One would think the obvious answer to the question: “Who runs a new public health insurance plan?” is: “The government.” Yet, a closer look suggests important nuances that merit exploring. Different and sometimes multiple levels of government direct a proposed public plan, and some public plan functions would be performed by private actors (see Table 1). This piece examines the precise role of government in different public plan variations, since these differences affect the extent to which a proposal may achieve its goals.
Federal versus State Governance
A major difference in public plan proposals is whether they are run at the federal or state level. Federal governance, like our current traditional Medicare program, generally means that all Americans have the same option nationwide. Federal governance proposals typically harness the infrastructure and popularity of Medicare (e.g., Medicare for All, Medicare Part E, Medicare X, and Midlife Medicare). Additionally, nationwide plans may enroll more people than some state-based plans. The former’s potential for more expansive membership helps such plans with financing by supporting a stable ìnsurance risk pool and by being supported by a broad revenue base to share in costs (if allowed in the proposal).
State-governed public programs like Medicaid, the Children’s Health Insurance Program (CHIP), and the proposed Medicaid option are tailored to local provider systems and consumer preferences; they are therefore less susceptible to the criticism of being “one-size-fits-all” plans. Having state-level ownership of a public plan may increase political engagement, which historically has increased enrollment and ongoing support for modifications and improvements. That said, state-level ownership can be inefficient, and local political priorities can often result in individuals receiving different levels of protections simply based on where they live. Furthermore, such proposals, like the Medicaid option, are not solely at states’ discretion: they still require congressional authorization and federal funding.
Executive- versus Legislative-Branch Direction
Both federal and state public plans and programs can vary in terms of how much say different branches of government have over its design and implementation. In broad structural terms, the legislative branch authorizes programs and the executive branch runs them. Congress or state legislatures could also set key features of a public plan in its authorizing legislation. For example, most proposals prescribe in legislation the plan’s provider payment rates. This is similar to how the rates for traditional Medicare are set. In the proposal to allow Medicare rates to be used by private plans, this congressional direction is practically the only government role. Governing public plans by legislation provides clarity and certainty for stakeholders. It keeps accountability with elected officials rather than investing it in executive branch appointees. But it also runs the risk of ossifying the plan’s operating rules and benefit design (e.g., traditional Medicare’s lack of a prescription drug benefit for forty years), especially when there’s congressional gridlock.
Significant delegation to the executive branch in running a public plan offers flexibility and adaptability over time. It also allows for more agile adjustments within the program without subjecting such adjustments to the legislative calendar and bandwidth. For example, Medicare X allows the secretary of health and human services (HHS) to determine where to launch the public plan and whether to increase payment rates in rural areas. That said, tension between the branches of government, especially when they are controlled by different political parties, could result in congressional limitations on the executive branch’s ability to effectively implement a public program or plan (e.g., the Republican Congress’ imposition of funding constraints in 2013 and 2014 on HHS’ management of Health Insurance Marketplaces).
Department versus Agency Management
Policy makers creating or extending public plans also have choices about the the nature of executive-branch governance as well. For instance, some proposals (like Medicare X) designate the secretary of HHS as the authority for the public plan. Doing so elevates accountability, since a secretary is both confirmed by the Senate and directly reports to the White House. Such a designation may also insulate the public plan from intra-departmental disputes.
Other proposals name the Centers for Medicare and Medicaid Services (CMS) as the lead agency. The CMS administrator can allocate resources and create synergies across Medicare, Medicaid, CHIP, and the Marketplaces to improve the public plan functioning (e.g., a shared call center, marketing expertise). CMS has significant operational and technical experience in running health insurance programs.
The 2009 House public plan option, in contrast, would have created a new agency to run its public plan. This plan aimed to prevent the same official (the secretary of HHS) from simultaneously running the public plan and the public–private exchanges, a dual position which could pose conflicts of interest. Separation from CMS would also help ensure that the new responsibilities in running a public plan do not detract from management of other programs. However, creating a new agency to run a public plan is no small enterprise.
Public versus Private Plan Engagement
As can be seen in Table 1, most proposals have designated at least some role for private plans. Medicaid’s private managed care plans, in current practice and in proposals like the Medicaid option, exert little control over benefits. But managed care plans are responsible for provider payments, network development, and coordinated care efforts, and bear some risk for costs. Under the current Medicare programs, Medicare Advantage private plans play similar roles, plus have some discretion at the margin on benefits offered to enrollees; such a role would continue in the Medicare for All, Part E, and Midlife Medicare proposals.
