Can public health insurance lower health care costs?

With millions of Americans staying away from the doctor and hospital during this pandemic, the private health insurance industry has delivered big profits to its shareholders. At the same time, it is threatening to raise rates significantly, making it near impossible for many people to get good affordable coverage. Vice-President Biden is proposing to provide Americans with a public health insurance option–an option similar to traditional Medicare–as an alternative to private health insurance, if he is elected president. Can public health insurance lower health care costs?

In a nutshell, public health insurance puts the public health first. Unlike private health insurance in the US, public health insurance does not have a profit incentive. It is publicly accountable. And, as with traditional Medicare, the government determines the terms of coverage–how much to pay, for what services, and when, as well as out-of-pocket costs, if any. But, these features don’t mean that a public health insurance plan can compete successfully with private health insurance and bring down health care costs.

The choice of public health insurance, sometimes called a public option, is not likely to bring down costs for Americans unless Congress better regulates private health insurers. To bring down costs, the public option needs to compete on a level playing field with private health insurance. Here’s why and what Congress would need to do.

Right now, private health insurers, including Medicare Advantage plans, have many ways to design their health plans to maximize profits. They can exclude top specialists from their networks in order to deter people with costly health conditions from enrolling in their plans. They can delay and deny care inappropriately to people in poor health to push them into disenrolling and switching to a different health plan. That’s called “lemon dropping.” They can require people to get prior authorizations and referrals in order to get certain care.

Private health plans also can restrict coverage far more than traditional Medicare or another public health plan. Yes, public and private health plans might be required to offer the same benefits, such as cancer care, rehab services and hospital care. But, private health plans might pay for far fewer services and treatments than a public health plan. For example, a private health plan might not cover a certain cancer treatment or might only cover a treatment if certain conditions apply. It might pay for a very limited number of rehab services. Or, it might not pay for some emergency services.

A health plan’s coverage rules can lead to inappropriate delays and denials of care. Still, private health insurers are allowed to establish coverage rules that are proprietary, not subject to public scrutiny. We don’t know how restrictive they are or which private insurers are the worst offenders. All we know is that many private health plans deny their members coverage for a lot of services.

For the public health plan to lower health care costs, it would have to compete on a level playing field with private health insurance. For the playing field to be level, public and private health plans would have to follow the same coverage rules, not simply offer the same benefits. That’s how private health insurance works in other wealthy countries. The government sets the rules as to what is covered and when, and they are open to public scrutiny.

Will the next Congress enact legislation to offer a public option and level the playing field between the public health plan and private health plans? It should. There is no evidence that allowing private health insurers to set their own coverage rules has any benefits. Their coverage rules cannot be analyzed and evaluated. Indeed, the evidence cuts the other way, with some lawsuits revealing that private health insurers can rely on coverage rules that are not in compliance with standard medical treatment protocols.

Here’s more from Just Care:

• Judge finds UnitedHealth illegally denied care to thousands
• Seven reasons commercial insurance cannot meet our health care needs
• Four things to think about when choosing between traditional Medicare and Medicare Advantage plans
• Coronavirus: Older adults take full advantage of Medicare telehealth benefit
• Coronavirus: Trump demands Social Security cut in next stimulus bill