursed physicians 115% of Medicare rates and hospitals 160% of Medicare rates and found it would drive down premiums in the non-group market by 12% and reduce federal deficits by $6 billion annually.
Health care is complicated and expensive, and programs typically need to be tweaked and reformed after passage. Passing programs for a limited period does not provide the opportunity for iteration, as their very survival will be in question. President Biden should push for a public option in his State of the Union address to help people get affordable coverage and help Democrats win in 2022.
