A public option and a strategy of capping payments made to health care providers by commercial insurers are two health reform approaches that are related; both seek to provide insurance options to consumers that would pay providers based upon payments determined (in the case of the public option) or limited (in the case of capped provider prices) by the federal government or its chosen agent. The public option would do so via a new insurance plan or set of insurance plans administered by the government, and the capped prices would do so via private insurers participating in the markets chosen. Depending on where these rates or rate limits are set, either approach could reduce premiums relative to current levels. Either policy could be used alone or in tandem with the other. Though people broadly support the idea of a public option and/or lowering the costs of health care, implementing such policies requires numerous design decisions, can have significant unintended consequences, and is politically challenging. Design decisions profoundly affect such policies’ abilities to meet their stated objectives, disruptions to the US health care system, and health care providers’ finances. Many of these design decisions interact with one another, meaning they ought to be considered together. This is especially true of how the chosen schedule of provider prices interacts with other design choices.
This paper delineates the major design choices that must be made for public option and/or capped provider price reforms and outlines their trade-offs in government costs, household costs, impacts on providers, and access to care. The content of the work is a summary and interpretation of an extended discussion in 2020 with a small group of health policy experts.