Once a rallying cry for pragmatic Democrats, the “public option” has fallen on hard times.
Several recent attempts to create such a government-run insurance plan at the state level have proven unworkable, unpopular, or both. And despite the support of President Joe Biden, the prospects for a federal public option look bleak.
Two professors at the University of California, Berkeley, are trying to buck this trend. Richard M. Scheffler, who was a member of Gov. Gavin Newsom’s Healthy California for All Commission, and Stephen M. Shortell have written a new report outlining their “Golden Choice” public health insurance option. They claim it will lower premiums and promote competition in the state’s insurance markets.
But the Golden Choice approach, like all public option variants, would choke off access to timely, high-quality care – and move the state one step closer to a government takeover of the insurance market.
The public option is generally defined as a government-run and -administered health plan that competes against private insurance alternatives.
But several states have opted to create a public option by co-opting private insurers. Colorado, Nevada, and Washington are all requiring private insurers to offer a plan that meets certain government standards, including premium caps. Nevada’s plan, which will come into being in 2026, will forbid private insurers that refuse from offering Medicaid managed care plans.
All the state-level public options in existence have struggled to launch. As Scheffler and Shortell write, state-level public options “have had little success in attracting enrollment or increasing competition among insurers to lower premiums.”
They believe that their Golden Choice plan will succeed where others have failed. Instead of turning the screws on insurers, Golden Choice trains its focus on healthcare providers. This latter group would “accept the financial risk of delivering health services” and in return “receive a risk-adjusted, per member per month payment for each enrollee.”
Scheffler and Shortell say their model would provide providers “with a predictable revenue stream and with incentives to develop innovative care models and continuously improve patient care.”
But the model also gives providers a strong incentive to skimp on care. After all, they make more money if they can “keep patient care costs within a budget,” Scheffler and Shortell write.
That’s a recipe for long waits for appointments and endless appeals when Golden Choice inevitably declines coverage for something a patient wants or needs. And beneficiaries can bet they’ll have to pay out of pocket for any care they seek beyond the confines of the Golden Choice network.
In effect, Golden Choice asks healthcare providers to act like insurers. It’s just another HMO. But it’s an HMO with the backing of the state government.
A state-backed insurer could effectively order providers to participate in its network in some way. It would be tough for hospitals and doctors licensed by the state to say “no” to Golden Choice’s request that they take on the financial risk for treating its enrollees – even if doing so could be ruinous.
Public options also don’t have to make money. They can run perpetual deficits and draw on the state treasury to remain whole. That advantage could allow Golden Choice to artificially under-price private insurers – and over time drive them out of business.
Eventually, the public plan could end up being the only plan available in the Golden State – single-payer by default.
Once that happens, there would be nothing to stop state officials from forcing all providers into the Golden Choice network – and setting that “risk-adjusted,” per-member, per-month payment at whatever level they wanted.
In this way, Scheffler and Shortell’s seemingly modest proposal could lead California to a future without private health insurance, where doctors are de facto government employees, and patients struggle to get the care they need.
Sally C. Pipes is president, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.
