Colorado lawmakers just nixed a bill that would’ve led to the creation of a state-level public health insurance option.
Hospitals and doctors argued that their revenues would plummet if a state-run health plan hit the market. The Colorado Hospital Association warned that some of its members would go out of business.
That’s not a prospect people are enthusiastic about. The pandemic drove home how crucial access to quality health care is, not just in Colorado but around the country.
Colorado is not the only state contemplating a greater role for government in the healthcare market. Apparently, states feel the need to discover for themselves that public health plans are unaffordable and erode the quality of care available to patients.
No less than six states in addition to Colorado are dabbling in everything from a public option to a full-fledged government takeover of health insurance.
California: Several members of the State Assembly introduced a bill in February 2021 that would ban private insurance and launch a statewide single-payer system called CalCare. They ended up shelving it in April, ostensibly because they needed to figure out how to pay for it. A similar measure that ended up stalling out in the Assembly in 2017 would’ve cost $400 billion—more than double the state budget.
Connecticut: In March and April, two state Senate committees ratified a public option bill. In the coming weeks, the full state Senate will consider it. Under the proposal, non-profits and small businesses could purchase the Connecticut Partnership Plan, a state-run plan available to teachers and municipal workers, for their employees. Democratic Governor Ned Lamont remains wary and worries taxpayers will end up footing a large bill for the expansion of coverage.
Nevada: The state Senate introduced a bill in April that would, in essence, allow any resident to buy a Medicaid-like plan from any private insurer that covers Medicaid beneficiaries in Nevada. Insurers would have to offer a 5% discount on premiums. The plan would be overseen by state officials but would not be directly subsidized by taxpayers. Lawmakers have until May 31 to act on the bill before the state’s legislative session ends.
New York: Members of the State Assembly passed a statewide single-payer bill out of committee in April. It’s now before the full Assembly. If passed, the bill would ban private insurance and force all New Yorkers onto a public plan.
Oregon: The state House of Representatives is considering a public option bill that would give residents who don’t qualify for Medicaid or Medicare the opportunity to enroll in a new public plan that pays healthcare providers the same rates as Medicare. Lawmakers may delay debate on the bill until 2022 by asking the Oregon Health Authority to provide recommendations.
Washington: The Evergreen State became the first in the country to create a public option in 2019. But the rollout of “Cascade Care” hasn’t gone as well as proponents hoped. This year, its first in operation, premiums were higher than the average private exchange plan, partly because Cascade Care offers generous coverage. Many providers have refused to accept the plan, given its low reimbursement rates.
Proponents of state-run health plans look at the low rates that America’s legacy public option Medicare pays—and conclude that health costs would plummet if everyone could pay the Medicare rate.
There’s no question private insurers pay more than Medicare. A Kaiser Family Foundation analysis of 19 studies found that private plans paid hospitals nearly twice as much as Medicare. For every dollar Medicare spent on doctor’s office visits, private insurers paid $1.43.
The RAND Corporation estimates that private insurers paid hospitals 247% more than Medicare for the same inpatient and outpatient services in 2018.
If the public option were able to copy Medicare’s payments, providers would find themselves in a world of financial hurt. A 2019 study from KNG Health Consulting found a country-wide Medicare-like public option would reduce payments to hospitals by $800 billion over 10 years.
Healthcare providers can’t just eat those losses. They’d have to reduce headcount or skimp on updates to medical devices and supplies. Consequently, patients would have to wait longer to see specialists—or would have to make do with treatment from outdated technology.
States aren’t waiting for Congress to inject more government in their health insurance markets. But that’s a mistake. Public plans—or worse, state-level single-payer systems—are costly proposals that will yield worse care for patients.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All, (Encounter 2020). Follow her on Twitter @sallypipes.