New CBO report says public option saves money

House Speaker Nancy Pelosi announced on Tuesday (Oct. 20) that a new cost estimate of the House health care reform bill (H.R. 3200, the “America’s Affordable Health Choices Act”) by the nonpartisan Congressional Budget Office (CBO) has determined that the version of the House bill with a public option based upon Medicare payment rates would reduce the federal budget deficit over ten years by $110 billion. That’s $20 billion more in savings than earlier estimates for that kind of public option. And it would save $85 billion more than a public option in which payment rates would be negotiated with providers.

So how have we arrived at the point where the public option based upon Medicare rates has such savings?

Earlier this summer, in a concession to conservative Blue Dogs, public option proponents agreed to an amendment in the House Energy and Commerce Committee that would require the Secretary of Health and Human Services to negotiate rates with providers. But that version of the plan would only save $25 billion. Speaker Pelosi asked CBO to examine three versions of the public option – one based on reimbursement rates paid to health care providers under Medicare (the Education & Labor Committee bill) and two that would rely on negotiated reimbursement rates (the Ways & Means and Energy and Commerce bills). The Education & Labor Committee version has the most savings of the three because it “pushes down premium prices,” reports Congress Daily, and as a result, lowers the amount of subsidies that the government would pay for low-income people who buy insurance through the private market.

Under all three scenarios, the price tag on the House bill drops to under $900 billion over ten years. President Obama has said he will not sign a bill that costs more than $900 billion.

The new CBO estimate on the public option comes as support for a public option in health care reform legislation seems to be growing. A new Washington Post-ABC Poll says that a majority of 57 percent now favor a public option while 40 percent are opposed.

The new CBO estimate along with the new poll results come at a critical moment as the U.S. House and Senate prepare to move health care reform to the floor for debate beginning the first week of November. Look for public option proponents to tout potential savings, especially with those senators who have been resistant to any public option. And in fact, today the Washington Post and other news outlets have reported that “[Senate] Majority Leader Larry M. Reid (Nev.) was increasingly leaning toward the idea of including a version of a public insurance option, albeit one that would allow state’s to opt out of such a system, in the chamber’s bill.”

-Steve Francisco

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About Steve Francisco

Steve Francisco is the former federal policy analyst for the Minnesota Budget Project.
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