Research Report Public Option and Capped Rate Reforms Would Have Limited Effects on Health Systems’ Financial Health without Worsening Racial and Ethnic Disparities in Access to Care
Fredric Blavin
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Policymakers, analysts, and advocates continue to explore the potential implications of a public insurance option and a related reform that would limit the prices providers could charge to any private insurer. Whenever substantial cost containment initiatives are explored, however, there are concerns that lower provider revenue could disrupt provider finances and adversely affect patients’ access to quality health care services. Access-to-care concerns associated with cost containment strategies are amplified when considering the implications for hospitals that disproportionately serve populations that have historically experienced the greatest barriers to adequate and affordable health care, including Black non-Hispanic, Hispanic, and American Indian and Alaska Native people.


Estimating the potential implications of lower payments on providers’ finances and patients’ access to care is necessary in designing cost containment strategies. Policymakers want to know the extent to which public option and capped rate reforms would affect hospital finances and the populations they serve, particularly those who have historically faced the greatest barriers to receiving necessary services.


  • We analyzed the public option provision of the Choose Medicare Act, a bill introduced by Senators Chris Murphy and Jeff Merkley that would create a nationwide government-administered insurance plan, or public option, available to employers and individuals purchasing coverage in the private nongroup market. We also assessed a related reform that would limit the prices providers could charge to any private insurer, allowing people in all private insurance plans to reap the potential savings that the original bill only affords to those choosing the public option.
  • The public option is estimated to reduce hospital spending nationally by 2.4 percent, and the capped rate reform would reduce hospital spending by 8.4 percent. Hospital revenue decreases and associated potential access concerns under the capped rate option would be larger because this reform would affect all those with private health insurance, not just those enrolling in a new public option or obtaining coverage in the nongroup market.
  • Overall, hospital referral regions (HRRs) that experience the largest hospital spending reductions under the reforms consist of hospitals with higher average commercial-to-Medicare price ratios and higher operating margins.
  • Similarly, health systems that would likely face the largest decrease in revenue under the reforms have, on average, higher operating margins, more unrestricted days cash on hand, higher commercial-to-Medicare prices, and a lower Medicaid payer share than other health systems. Meanwhile, more financially at-risk health systems, which could struggle to maintain core operations amid sudden revenue drops, are less likely to experience large revenue decreases under either reform.
  • Although both reforms’ effects vary across racial and ethnic groups within groups of impact quintiles, this variation tends to be small, with one exception: hospital spending declines under reforms on behalf of the Asian and Pacific Islander population are larger compared with smaller (and comparable) declines among the white non-Hispanic, Hispanic, and Black non-Hispanic populations.
  • While hospital spending declines for the Asian and Pacific Islander population is higher than for other groups, we find no evidence to suggest that the reforms would reduce access or affordability for Black non-Hispanic, Hispanic, American Indian and Alaska Native, or multiracial populations more than for their white non-Hispanic counterparts. This finding suggests that the reforms would not hamper access to care further for populations that have historically faced more barriers to medical care.


We use individual-level data from the Urban Institute’s Health Insurance Policy Simulation Model, as well as health system data from audited financial statements and 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 public option and capped rate reforms.

Research Areas Health and health care
Tags Federal health care reform Health care delivery and payment Health care spending and costs Health care systems and managed care plans Private insurance Racial and ethnic disparities
Policy Centers Health Policy Center
Research Methods Health Insurance Policy Simulation Model (HIPSM) Data analysis
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