Democratic congressional leaders ramp up efforts to craft a health insurance public option, generating hospital pushback

• Leading Democrats in the House and Senate sent out a request for information to healthcare stakeholders, seeking input as they look to establish a public option for health insurance.
• Various question surround the design and impact of a public option.
• Hospital groups don’t view the concept as being viable.

As the debate over adding a public option to health insurance marketplaces gained some steam Wednesday, leading hospital groups again declared their opposition to the idea.

Two congressional committee leaders announced they would collaborate on legislation to establish a public option. As a first step, they sent out a May 26 request for information to stakeholders, seeking input by July 31.

The RFI came from Sen. Patty Murray (D-Wash.), chair of the Senate Health, Education, Labor and Pensions Committee, and Rep. Frank Pallone (D-N.J.), head of the House Energy and Commerce Committee. “Our goal in establishing a federally administered public option is to work towards achieving universal coverage, while making healthcare simpler and more affordable for patients and families,” they wrote.

Although legislation for a public option had been introduced in the previous Congress and again in March 2021, by which point Democrats had narrow control of both chambers, the announcement by the two committee leaders signals a renewed effort.

The bill likely would have the backing of the White House, with President Joe Biden having campaigned on the idea of adding a public option to the Affordable Care Act (ACA) marketplaces. Biden did not support moving to a single-payer system, which would be a far more sweeping change.

With both houses of Congress almost evenly divided, passage of a public option will be tricky. The best chance seemingly is to include the legislation in a reconciliation bill, which requires only a simple majority rather than 60 votes in the Senate. It’s uncertain whether such a tactic would be allowed.

Attempting to make healthcare more accessible

The COVID-19 relief legislation known as the American Rescue Plan included a two-year expansion of ACA marketplace subsidies, raising the threshold at which individuals and families qualify for subsidies and also increasing the amounts available to people with lower incomes. The administration also opened a special enrollment period from Feb. 15 through Aug. 15 for ACA marketplace plans.

According to an analysis by the Kaiser Family Foundation, eligibility for subsidies increased by about 20% (from 18.1 million people to 21.8 million) through passage of the legislation. Among the 28.9 million uninsured, 1.4 million became newly eligible for subsidies.

A public option would be a significantly more dramatic step, potentially making a Medicare-like plan available to all adults and families who don’t qualify for coverage through another federal healthcare program. Alternatively, eligibility could be restricted to those who lack access to adequate coverage through an employer.

In its recent analysis of the impact of a public option, the Congressional Budget Office (CBO) said much would depend on the plan design, including how payment rates to providers would be determined.

“There are two broad approaches to determining in-network provider payment rates that the federal government could consider — administering rates or negotiating them,” CBO wrote. In the former approach, payment might depend on a multiplier of Medicare fee-for-service rates.

Rate setting could be preferred to negotiation in part because the latter “would be administratively complex and difficult to implement,” CBO wrote.

Hospitals aren’t eager to engage on the idea

Murray and Pallone specifically sought stakeholder feedback on the following questions:

• Who should be eligible for the public option? Should a federally administered plan be available to all individuals or limited to certain categories of individuals (e.g., ACA marketplace-eligible individuals, private employers, individuals offered employer coverage)?
• How should Congress ensure adequate access to providers for enrollees in a public option?
• How should prices for healthcare items and services be determined? What criteria should be considered?
• How should the benefit package be structured?
• What type of premium assistance should the federal government provide for individuals enrolled in the public option?
• What should be the role of states in a federally administered public option?
• How should the public option interact with public programs, including Medicaid and Medicare?
• What role can the public option play in addressing broader health system reform objectives, such as delivery system reform and addressing health inequities?

The American Hospital Association (AHA) and the Federation of American Hospitals (FAH) don’t seem inclined to get into details about a public option. They quickly expressed their opposition to the general concept.

Both groups support expanded healthcare coverage, but the preference is for that to take place through the commercial market.

“We do not support the introduction of a public option plan that could increase the strain COVID-19 has placed on our healthcare system,” AHA President and CEO Rick Pollack said in a statement. “This type of proposal would strip significant resources from providers by relying on inadequate reimbursement rates, increasing the risk of hospital closures and threatening access to care for patients and communities.”

FAH President and CEO Chip Kahn voiced similar sentiments.

“Congress should focus on making new ACA subsidies permanent, incentivizing states to expand Medicaid and finding a way to lower skyrocketing drug prices,” Kahn said in a statement. “We look forward to working with Chair Murray and Chair Pallone, as well as other congressional leaders, on these important issues.

“Now is not the time for us to become embroiled in debates over issues like public option. It would be a mistake to allow such distractions to stand in the way of enacting legislation that sets the pathway to all Americans having the health coverage and healthcare security that all of us deserve and should expect.”