How a public option like Bennet’s Medicare-X proposal could help — or hurt — insurance options in Colorado

“An intriguing part of this bill is that it would start to come into effect in the areas where it is needed the most.”
7 min. read
Michael Bennet on Election Night 2016 at the downtown Denver Westin. (Chloe Aiello/Denverite)

There are a lot of questions about how a public option might change the insurance market in Colorado, particularly in rural areas where customers face high prices and few choices.

But Joe Hanel of the Colorado Health Institute called U.S. Sen. Michael Bennet's Medicare-X proposal the only idea to come out of Washington, D.C., recently that actually addresses the vexing problem of urban and rural disparities.

"An intriguing part of this bill is that it would start to come into effect in the areas where it is needed the most," Hanel said. "There would be lots of different ways to roll out a public option, and it seems like they are targeting the areas that are in most desperate need."

Bennet introduced legislation Tuesday with U.S. Sen. Tim Kaine of Virginia that would allow people to buy into Medicare, starting in rural counties with just one insurance provider before expanding to the rest of the country and to the small business health exchange. There are 14 Colorado counties with just one provider, and residents who buy plans on the individual market there pay very high premiums for high deductible plans.

"I've said from the very beginning that the Affordable Care Act has problems that we need to fix," Bennet said in a call with reporters to explain the bill. "Across the state and in particular with our rural counties, people are tired of having insurance that is too expensive or doesn't provide the coverage they need."

People confront him at town halls over his support for the ACA, sometimes in pretty strong terms ("You voted for the f-ing Affordable Care Act"), Bennet said. "Because there is a lack of competition, premiums are too high, deductibles are too high. 'Why are you forcing me to buy something that is worthless to my family?' And I've said over and over, this is a fair criticism."

Medicare-X would be funded largely by the premiums paid by customers, but the cost should be lower than what many pay on the private market. Bennet said the plan has not been scored yet by the Congressional Budget Office, but a previous public option proposal would have saved $158 billion over 10 years. Medicare has lower administrative costs than private insurance plans and pays doctors and hospitals at lower rates -- though not as low as Medicaid. Medicare-X would provide an alternative to private insurance in places where there are fewer options.

"This is my attempt to respond to specific challenges I've heard from Coloradans about rising costs and dwindling options," Bennet said.

Bennet said that unlike the single-payer "Medicare for All" plan proposed by U.S. Sen. Bernie Sanders and supported by many activists, his proposal would allow people who like their private insurance options or who get insurance through their employer to maintain that.

The Colorado Health Institute, which does nonpartisan research on heath care policy, hasn't done a detailed analysis yet of a public option -- Medicare-X is just one version of this idea, with others being allowing people to buy into Medicaid or setting up a state-level public option.

There are questions and concerns, Hanel said. Would the introduction of a public option cause the last remaining private insurers to pull out of the marketplace? Would small businesses stop offering insurance? How would hospitals be affected if a larger share of their patients were paying at Medicare rather than private rates?

The institute also is working on but has not completed an effort to identify which factors are most contributing to the high cost of insurance in rural areas. Rural counties have smaller populations so the core costs of health care have to be born by fewer people, and in some counties the population is older and less healthy than the state average. There's also a serious lack of competition, among both hospitals and insurers. The Affordable Care Act also allows insurers to charge higher premiums based on geography, along with age and smoking status, so some of the cost disparity is baked in. But without knowing how much each factor contributes to higher rates, it's hard to be sure which policy changes would make the most difference.

However, Hanel said, none of the Republican plans to date would do anything to make health care cheaper in rural areas.

"For people who have been really concerned about high price variability within a state, where people in rural Colorado are paying a lot more, it's been really discouraging that there hasn't been a lot of talk about this at the federal level," Hanel said. "None of the repeal-and-replace bills had anything approaching something that would address these regional problems."

There are an estimated 29,000 people in the 14 counties with just one provider who would be eligible for Medicare-X and 11,000 who are currently uninsured, out of a total population of 161,000, Hanel said.

A 2016 analysis by the Urban Institute looked at the viability of a public option and found that it could help with costs and access, given certain conditions.

A public option, available to all Marketplace enrollees (i.e., not limited to a specific age group), either nationally or in specific geographic areas, could provide a competitive catalyst in some nongroup insurance markets. It would not be a complete answer to high premiums caused by adverse selection into the nongroup insurance market as a whole, but it could address high premiums caused by weak competition in insurance and/or provider markets. Marketplace-qualified health plans based on Medicare payment rates (or possibly some other metric) could integrate seamlessly within the existing Marketplace structure. Such plans would be among the low-cost plans in some areas, but even in markets where they were somewhat higher priced, they could serve as a broader provider network option and a check on other insurers’ premium growth. A key issue for a government-based qualified health plan’s ability to compete in currently noncompetitive markets, however, would be its ability to develop a strong provider network. This means that strong incentives for provider participation would be necessary. The leverage of participating in Medicare would appear to be the strongest leverage available; this is a tool available to the federal government but not to states.

Bennet said he did not believe the availability of a public option would cause insurers to pull out of the individual marketplace. Rather, they would want to compete for those customers and would structure their plans accordingly. When I told Hanel this, he responded with a neutral, "OK." There was a lot of angst this year about whether Anthem would remain in every Colorado county, and for 2018 at least, they will. I reached out to Anthem for comment on Bennet's proposal, but I didn't hear back.

The Colorado Hospital Association said in an emailed statement that they want to better understand the details.

“CHA applauds Senator Bennet’s efforts to stabilize and ensure health insurance coverage options, which is particularly important in rural Colorado," the trade group said. "The question however, is whether or not this plan will further magnify the cost shift that already places increased burden on privately insured patients. We look forward to further understanding the details behind this idea.”

Of course, for this to go anywhere, some Republicans need to get on board. Bennet said he hasn't found one yet -- he thinks they're nervous about looking like they might be trying to fix the ACA rather than dismantle it -- but he thinks this proposal could get support.

"We're in a moment still where people want to relitigate the Affordable Care Act after trying to repeal it 70 times and then being the governing party and finding that they couldn't repeal it because the American people wouldn't let them," he said. "This is the perfect moment to work in a bipartisan way to improve not just the ACA but America's health care system. ... I believe there will be people on the Republican side who will find this attractive because it adds one more choice."

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