Two proposals would create public programs run by private plans. A proposed public reinsurance program would attach Medicare rates to federally-pooled dollars for high-cost claims. Another would allow individual market insurers to use Medicare rates as a ceiling. Both would import a main advantage of a public plan—its lower payment rates—into private plans, without the government having to assume all the financial risk or other responsibilities.
These permutations of both government-only and public–private hybrid health programs offer insight into the trade-offs of the available design choices. One key trade-off relates to prices. Proposals that would legislatively set payment rates for each particular health care service would maximize certainty and public accountability, since members of Congress vote on such rates and any changes. In contrast, delegating pricing decisions to HHS or CMS would allow for some adaptability and faster movement toward alternative payment models. Another hybrid approach is the proposal to allow private plans to negotiate rates below a cap at Medicare rates. Allowing private plans in public programs to set prices with limited guidance allows for negotiation and competition, but it does so in a proverbial black box. The public does not know, for example, what prices Medicare private plans pay for prescription drugs. Such prices may be higher or lower than those paid by Medicaid or the Veterans Health Administration.
Another trade-off is between secure access to benefits and unfettered access to providers versus innovation, quality, and care management. An essential role of public programs is ensuring that people have certain levels of support (e.g., specific covered benefits, provider participation rules). Proposals like eliminating the waiting period for people with disabilities specify, in legislative language, strong benefit and provider access policies. In proposals that allow public plans to compete alongside private plans, HHS or CMS typically would have the same flexibility regarding benefits that private plans do, allowing for some variation within congressionally set parameters.
The greater flexibility and fewer political constraints afforded to private health plans within public programs (e.g., Medicare Advantage) would allow them to form networks of providers, implement care management best practices, and more quickly adopt innovative treatments—as well as to deny payment for unproven, poor-quality, or excessively costly health care services. The trade-off, in short, is between a broad choice of providers and services versus a limited choice at a lower cost.
Lastly, the differing incentives for a public agency and a private insurer could affect outcomes. Public plans are driven by their statutory purpose (e.g., cover medically necessary care in Medicare, provide funds to states to cover uninsured, low-income children in CHIP), whereas private plans are motivated by business decisions, with their ultimate obligation to the bottom line. This discrepancy could result, in a questionable case about whether a person qualifies for expensive health care, in different decisions.
Combining public and private plans in proposals is how policy makers attempt to balance these trade-offs.
Table 1. Government Involvement in Public Plan Proposals
KEY: Red is Federal Government, Blue is State Government, Yellow is Private, Orange is Federal-Private Mix, Green is State-Private Mix, and Purple is Federal-State-Private Mix.
|Who Is Runs the Program?||Who Runs the Health Plan(s)?||Who Sets Provider Payment Policies?||Who Decides What Enrollees Get?||Who Bears Financial Risk?|
|Medicare for All (S. 1804)||HHS||CMS and Medicare Advantage plans||Congress and Medicare Advantage plans||Congress and Medicare Advantage plans||Federal gov’t and Medicare Advantage plans|
|Medicare Part E*||HHS||CMS and Medicare Advantage plans||HHS within Congressionally set bounds||Congress and Medicare Advantage plans||Federal gov’t and Medicare Advantage plans|
|Medicaid Option* (S. 2001 / H.R. 4129)||State||State and managed care plans||State and managed care plans||Congress sets minimums, state have options||State and Federal gov’t, managed care plans|
|House Public Health Insurance Option (H.R. 3962, 2009)||HHS||New commissioner||HHS within Congressionally set bounds||Congress||Public plan|
|Medicare Rates Applied to Private Plans*||CMS||Private individual market plans||Congress (sets maximum rates)||Private individual market plans||Private individual market plans|
|Medicare X (S. 1970 / H.R. 4094)||HHS||CMS||Congress, with some flexibility given to HHS||Congress||Public plan|
|Midlife Medicare*||CMS||CMS and Medicare Advantage plans||Congress and Medicare Advantage plans||Congress and Medicare Advantage plans||Federal gov’t and Medicare Advantage plans|
|Medicare for Individuals with Disabilities*||CMS||CMS||Congress||Congress||Federal gov’t, trust fund|
|Public Reinsurance Program for Private Plans*||CMS||Private plans||Congress for claims eligible for reinsurance||Private plans||Shared b/w private plans and federal gov’t|
|* Described in an article in the Health Reform 2020 issue of The American Prospect. View the collection online here.|