The Public Option Revisited

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Ezra Klein quotes Congress Daily on the cost of healthcare reform that includes a public option.  The estimates are from the CBO:

The original House bill required the public plan to pay providers 5 percent more than Medicare reimbursement rates. But as part of a package of concessions to Blue Dogs, the House Energy and Commerce Committee accepted an amendment that requires the HHS Secretary to negotiate rates with providers. That version of the plan will save only $25 billion.

In total, a public plan based on Medicare rates would save $110 billion over 10 years. That is $20 billion more than earlier estimates, a spokesman for House Speaker Pelosi said.

So a public option would save anywhere between $2 billion and $11 billion per year depending on whether or not it’s based on Medicare rates.  That’s savings to the government, and it’s based on the fact that the public option would lower the cost of insurance and the feds would therefore have to pay lower subsidies to low-income households buying coverage under the individual mandate.  However, if the private plans lower their prices to compete with the public option, then everyone buying insurance would save money, not just low-income families, and the total cost savings to consumers would be much higher.

It’s hard to say how significant this would be without seeing the actual CBO report, but in any case the point is clear: the public option saves money.  Supposed “fiscal conservatives” who oppose the public option are either poorly informed or simply hypocritical.  It’s not only good for the public, it’s something that’s more fiscally responsible than a healthcare plan that’s purely private.  That’s why we need it.

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