The Cost and Coverage Impacts of a Public Plan: Alternative Design Options
Some national health reform proposals would create a “public plan” that would compete for enrollment with the private insurance industry. The details of such a plan would work are uncertain. This paper presents impact estimates under several variations on the public plan model. Each variation assumes that the public plan is implemented together with President Obama’s coverage expansion proposals, which are estimated to cover about 28 million uninsured people.
If Medicare payment levels are used in the public plan, premiums would be up to 30% less than premiums for comparable private coverage. On average, the monthly premium in the public plan for a typical benefits package would be $761 per family compared with an average of $970 per family in the private market for the same coverage. If, as the President proposed, eligibility is limited to only small employers, individuals and the self-employed, public plan enrollment would reach 42.9 million people. The number of people with private coverage would fall by 32 million people. If private payer reimbursement levels are used by the public plan, enrollment would be lower, with only 10.4 million people switching to the public plan from private insurance. Medicare premiums would be lower than private premiums because of the exceptional leverage Medicare has with providers and because Medicare’s administrative costs are about one-third of administrative costs in private health plans.
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