Public Health Plan Option Could Save State and Local Governments $921 Billion

July 10, 2009

If health care reform includes a public health insurance option that pays Medicare payment rates to providers, state and local governments are predicted to save an estimated $921 billion in lower health care costs over 11 years, according to researchers at the well-respected The Commonwealth Fund.

State and local governments would save $765 billion during this period if a public health insurance plan pays providers at rates set midway between current Medicare and private rates, but they would save only $594 billion if no public plan option is offered.

The study, “Fork in the Road: Alternative Paths to a High Performance U.S. Health System,” also found that overall health care savings with a public health insurance choice would be $3 trillion over 11 years, and only $1.2 trillion under a private plan-only scenario. The major sources of the differences in savings are lower administrative costs, greater efficiencies in health care delivery and slower growth in health care spending with a public plan choice. Further, the authors estimate that premiums for the public plan option paying Medicare payment rates would initially be 25 percent below those currently available for a comparable benefit package in the private individual/small firm market.

To see the full paper, go to The Commonwealth Fund's website at commonwealthfund.org.