The Best Option: Why the Public Option Won’t Be Universal

November 19, 2019

Health care—and the prospect of a single-payer system—has gotten a lot of attention at the national level and in presidential debates this year. And for good reason: The costs of health care are consistently rising faster than the economy overall, and households are bearing those increased costs through growing premiums and deductibles. That means many Americans—even those who are insured—still aren’t able to get all of the health care they need.

Momentum against the current system is building, and the state of New York may soon grant the movement its biggest win yet: the New York Health Act, a comprehensive single-payer bill and the subject of a hearing I testified at late last month.

Upon passage of the bill, New York residents would have no deductibles, no co-pays—no payments at all at the point of health care service. All residents would be covered under the bill, which would prohibit the sale of private insurance covering the same major medical care covered under the legislation. As a result, there would be no narrow networks, no eligibility rules, no “churning” in and out of coverage when you change jobs—just 100 percent progressively tax-financed universal single-payer coverage.

From a political standpoint, the bill is surprisingly close to passage. It passes the assembly annually and has one senator short of a majority as cosponsors. Governor Cuomo has said that he would not veto the bill if passed. With high turnout expected for the 2020 elections, Democratic senators in New York are relatively safe to pass such a sweeping reform. Hearing the compelling testimonies of state residents and leaders who have sacrificed to get health care for themselves, their families, and their employees, one can begin to grasp the urgency of the moment.

The idea of a public option, however, remains a popular alternative among more moderate candidates. The idea behind the public option would be to introduce a new alternative for consumers who find the private market unaffordable. In most states considering this kind of legislation, the public option would work by allowing consumers the option of buying into a narrow-network Medicaid policy alongside other options in the private insurance marketplace. As I testified before the legislature, there are several reasons the public option cannot bring the kind of large-scale relief that the public seeks.

Consumers won’t be clamoring for a public option.

Under a public option, policies would retain the high deductibles of the Affordable Care Act (ACA) private insurance markets, which average $4,000 this year for benchmark coverage and draw few consumers out.

The public option would combine high deductibles with very narrow networks of doctors from which to choose. The bright side would be about a 15 percent discount in the monthly premium, since doctors would get paid less. And that brings up the second point.

Medical providers won’t be stoked about a public option either.

Consider this: Medicaid pays about 56 percent of what Medicare pays in the state of New York. Most providers’ offices can’t and won’t operate at that level. But if provider fees are the only source of savings, as is the case in each of the states currently considering a public option, we face a steep tradeoff between savings and access. (Alternatively, the New York Health Act maintains the average reimbursement rate and generates savings through other avenues, including through the elimination of private insurance companies.)

Finally, private insurance companies won’t want to contract with the states to offer a very widespread public-option alternative.

We would be mistaken to expect private insurers to create a low-cost, high-quality alternative that wholly dominates their private product. It would be irrational.

Instead, the state-insurance partnerships considering the public option are designing limited-eligibility programs for people who are unable to get coverage through an employer, Medicaid, or marketplace subsidies from the ACA. This limited scope leaves little room for major competitive pressure in the market because consumers won’t be choosing between alternatives; they’ll only have one option.

What the public cares about is whether they will see relief—whether their deductibles can be eliminated without their premiums going up, whether they can find doctors near their home to choose from, and whether they can freely tend to their own well-being. The public option conveniently leaves these questions largely unanswered. The best option for truly universal health care is a single-payer system.