EPI News

EPI News

August 18, 2009

Saving the public option
EPI research has repeatedly shown that a public health insurance option should be the cornerstone of health care reform -- it would help to lower health care costs in the long run while providing coverage to millions of the uninsured. Today, as the public option is in danger of becoming a casualty in the impassioned debate over health care reform – partly because of widespread mischaracterizations over how it would work – EPI highlights the body of research it has produced in support of a public option.

Greater competition
In the policy memo, Why a Public Insurance Plan Is Essential for Health Reform, EPI researcher Alexander Hertel-Fernandez argues that the lack of competition in the U.S. health care market is the source of the country’s uniquely high and rising health costs. A public plan option would inject some badly needed competition into the system, he writes, and “force private insurers to compete on efficiency and quality,” rather than the way they currently compete for business by trying to enroll the lowest-cost workers and businesses. Hertel-Fernandez also cites independent research showing that a public health insurance option would have significantly lower operating costs than private insurers, which could result in windfall savings for employers and their workers. Unlike private insurance companies that often earn hundreds of millions, or more, in profits each year, a public option would not have to earn profits.

Health care for all
Elise Gould, director of Health Policy Research at EPI, along with Hertel Fernandez, argue in A Public Plan Option as Backup Insurance for all Americans, that even though a majority of Americans get health insurance through their employers, millions do not. Even among full-time workers, the authors note, 17% do not have insurance: more than one-third of the uninsured work full time. They also point out that job loss and job changes often result in lost coverage, at least temporarily. Gould’s 2008 briefing paper, The Erosion of Employer-Sponsored Health Insurance, showed that the workers earning the lowest wages were least likely to have employer-sponsored coverage, although workers at all income levels have suffered declining rates of coverage in recent years.

Cost savings
In Seeing the Big Picture on Health Reform and Cost Containment, EPI economist Josh Bivens shows how those who protest about the cost of creating a public health insurance option fail to account for all the savings that would be achieved over time. Bivens shows how per capita health spending in the United States far exceeds that of any of its 20 closest international peers, while U.S. government spending on health care is the lowest of the group. He also shows how the government-operated Medicare health insurance system has done a much better job than private insurers in reining in costs. “It is possible to increase federal costs while still economizing overall,” explains Bivens. “Sometimes you have to spend money to save money.”

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