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Study: Public Option Saves the $200 Billion

Sen. Chuck Grassley (R-IA) told MSNBC that the Senate Finance Committee needed to find $200 billion in savings to pass health care reform. Grassley is opposed to the public option; if Grassley were serious about finding $200 billion in new savings, he’d support a public option.

A new study from the Commonwealth Fund finds that the public option could save the country $265 billion. The same study found that Grassley’s favored approach–allowing insurance companies to maintain their near-monopoly status–would cost the country $32 billion.

According the to the report, a combination of insurance regulations aimed at eliminating the insurance industry’s ability to discriminate against the chronically ill, broader pooling of risks, and a more stream lined administrative system that the House bill would bring about saves money:

"Such a mixed public-private approach could substantially reduce costs over time, particularly, related to insurance administration. A national insurance exchange, coupled with the requirement that all individuals must have health insurance, would reduce underwriting by broadly pooling risks and restricting carriers from underwriting on the basis of health and other characteristics. A standard benefit package would be established, the transparency of prices and benefits covered would be increased, and broker and marketing functions would be reduced through a centralized authority that “connected” applicants with health plans and facilitated enrollment. The exchange would help improve portability of coverage, reducing churning in two ways: it would enable individuals who leave their jobs to keep their coverage; and it would facilitate the continued coverage of low-income individuals and families whose eligibility for subsidies or public programs, like Medicaid and CHIP, fluctuated.

Moreover, substantial reductions in administrative costs would likely stem from the inclusion of a public health insurance option in the exchange. Such a plan would operate with few broker or marketing costs, no costs associated with underwriting, and premium margins invested in reserve funds. There would be no
negotiating of rates between providers and the public health insurer and therefore no associated costs; like Medicare, the public plan would be standard and avail-
able nationally to any provider willing to participate. The plan would thus provide an incentive for competing private plans to streamline their operations."

The Senate Finance Committee is looking for $200 billion in savings. A non-partisan study has clearly shown that adopting a strong public option is a feasible way to achieve those savings. But the Finance Committee still can’t release an agreement, even though they insist they’re making progress. While Washington dithers, American patients are kept from their doctors by their inability to access insurance due to things like pre-existing conditions.

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