As debate over health care reform continues, concerns remain that public option and capped provider payment rate policies could impinge on access to or quality of care. In this brief, we outline the design decisions likely to impact each policy’s effects on provider revenues and the variation in current provider circumstances that would lead to differing effects across markets and types of providers. We then summarize the research literature examining provider responses to changes in prices and draw implications for public option and capped rate reforms.

WHY THIS MATTERS

Public option and capped provider payment rate reforms are policy options being seriously considered by analysts and policymakers as possible strategies to lower health care spending for consumers and governments. If these types of reforms significantly threaten access to necessary care, their appeal would be substantially diminished. Sound policymaking requires that this issue be explored and understood to the extent possible.

WHAT WE FOUND

We find that the likely effects of public option and capped rate policies on provider participation and patient access are more nuanced than critics suggest. Design choices such as which insurance markets would be included, the relative cost of other insurance options, the initial price level and subsequent updates of administered rates (or caps), and the pre-reform payer mix in the market would significantly impact the degree to which providers would be affected.

Existing studies examining the effects of provider price changes on access to and use of care rely largely on experience with the Medicare and Medicaid programs, making direct application to currently discussed reforms difficult. Plus, there is limited research on whether changes in service utilization resulting from changes in provider prices have implications for health outcomes. To date, this body of research has produced mixed findings on the implications of various price changes for access and use.

However, based on the weight of available evidence, one would expect that public option and capped provider payment rate reforms would reduce use of hospital care, particularly in the most-affected areas (those with high hospital prices). But, one would not anticipate that quality of care or health care outcomes would suffer as a consequence. One could anticipate physician service volume would increase somewhat under the policy changes, but the volume effect would vary significantly by condition and physician specialty. While such increases in volume of physician care are unlikely to affect patient outcomes, they are not likely to affect access to necessary care.