Health care reformers have a number of arguments for the public option, but the main one is this: that by injecting fairness and competition into the market the public option will lower premiums for everybody, including those paying for private plans. Unfortunately, a new CBO study finds that it may not have that effect at all.
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The theory behind the public option is that, by injecting a major non-profit insurer into the marketplace, it will force private competitors to cut down on administrative waste and other excesses, and, therefore, drive premiums down for everybody. Last week, when House Speaker Nancy Pelosi was on the verge of losing the fight for a muscular public option, she said "There's no philosophical difference between a robust public option and negotiated rates. It's just a difference in money."
But is that true? Yesterday, in an analysis of House health care legislation, the CBO concluded that the six million people expected to enroll in the public option by 2019 will be paying, on average, higher premiums than will people buying private plans.
"[A] plan paying negotiated rates would attract a broad network of providers but would typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges," wrote CBO chief Doug Elmendorf.