- Colorado and Washington state have either halted or slowed their launch of public option plans.
- The decisions to throttle back the plans were spurred by providers’ financial challenges amid the pandemic.
- Joe Biden’s public option plan would carry the same financial risks for providers, potentially weakening its appeal.
State efforts to implement a so-called public option are running aground amid provider financial struggles during the COVID-19 pandemic. The implications could carry over to the federal level, analysts say.
Two states at the forefront of efforts to launch government-run health plans that use lower provider rates have either halted or slowed those initiatives. And some say those struggles could foreshadow trouble for presumptive Democratic presidential nominee Joe Biden’s plans for a national public option, which is a central component of his healthcare platform.
State proposals hit turbulence
Colorado legislators have dropped plans to launch a government-sponsored health plan available to all residents on the state’s Affordable Care Act (ACA) marketplaces, according to published reports. That plan would have:
- Set minimum provider payment rates at 155% of Medicare rates
- Required hospital participation
The public option plan would have cost hospitals between $536 million and $1.1 billion annually over its first three years, according to a Colorado think tank analysis.
Washington state has scaled back the fall launch of its public option, called Cascade Care, according to published reports. Gov. Jay Inslee said it could take years to fully ramp up the plan after it was launched last fall.
“While Cascade Care may take a preliminary approach in its initial year, we fully expect it to flourish in future years,” Inslee said in a letter to leaders of his state’s marketplace in May.
Details of that plan include:
- Setting most provider rates at 160% of Medicare rates
- Establishing a rate floor for rural hospitals at 101% of Medicare rates
- Establishing a rate floor for primary care services at 135% of Medicare rates
Washington state leaders said the slower approach was needed due to the increased financial strain the pandemic and associated mandates to suspend elective surgeries have placed on providers.
Providers “are making the case of how fragile they are financially and how ill-prepared they are for building excess capacity into their system that can handle surge needs, like a pandemic,” said James Capretta, a fellow at the right-leaning American Enterprise Institute. “That may resonate, at least for some time.”
Implications at the federal level
The trouble for state-implemented public options also may bode ill for nationwide implementation of such plans, including Biden’s.
Key provisions of Biden’s plan include:
- Creating a federal public option available to marketplace-eligible individuals, people with employer coverage, and low-income adults, including adults in the Medicaid expansion population
- Requiring public-option plans to include ACA essential health benefits
- Negotiating with providers to set payment rates
The state-specific difficulties underscore the very different challenges that apply to each insurance marketplace. That dynamic would keep a single type of public option from succeeding across all states, said Robert Moffit, PhD, former chairman of the Maryland Health Care Commission.
The challenges at the state level also underscore the financial challenges that any national public option would create for providers, Moffit said.
Another potential obstacle is illustrated by the muddled findings from a recent RAND Corporation analysis of public option alternatives. The analysis found under such plans, some enrollees would be better off by either becoming newly insured or getting a better deal on coverage. But others would be worse off, either becoming uninsured or getting a worse deal.
Another question regarding Biden’s plan is its stated core cost-control mechanism: negotiating lower rates with providers, “as in Medicare.”
“Medicare doesn’t negotiate with providers,” Capretta said. “People often will say that, as a way of making it seem like it’s sort of a friendly sit-down and so on.”
Despite providers’ evident financial vulnerability and their essential role in responding to the pandemic, Capretta doubted Biden will back off plans to push a national public option. The continued push will be driven both by notions of affordability and because the plan was presented as an alternative to single-payer proposals favored by more-liberal Democrats.
“The Biden campaign doesn’t have any choice but to continue to press forward and hope that the pollical environment will allow them to pursue it if he were to win the election,” Capretta said.
