A public option would perpetuate our highly dysfunctional financing system

September 14, 2021

Summary: Jacob Hacker proposes Public Option 2.0 as part of Medicare and integrated into ACA marketplaces. He says it would pave the way for Medicare for All. But would it? History teaches us that it might well derail the drive for Medicare for All.

Medicare for More — Why We Still Need a Public Option and How to Get There
The New England Journal of Medicine
September 11, 2021
By Jacob S. Hacker

When I first argued for the public option two decades ago, it was seen as a huge reach. Today, it is a mainstream Democratic idea. Indeed, the version that Biden supported during his campaign is more robust than anything considered during the debate over the ACA — so much so that I believe it should be called the “Public Option 2.0.” The public option that Biden embraced would explicitly be part of Medicare, using Medicare’s provider network and basing its reimbursements on Medicare payment rates. It would also be available through the ACA marketplaces to all legal U.S. residents who are not eligible for other public coverage, including workers with employer-sponsored insurance (who today are essentially barred from obtaining ACA coverage), and tax credits would be provided on the same terms as they are with private plans. In addition, the Public Option 2.0 envisions a system in which employers could eventually pay the federal government to enroll their workers in the Medicare-based plan.

The Public Option 2.0 would not be Medicare for All. But it could evolve into something similar.

Progressive critics of the public option argue that it would end up at a competitive disadvantage relative to private plans. They note that in Medicare Advantage, commercial insurers siphon off an increasing share of healthier-than-average beneficiaries who would otherwise enroll in the traditional public plan. On a level playing field, the public option’s ability to negotiate lower prices would give it an important advantage over private plans, as would Medicare’s popularity and the broad choice of providers it offers.

Voters not only support a generous public option by overwhelming bipartisan margins, but they also support automatically enrolling every uninsured person in it. Nor do they seem too worried about its evolving into Medicare for All. Indeed, the largest plurality of voters think it should be a stepping stone to universal Medicare.

Medicare has substantial gaps — most notably, no cap on out-of-pocket costs and no drug benefit integrated into the traditional public program. Expanding Medicare benefits will help beneficiaries now, and it will help the cause of expanding Medicare later. By the same token, Medicare Advantage plans should be stripped of their current unjustified advantages.

Advocates of the Public Option 2.0… can build power to finally make Medicare an option for all Americans who need it.

Comment by: Don McCanne (adapted from NEJM posting)

Jacob Hacker has long been a leader in designing and advocating for a Medicare-like public option, and his current version 2.0 would benefit many. It would be a great addition to the current insurance options, but it would leave in place the rest of our fragmented, dysfunctional, inefficient, inequitable, and overpriced financing system.

Although it has been suggested that it would serve well as a transition to an improved Medicare for All, it is likely that the breadth of coverage, as dysfunctional as it would be, would reduce further the political drive to complete the transition, as we’ve seen in the past. Possibly forever.

It would be far better to take a single leap to a well-designed, less expensive, more equitable, single payer Medicare for All. Jacob Hacker has a standing invitation to join us in the single payer camp where his system design expertise and advocacy for health justice would be most welcome.