Pelosi To Allow Public Option To Use Medicare-Like Reimbursement Rates In Final House Bill

The Hill newspaper is reporting that Speaker Nancy Pelosi (D-CA) is scrapping an agreement with Blue Dog Democrats that decoupled the public option from Medicare and required the plan to directly negotiate its reimbursement rates with providers.

“Pelosi is planning to include a government-run “public option” in the House version of the healthcare bill. She wants to model it on Medicare, with providers getting reimbursed on a scale pegged to Medicare rates,” Mike Soraghan writes. The original House bill allowed the public option to reimburse providers at five percent above Medicare rates:

Pelosi’s decision to abandon the agreement that was made with a group of Blue Dogs to get the bill out of committee would steer the healthcare legislation back to the left as she prepares for a floor vote. Pelosi is planning to include a government-run “public option” in the House version of the healthcare bill. She wants to model it on Medicare, with providers getting reimbursed on a scale pegged to Medicare rates….Blue Dog Democrats, many of whom represent rural districts where Medicare reimbursement rates are low, vehemently oppose tying the public option to Medicare.

The compromise initially “drew howls of protest from liberal members” who argued that a small just-established public option would be unable to negotiate lower reimbursement rates without relying on Medicare’s existing size and leverage. By reimbursing providers some percentage above Medicare rates, however, the public option could benefit from Medicare’s ability to negotiate with providers and pass on the savings to consumers, these critics argued.

Indeed, according to the Congressional Budget Office, a public option that reimburses providers at market rates would not lower premiums. In its analysis of the HELP committee bill the CBO concluded that “the public plan would pay providers of health care at rates comparable to privately negotiated rates—and thus was not projected to have premiums lower than those charged by private insurance plans in the exchanges.” As a result, that kind of public option does not “have a substantial effect on the cost or enrollment projections.”

Conversely, the House bill’s original public option “would be about 10 percent cheaper than a typical private plan offered in the exchanges,” the Congressional Budget Office concluded.

During a recent hearing before the Democratic Steering and Policy Committee Forum on Health Insurance Reform, Pelosi insisted that a robust public option would lower private premiums and hold insurers accountable. “[If reform does not include a public option], we will be passing the ‘Private Insurance Profit Perpetuation Act,’” Pelosi said. “We have no intention of doing that…We want the private sector to thrive — we don’t want our members to go into an exchange where they only have one choice, where there’s sole sourcing. But that the public option provides that competition.”