Some Democrats are proposing a government alternative to private insurance. But allowing people to choose such a plan may destabilize the A.C.A., some experts say.
It seems a simple enough proposition: Give people the choice to buy into Medicare, the popular federal insurance program for those over 65.
Former Vice President Joseph R. Biden Jr. is one of the Democratic presidential contenders who favor this kind of buy-in, often called the public option. They view it as a more gradual, politically pragmatic alternative to the Medicare-for-all proposal championed by Senator Bernie Sanders, which would abolish private health insurance altogether.
A public option, supporters say, is the logical next step in the expansion of access begun under the Affordable Care Act, passed while Mr. Biden was in office. “We have to protect and build on Obamacare,” he said.
But depending on its design, a public option may well threaten the A.C.A. in unexpected ways.
A government plan, even a Medicare buy-in, could shrink the number of customers buying policies on the Obamacare markets, making them less appealing for leading insurers, according to many health insurers, policy analysts and even some Democrats.
In urban markets, “a public option could come in and soak up all of the demand of the A.C.A. market,” said Craig Garthwaite, a health economist at the Kellogg School of Management at Northwestern University.
And in rural markets, insurers that are now profitable because they are often the only choices may find it difficult to make money if they faced competition from the federal government.
Some insurers could decide that a smaller and uncertain market is not worth their effort.
If the public option program also matched the rates Medicare paid to hospitals and doctors, “I think it would be really hard to compete,” Mr. Garthwaite said. Even leading insurers do not have the leverage to demand lower prices from hospitals and other providers that the government has.
Whether to implement a public option or Medicare buy-in has become a defining question among Democratic presidential candidates and is likely to be a contentious topic at this week’s debates.
On Monday, Senator Kamala Harris took an alternate route, unveiling a plan that would allow private insurers to participate in a Medicare-for-all scheme, akin to their role currently offering private plans under Medicare Advantage.
The recent spate of proposals reprises some of the most difficult questions leading up to the passage of the A.C.A., in many ways a compromise over widely divergent views of the role of the government in ensuring access to care.
After a shaky start, the federal and state Obamacare marketplaces are surprisingly robust, despite repeated attempts by Republicans to weaken them. They provide insurance to 11 million customers, many of whom receive generous federal subsidies to help pay for coverage.
The A.C.A. is now a solidly profitable business for insurers, with several expanding options after earlier threats to leave. For example, Centene, a for-profit insurer, controls about a fifth of the market, offering plans in 20 states. It is expected to bring in roughly $10 billion in revenues this year by selling Obamacare policies.
In spite of stock drops because of investors’ concerns over Medicare-for-all proposals, for-profit health insurers have generally thrived since the law’s passage.
But a buy-in shift in insurance coverage could profoundly unsettle the nation’s private health sector, which makes up almost a fifth of the United States economy. Depending on who is allowed to sign up for the plan, it could also rock the employer-based system that now covers some 160 million Americans.
In a recent ad, Mr. Biden features a woman who wants to keep her current coverage. “I have my own private insurance — I don’t want to lose it,” she said.
A spokesman for Mr. Biden argued that a public option can extend the success of the Affordable Care Act.
“Joe Biden thinks it would be an egregious mistake to undo the A.C.A., and he will stand against anyone — regardless of their party — who tries to do so,” said Andrew Bates, a spokesman for Mr. Biden, in an email.
Major insurers and hospital chains, pharmaceutical companies and the American Medical Association have joined forces to try to derail efforts like Medicare-for-all and the public option. Mr. Sanders denounced these powerful interests in a recent speech.
“The debate we are currently having in this campaign and all over this country has nothing to do with health care, but it has everything to do with the greed and profits of the health care industry,” he said.
Other critics of the public option, including Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, argue Democrats’ programs will lead to a “complete government takeover.”
“These proposals are the largest threats to the American health care system,” she said in a speech earlier this month.
Some experts predict that private insurers will adapt, while others warn that the government could wind up taking on the sickest customers with high medical bills, leaving the healthier, profitable ones to private insurers.
It’s uncertain whether hospitals, on the other hand, could thrive under some versions of the public option. If the nation’s 5,300 hospitals were paid at much lower rates by a government plan — rates resembling those of Medicare — they might lose tens of billions of dollars, the industry claims. Some would close.
One variant of the public option — letting people over 50 or 55 buy into Medicare — is often depicted as less drastic than a universal, single-payer program. But this option would also be problematic, experts said.
This consumer demographic is quite valuable to insurers, hospitals and doctors.
