The Need for a Public Option

America spends twice per capita on health what any other nation in the world spends. The reason for our perpetuated inefficiencies is that we have a lack of political will to pass legislation that would bring our nation in line with the rest of the world, offering universal health insurance coverage while reducing healthcare as a percentage of Gross Domestic Product (GDP) from nineteen percent closer to the eight to twelve percent of GDP that characterizes healthcare expenditures around most of the rest of the world. 

Healthcare doesn’t require “common sense solutions” though; quite to the contrary healthcare policy is quite complicated. And though “Medicare for All” might be a simple enough concept to understand that would do a great deal for our nation in its attempt to control healthcare costs, the current national political climate and the dysfunction of the Congress clearly make such a proposal an impossible dream. 

Instead states must take the initiative and seek to move towards universal health insurance coverage as a means of controlling costs. This counter-intuitive concept stems from our current system of de-facto universal health insurance coverage through hospital emergency rooms (as a result of a federal law passed in 1986 known as EMTALA). In Maryland this is especially true because of our unique in the nation all payer rate setting system. Essentially, as a result of an uninsured individual getting shot and being taken to a hospital emergency department, the State of Maryland increases the prices for everything in that hospital from hip replacements to labor and delivery. Private health insurers like CareFirst, United, Aetna, and Kaiser Permanente subsequently increase premiums for policyholders across the state, passing on the cost of the increased prices to us. All the while these hospitals (46 of 47 hospitals in Maryland are non-profit) and health insurance companies (whose executives are paid millions) are exempt from paying corporate income taxes due to their non-profit status supposedly because they provide the equivalent of five percent of their annual revenues in community benefits, which is overwhelmingly accounted for by the same uncompensated care that leads to increases in their compensation. In sum, everyone in Maryland already pays for an inefficient, ineffective, and inequitable form of universal health insurance coverage. 

To address ballooning healthcare costs (premiums in Maryland have increased on average by fifty percent in the past four years) and to move us closer to universal health insurance coverage, Maryland needs to adopt a “Public Option” that would function as a state-run Health Maintenance Organization (HMO). This Public Option would be created as an opt-in, means-tested Medicaid expansion plan. It would create a nearly two million person risk pool by incorporating traditional Medicaid, the individual and small business exchanges, and by requiring that a half million public employees in Maryland receive coverage through this Public Option. 

The moral and financial benefits would be immediate. By pooling risk across one-third of Maryland’s population, including Maryland’s public workforce, more healthy people who need less care will be subsidizing proportionally fewer unwell individuals who require more costly care. The Public Option will also be in a position to leverage its purchasing power to negotiate down the prices of prescription drugs and medical devices. It will benefit from lower administrative costs associated with publicly administered plans (as an example, Medicare has an average administrative overhead of three percent and CareFirst has an overhead cost of about eighteen percent). The Public Option will gain from economies of scale, further reducing healthcare costs. And the creation of this Public Option will create an opportunity for Maryland to expand its all payer rate setting program from hospitals to all settings of care, thus eliminating pricing variability across the state and achieving savings that have been proven to accrue over the nearly five decades that the all payer rate setting system has been in place in Maryland. 

Marylanders of any income level would be able to buy into this Public Option at a fair price for their income level, thus making this plan financially self-sustaining. No federal funds would be required to create this Public Option because it would not be a true Medicaid expansion plan and therefore all authority for administering this plan would be regulated by the State of Maryland. The Public Option would create contracts with individual providers just as any insurance company does and its network could include many of the same providers who currently take other forms of health insurance. Perhaps some of these providers could be taken on as direct employees who only service Public Option beneficiaries, thereby moving Maryland towards a high-value publicly administered integrated care delivery model a la Kaiser Permanente. 

Those public employees who would prefer to seek coverage through a traditional insurer would be welcome to do by purchasing a plan directly through a private insurer. An analogy can be made between this situation and that facing individuals who prefer to pay for their children to attend private schools. Those who opt to send their children to private school in Maryland still pay property taxes for the public school system and can, at any time, place their child in the public school system at no additional cost to them. Essentially those parents are paying private school tuition on top of the costs of funding public schools that they pay by virtue of their residency in Maryland. Just so, the Public Option would be available to public employees at no additional cost as a benefit associated with their employment, but at any time they could choose to buy a private plan on the open market. 

A Public Option would provide comprehensive baseline healthcare with no carve-outs for mental, optical, or dental care. It would provide coverage for every part of your body and would be adequate to provide decent care to all at a lower cost to society than the status quo. We can no longer morally afford to allow the uninsured and underinsured to languish in a wealthy society and we can no longer financially afford the burgeoning cost of healthcare and its insatiable appetite for swallowing resources that might otherwise be applied to other worthy causes in our society. The time is ripe for the creation of a Public Option in Maryland.