Policymakers, analysts, and advocates continue to explore the potential implications of a public insurance option. As an alternative to commercial health insurance coverage, a public option is often envisioned as nonprofit, government-run insurance that would pay providers at rates lower than those typical in commercial plans. The proposal is attractive to some for its potential to lower premiums for consumers and reduce overall health care spending. However, others, including provider stakeholders, worry that lower provider revenue could decrease access to or quality of care, particularly for Black and Hispanic people.

WHY THIS MATTERS

Policymakers want to know if a public option approach would tend to decrease health care prices paid to hospitals on behalf of certain groups of people, in particular those who have historically faced the greatest barriers to receiving necessary services. Without attention to such potential disproportionate outcomes, reforms could exacerbate the disparities in access and affordability present in the current system.

WHAT WE FOUND

• We analyzed the public option provision of the Medicare-X Choice Act, a bill introduced by Senators Tim Kaine and Michael Bennet that would create a nationwide government-administered insurance plan, or public option, available to small employers or those purchasing insurance through private nongroup (i.e., individually purchased) insurance markets.

• The effect of the Medicare-X public option would vary across areas of the country. While the overall implications for hospital spending are modest, with simulated decreases of 1.4 percent nationally, the effect would vary between 2.8 percent in the quintile of regions that would be most impacted and by 0.5 percent in the quintile of regions least impacted. These findings suggest that any overall changes in access to care would be small.
• The Medicare-X public option is simulated to have a lower average impact on the Black non-Hispanic population than on the white non-Hispanic population in each quintile. Hospital spending on behalf of Black non-Hispanic people is estimated to fall by 1.1 percent nationally, compared with 1.4 percent for white non-Hispanic people and 1.5 percent for Hispanic people. Still, the effect for each Hispanic person in dollar terms ($29 per person per year in reduced hospital spending, on average) is considerably smaller than the reduction for white non-Hispanic people ($46 per person per year) because Hispanic people tend to use less hospital care today than people overall.
• Black non-Hispanic and Hispanic people would be more likely to retain insurance coverage other than the public option than their white non-Hispanic counterparts. As a result, they are less likely to be directly impacted by a Medicare-X public option.

• The average consumer affected by the public option and living in one of the highest-impact regions would save 7.6 percent ($486) per year in combined premium and out-pocket-costs, while one living in a lowest-impact region saves 2.9 percent ($226).

• When we use an ordinary least squares regression to summarize the correlation between a region being in one of the two highest public option impact groups and an array of factors, we find no statistically significant relationship with the population concentration of any racial or ethnic group.
• In sum, this analysis finds no indication that the Black non-Hispanic or Hispanic populations affected by a public option would have their access to hospital care affected differently by a public option than the white non-Hispanic population.

HOW WE DID IT

We use individual-level data from the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM), as well as hospital data from the American Hospital Association Annual Survey, the RAND Corporation Hospital Price Transparency Study, and the Centers for Medicare & Medicaid Services Healthcare Cost Report Information System to provide insights into the likely effects of a Medicare-X-style public option reform on hospital revenues and family health care spending.