New Report: State Public Option Fails to Deliver on Promises and Raises Doubts About Success of Government-Run Plans 

Today, a new report released by Lanhee J. Chen, Ph.D., Tom Church, and Daniel Heil, supported by the Partnership for America’s Health Care Future, shows  in Colorado, Minnesota, Nevada, and Washington, have been unable to reconcile the tension between lowering premiums and maintaining adequate provider reimbursement rates. The failure to address this conflict, which is inherent in public option plans, highlights the fundamental flaws that will keep such plans from delivering on their promises to lower costs or expand access.

“Government-controlled health care systems, such as the public option, consistently fall short in providing Americans with affordable, high-quality health care coverage. This report underscores a well-established truth: public option plans are neither popular nor affordable,” said Lauren Crawford Shaver, the Partnership’s executive director. “Instead of advancing flawed initiatives like the public option, it is imperative for state and federal lawmakers to build on and improve what is working.”  

The study evaluates four state public option plans with a focus on the premiums and provider reimbursement rates, finding  “lawmakers’ unwillingness to accept the inevitable trade-offs public option plans present between reimbursement rates and premiums make it unlikely the plans will deliver significant premium reductions or broadly attract consumers.”

Key findings from the report include:

• Washington State and Colorado have each failed to meet their respective premium target goals:
  • After three years, only four of Washington State’s 39 counties have public option plans that have met the state’s premium targets for bronze-level plans; only one county has met the target for silver-level plans.
  • In Colorado, only 15 percent of plans met the state’s initial-year premium targets, and even fewer plans met the state’s second-year targets.
  • In 2022 and 2023, aggregate premiums for Washington State’s public option plans were $2 million more than if public option participants had chosen the lowest-cost non-public option. In Colorado, the figure was $13.3 million in 2023. 
• Washington State, Colorado, and Nevada have failed to meet their premium targets in part because policy makers have been unwilling or unable to secure sufficiently low reimbursement rates:
  • In Washington State, lawmakers hoped to set reimbursement rates at Medicare-level rates but settled on a statewide ceiling of 160 percent of Medicare-level rates.
  • Colorado lawmakers enacted state-mandated floors on hospital reimbursement rates. In some cases, these floors have undermined previous successes by private insurers to secure lower reimbursement rates.
  • While Nevada will not begin public option enrollment until 2026, an analysis of insurers’ payments to physicians and other medical providers suggests the state will not be able to significantly reduce provider reimbursement rates. Instead, achieving the state’s premium targets will require large cuts to hospital reimbursement rates and aggressive rules on insurers’ administrative costs.
• Minnesota state lawmakers hope to launch a state public option in 2027; however, estimates suggest that MinnesotaCare’s reimbursement rates are significantly below commercial providers.
  • As a consequence, any significant shift in exchange enrollment to a MinnesotaCare public option would result in significant cuts to providers.
• Lawmakers’ unwillingness to accept these inevitable trade-offs has produced plans that have failed to attract consumers. This reality is evident in meager enrollment in the early states: 
  • Washington State and Colorado public option plans have enrolled less than one percent of their respective state populations.
  • State-sponsored actuarial analyses of Nevada’s state plan suggest the public option will have little effect on total exchange enrollment, even if insurers meet the state’s aggressive premium targets.

To read the full report, CLICK HERE.

To learn more about the Partnership for America’s Health Care Future, CLICK HERE.

### 

The Partnership for America’s Health Care Future’s (PAHCF) mission is to build on and improve what’s working, where private coverage, Medicare and Medicaid work together to expand access to coverage and care, and fix what’s not. We want to work together to lower costs, protect patient choice, expand access, improve quality and foster innovation. And whether it’s called Medicare for All, Medicare buy-in, or the public option, one-size-fits-all health care will never allow us to achieve those goals.