Study: Public option would slash federal health spending by $19B in 2020

Amid a flurry of proposals for comprehensive healthcare system reform, a new analysis from the Urban Institute makes the case for incremental reform to current law.

Urban Institute, a Washington, D.C.-based liberal think tank, found a public option alone could reduce federal health spending by $19.4 billion next year. When combined with other policies, savings would be slightly more modest, but would also expand health insurance coverage to more than 1 million more Americans.

The report analyzes the following two policies with Urban Institute's insurance policy simulation:

  • A public option or a cap on provider payment rates for plans sold on the exchanges
  • An extension of premium tax credits to eligible people earning above 400 percent of the federal poverty level

The first policy would add about 325,000 people to insurance rolls, reduce federal spending by $19.4 billion and save consumers $10.9 billion by reducing premiums and out-of-pocket costs in 2020. The average person buying an ACA-compliant individual health plan without tax credits would save about $150 per month on premiums and out-of-pocket costs under this reform, according to the report.

The second policy would extend comprehensive insurance coverage to 912,000 people but increase federal spending by $8.2 billion in 2020. Average premiums would be $130 less per month for people earning over 400 percent of the federal poverty level under this policy.

Combined, the policies would reduce federal spending by $12 billion, reduce aggregate household spending by $9.2 billion and expand health insurance coverage to 1.2 million Americans.    

For more details, download the full report here.


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