By James Rowley Nov. 3 (Bloomberg) — Economists skeptical about a U.S. government-run health-insurance plan received new evidence to support their argument that it won’t force private insurers to cut premiums. The Congressional Budget Office says a version of the so- called public option backed by House Democrats would charge “somewhat higher” premiums than the average private insurance policy offered on a government-sponsored exchange to be set up to sell coverage to small businesses and individuals. That counters claims by President Barack Obama and House Speaker Nancy Pelosi that the public option would charge lower premiums to “keep insurers honest.” One reason premiums may be higher: Pelosi, seeking votes to pass a $1.055 trillion House health bill, decided against a “robust” public option, which would peg doctor reimbursements to Medicare rates to cut costs. Instead, she proposed that the public option negotiate fees it pays providers. “The robust option had a lot more power to buy services from providers at much lower rates than private insurers paid,” said Paul Ginsburg , an economist who heads the nonpartisan Center for Studying Health System Change in Washington. “That would have been a big deal.” The House and Senate are considering legislation to expand health coverage to tens of millions of uninsured Americans and try to rein in costs. The public option is among the most contentious issues, opposed by every Republican and by some Democrats, who say it would offer unfair competition for insurers such as Indianapolis-based WellPoint Inc. and Hartford, Connecticut-based Aetna Inc. Vote Coming Up Pelosi, a California Democrat, is considering a plan to debate and vote on the health-care legislation on Nov. 6, a leadership aide who briefed reporters and who asked for anonymity said last night. The budget office yesterday also reported that health-care costs would eat up as much as 20 percent of income for some families, even those getting subsidies, under legislation being considered by the House. A family of four with an annual income of $66,000 would be eligible for $10,500 in subsidies if they purchased insurance on health exchanges created under the bill, and would still pay $10,000 to cover premiums, deductibles and copayments, the CBO said. On the public option, the budget office estimated in an Oct. 29 letter to congressional leaders that rates the program pays doctors and hospitals would “on average, probably be comparable to those paid by private insurers” that sell on the exchange. Won’t Curb Benefits The public option wouldn’t curb benefit payouts as much as private insurers by managing how people use health care, the CBO said. It would also incur higher costs because it would draw a “a less healthy pool of enrollees.” “Attracting sicker people” and doing less “utilization management than private plans” would “put the public plan in a weak competitive position,” said Ginsburg. The CBO estimated the House public option would attract about 6 million people. Some economists say that to dictate lower fees it pays to doctors and hospitals, the public option would need more enrollees. House Education and Labor Committee Chairman George Miller , a California Democrat, said the new program would “be competitive because it will not be putting money into shareholder dividends and executive salary bonuses.” Questioned about the public plan’s competitiveness at an Oct. 30 conference call with reporters, Miller said it “would operate on a level playing field” that “in some years makes it more expensive than other plans, on other years it may be more competitive or less expensive.” Unfair Advantage Some economists also say the public option would have the unfair advantage of not being taxed and, if it loses money, to ask Congress to make up the shortfall. “I am skeptical of the ability of the public plan to deliver meaningful competition while keeping within a break- even budget constraint,” said Leemore Dafny , a health economist at Northwestern University’s Kellogg School of Management in Evanston, Illinois. “Sure, it will inject competition if they don’t have to break even.” Republican lawmakers, insurance industry officials and some economists contend that the advantage of government subsidies would eventually push private competitors out of the market. “It’s a risk,” said Maine Senator Olympia Snowe , the only Republican in Congress to show willingness to support a Democratic health plan. Working With Democrats Snowe said she’s working with Democrats who oppose the public option, which is included in the proposal Democratic Leader Harry Reid says he will submit to the Senate for a vote. The public option would be included on the new online exchanges intended to extend insurance to individuals and small business owners. House leaders said the CBO estimates on premiums confirm that their bill will curb costs. “This underscores that this legislation will control health costs and lower health-care premiums for families and individuals,” said Representatives Henry Waxman , Charles Rangel and Miller, in a joint statement. Waxman, a California Democrat, is chairman of the Energy and Commerce Committee. Rangel, of New York, heads the Ways and Means panel. The chairmen said under their bill premiums for a family making $102,100 would be $15,000 by 2016. “This is well below the $24,000 family premium expected if Congress fails to act and premiums grow as projected under current law,” they said. To contact the reporter on this story: James Rowley in Washington at jarowley@bloomberg.net
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Health-Care Public Option Skeptics Find Support in CBO Premiums Estimates
