Reid’s Merged Public Option To Compete On Level Playing field, Negotiate Reimbursement Rates

The opt-out public option that Majority Leader Harry Reid (D-NV) sent to the Congressional Budget Office (CBO) would establish “a national insurance plan with government seed money and be run by a private, not-for-profit board,” Fox News reports. The plan would negotiate its own reimbursement rates with providers and allow state legislatures to opt out of the option by 2014 if they can provide comparable coverage in order to exit out of the federal plan.” States may also choose to establish a consumer-driven cooperative, although “states that opt out of the public plan could not offer co-ops.”

The comprise was developed by Sen. Chuck Schumer (D-NY), who converted Sen. Tom Carper’s (D-DE) original state-based opt-in proposal into a national opt-out option, and is far more conservative than the robust public option being considered in the House.

If the option is modeled on the provision in the HELP Committee’s bill, the plan would only save about $25 billion over 10 years, without significantly lowering health insurance premiums. It would likely lack Medicare’s market clout or leverage to significantly lower health care costs, but would still represent a not-for-profit alternative that can begin spearheading critical delivery system reforms.

Since both Senate bills establish state and regional based exchanges in lieu of a single national structure, it’s likely that the compromise in the merged Senate bill will establish 50 different options, all controlled by the Secretary of Health and Human Services. The public plan would have to attract a network of providers, charge premiums “in an amount sufficient to cover expected costs,” and meet all solvency and reserve fund requirements.


If Reid follows HELP’s template, then within each state or region the Secretary would negotiate reimbursement rates on behalf of the pubic option that would likely mirror the rates used by private insurers (the legislative language states that rates “shall not be higher, in aggregate, than the average reimbursement rates paid by health insurance issuers offering qualified health plans through the Gateway”). The HELP language also allows the public option to “develop or encourage the use of innovative payment policies that promote quality, efficiency and savings to consumers,” a critical provision that would allow the public option to invest in payment and delivery system reforms.

Reid aides stressed that the legislative language for the opt-out provision was a “work in progress” that has yet to be scrutinized by the Congressional Budget Office. The aide said “Reid delivered a menu of proposals to the CBO for review and will make a final decision about what the Senate measure will include once he receives cost estimates for the various policies, which could come within a week.”

The merged Senate public plan would still have to be reconciled with the House, where liberals “are keeping up their pressure on key Democrats — including President Barack Obama — and urging them to embrace a robust public insurance option” that reimburses providers at five percent above Medicare rates. (The Congressional Budget Office has concluded that the option could save approximately $85 billion more than a level-playing field proposal.)

Rep. Raúl Grijalva (D-AZ) — co-chairman of the Congressional Progressive Caucus — explained that there is “a big difference” between the Senate’s proposal and the Progressive Caucus’ demand. “’My state would opt out immediately,’ [out of the Senate’s public plan] he said, predicting that Texas and other conservative states would as well, despite having some of the highest rates of uninsured people in the country. “Without protections for those people who would be left behind, I would have a hard time,” Grijalva said. “Without the robust plan, based on Medicare plus 5 [percent], there is no competition, there is no mechanism to drive down costs for insurance companies and you hurt coverage,” Grijalva said.