CBO Scores Stark Public Option Proposal


Rep Pete Stark got the Congressional Budget Office to score a new version of the old public option idea, and the results underscore the point that such an option would be a good idea:

CBO estimates that the public plan’s premiums would be 5 percent to 7 percent lower, on average, than the premiums of private plans offered in the exchanges. The differences between the premiums of the public plan and the average premiums of private plans would vary across the country because of geographic differences in the plans’ relative costs. Those differences in premiums would reflect the net impact of differences in the factors that affect all health insurance premiums, including the rates paid to providers, administrative costs, the degree of benefit management applied to control spending, and the characteristics of the enrollees. […]

CBO and the staff of the Joint Committee on Taxation (JCT) estimate that the proposal would reduce federal budget deficits through 2019 by about $53 billion. That estimate includes a $37 billion reduction in exchange subsidies and a $27 billion increase in tax revenues that would result because a greater share of employees’ compensation would take the form of taxable wages and salaries (rather than nontaxable health benefits). Those changes would be partly offset by an $11 billion increase in costs for providing tax credits to small employers. (The proposal would have minimal effects on other outlays and revenues related to the insurance coverage provisions of PPACA.)

They write that “[t]he bulk of those budgetary effects would occur in the second half of the decade.”

Ultimately, however, I think this kind of technical analysis actually misses the public options greatest deficit-reducing potential. This is that, basically, if you’re able to really make the Affordable Care Act work and turn it into something people like then it’s possible to imagine down the road a world in which means-tested ACA coverage is provided to people who are 69 or 75 or 82 or 97, which would be more fiscally sustainable than the Medicare model. But you can’t just kind of wave your hand and make this happen, you would need to prove to people that ACA really works and delivers health benefits people like the way Medicare does. And the best way to make that happen is to incorporate some kind of public option or Medicare buy-in scenarios in to the ACA mechanism and ensure that people aren’t being left to the tender mercies of the insurance industry.