The Irony of Health Care’s Public Option
in Debating the Public Option (Anne Alstott and Ganesh Sitaraman, eds., Cambridge University Press, Forthcoming)
19 Pages Posted: 15 Sep 2020
Date Written: September 10, 2020
The idea of a public health insurance option is at least a half century old, but has not yet had its day in the limelight. This chapter explains why if that moment ever comes, health care’s public option will fall short of expectations that it will provide a differentiated, meaningful alternative to private health insurance and will spur health insurance competition.
Health care’s public option bubbled up in its best-known form in California in the early 2000s and got increasing mainstream attention in the lead up to the 2010 health reform, the Patient Protection and Affordable Care Act (ACA). The idea has reemerged with vigor once again as a core tenet of Democratic presidential nominee Joe Biden’s plans to build on the ACA.
When people talk about health care’s public option, they mean a public health insurance plan, typically based on Medicare that someone could select in the individual, or nongroup, health insurance market instead of a private health insurance offering. Proponents have argued that a public health insurance option could deliver better cost-control than private insurance, while also being able to offer a broad choice of providers and quality control.
Health care’s public option died in the 2010 ACA legislative process, but had it been enacted, it would have faced serious obstacles to produce these results its architects hoped. The assumption that people will select the public option if it is better than other options is belied by a mounting body of empirical literature showing how we struggle, and do not do all that well, when choosing among health insurance options. Even more, political thorniness would almost certainly have prevented the public option from being a clear best alternative, which would have further impeded its ability to stand out in a crowd of options. If consumers fail to gravitate overwhelmingly to a public option, it cannot catalyze the market pressure necessary to produce lower prices or higher quality.
For a public health insurance option to have transformative potential—to promote greater health equity and freedom—it needs to be more than an option among many, what Sitaraman and Alstott call a competitive public option. It must be designed in a way that does not rely on people weighing it against other options and selecting it when it is the best.
This chapter examines possibilities for health care’s public option in three parts. It first explains the theory behind health care’s competitive public option, the form envisioned in the ACA and similar to early proposals by the Biden Campaign during the Democratic primaries. It then considers the challenges this competitive public option would have faced had it become policy reality. Finally, it examines more effective ways that public health insurance might be integrated into a public/private hybrid system to achieve greater health equity.
Keywords: Law & society, health economics & policy, social insurance, public provision, universal coverage, Patient Protection & Affordable Care Act, PPACA, Obamacare, market bureaucracy, competition, regulation, insurance choice
JEL Classification: G52, H53, I13, I18, K23
Suggested Citation: Suggested Citation