A Modest Proposal for a Competing Public Health Plan

Source: Len Nichols, John M. Bertko, Actuarial Consultant, New America Foundation, Policy Paper, March 11, 2009

From the summary:
Many comprehensive reform proposals reflect the fundamental need to control health care costs and create a marketplace wherein insurers compete on value and customer satisfaction, rather than risk selection and marketing. Several leading proposals promote competition between private health plans and a “public” health insurance option. Unfortunately, the debate over this issue has become polarized unnecessarily.

It is possible to structure a new insurance marketplace so that public and private health plans compete on a level playing field. This will require separating the oversight of the public plan from that of the managers of the marketplace or exchange(s). It will also require that all rules of the marketplace – benefit package requirements, insurance regulations, and risk adjustment processes – apply to all plans equally, whether public or private. Finally, this model requires that we address cost growth containment systemically and avoid relying heavily on the public plan’s potential market power. In turn, this will require a commitment on the part of policymakers to acquire a health information infrastructure, develop best practice information, and encourage re-aligned incentives that promote high-quality, efficient care for all.

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