Middle-aged and older Americans have become the bedrock of the Obamacare market. Some insurers say this demographic makes up about half of the people enrolled in their A.C.A. plans and, unlike younger people who come and go, is a reliable and profitable source of business for the insurance companies.
The aging-related health issues of people in this group guarantee regular doctor visits for everything from rising blood pressure to diabetes, and they account for a steady stream of lucrative joint replacements and cardiac stent procedures.
The 55-to-64 age group, for example, accounts for 13 percent of the nation’s population, but generates 20 percent of all health care spending, according to the Kaiser Family Foundation.
Several experts said that designing a buy-in program that is compatible with the existing public and private plans could be daunting.
“You’d have to do it carefully,” said Representative Donna Shalala, a Florida Democrat who served as the secretary of health and human services under President Bill Clinton.
Linda Blumberg, a health policy expert at the Urban Institute, a nonpartisan think tank, agreed. “The idea of Medicare buy-ins was taken very seriously before there was an Affordable Care Act,” she said. “In the context of the A.C.A., it’s a lot more complicated to do that.”
Many dismiss concerns about whether insurers can compete.
“Any time a market shrinks in America, insurers don’t like it,” said Andy Slavitt, the former acting Medicare administrator under President Obama and a former insurance executive. Mr. Slavitt noted that insurers raised similar concerns about the federal law when it was introduced. “They’ll figure it out,” he said.
In Los Angeles County, five private insurers that sell insurance in the A.C.A. market already compete with L.A. Care Health Plan, which views itself as a kind of public option, said John Baackes, the plan’s chief executive.
The insurer offers the least expensive H.M.O. plan in the county by paying roughly Medicare rates. “We’ve proved that the public option can be healthy competition,” he said.
But the major insurance companies, which were instrumental in defeating the public option when Congress first considered making it a feature of the A.C.A., are already flexing their lobbying muscle and waging public campaigns.
In Connecticut, fierce lobbying by health insurers helped kill a state version of the public option this spring. Cigna resisted passage of the bill, threatening to leave the state. “The proposal design was ill-conceived and simply did not work,” the company said in a statement.
Blue Cross plans could lose 60 percent of their revenues from the individual market if people over 50 are shifted to Medicare, said Kris Haltmeyer, an executive with the Blue Cross Blue Shield Association, citing an analysis the company conducted. He said it might not make sense for plans to stay in the A.C.A. markets.
Siphoning off such a large group of customers could also lead to a 10 percent increase in premiums for the remaining pool of insured people, according to the Blue Cross analysis. More younger people with expensive medical conditions have enrolled than insurers expected, and insurers would have to increase premiums to cover their costs, Mr. Haltmeyer said.
Tricia Neuman, a senior vice president at the Kaiser Family Foundation, which studies insurance markets, said a government buy-in that attracted older Americans could indeed raise premiums for those who remained in the A.C.A. markets, especially if those consumers had high medical costs.
But some experts countered that prognosis, predicting that premiums could go down if older Americans, whose health care costs are generally expensive, moved into a Medicare-like program.
“The insurance companies are wrong about opposing the public option,” Ms. Shalala said.
Dr. David Blumenthal, the president of the Commonwealth Fund, a foundation that funds health care research, said a government plan that attracted people with expensive conditions could prove costly.
“You might, as a taxpayer, become concerned that they would be more like high-risk pools,” he said.
Jonathan Gruber, an M.I.T. economist who advised the Obama administration during the development of the A.C.A., likes Mr. Biden’s plan and argues there is a way to design a public option that does not shut out the private insurers.
“It’s all about threading the needle of making a public option that helps the failing system and not making the doctors and insurers go to the mat,” he said.
Many experts point to private Medicare Advantage plans, which now cover one-third of those eligible for Medicare, as proof that private insurers can coexist with the government.
But the real value of a public option, some say, would stem from the pressure to lower prices for medical care as insurers were forced to compete with the lower-paying government plans, like Medicare.
Washington State recently passed the country’s first public option, capping prices as part of its plan to provide a public alternative to all residents by 2021.
“It’s couched in this language in expanding coverage, but it does it by regulating prices,” said Sabrina Corlette, a health policy researcher at Georgetown University.
The hospital industry would most likely fight just as hard to defeat any proposal that would convert a profitable group of customers, Americans who are privately covered at present, into Medicare beneficiaries.
Private insurers often pay hospitals double or triple what Medicare pays them, according to a recent study from the nonprofit Rand Corporation.
While Ms. Shalala supports a public option as an alternative to “Medicare for All,” she is clear about how challenging it will be to preserve both Obamacare and the private insurance market. “You can’t do it off the top of your head,” she said.
HENRY KOTULA 