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Newsom Touts California’s ‘Public Option.’ Wait — What Public Option?

Gov. Gavin Newsom says the state already has a public option: Covered California, the state health insurance exchange. While there is no single definition of a public option, some health care experts say that’s a stretch. (Smith Collection/Gado/Getty Images)

Several Democratic presidential hopefuls are pitching a federal “public option” as a way to expand health coverage and make it more affordable.

The details of their proposals vary, but the general idea is to create a government-sponsored plan that could compete with private insurance.

“We have a public option, just so folks know,” California Gov. Gavin Newsom claimed last month as he unveiled his proposed 2020-21 state budget. “It’s called Covered California.”

Hmm, really?

California does not have a public option in the way most people understand the term. According to Newsom’s definition, offering a public option simply means ensuring that consumers have choices and affordable coverage, and that health plans are held accountable, things Covered California already does, his office said.

That’s a stretch, say some health care and political experts.

Covered California “is manifestly not a public option,” said Thad Kousser, chair of the political science department at the University of California-San Diego.

Kousser theorized that Newsom may be co-opting the term to make it seem like the state is making progress toward his goal of creating a single-payer system.

But if Newsom wants to flout the term, the state should “create a public option that doesn’t involve insurance companies, and Covered California is a market to buy insurance from insurance companies,” Kousser said.

Covered California is the state-run exchange, created under the Affordable Care Act, where some individuals, families and small businesses can purchase insurance.

A public option is considered less sweeping than single-payer, a system in which health care is paid for by a single public authority. As a candidate, Newsom, a Democrat, campaigned for the creation of a single-payer program.

But that isn’t likely to happen anytime soon, for a variety of reasons. For one, the Trump administration has said it would reject any state plans to use federal dollars to implement single-payer.

At the national level, Democratic presidential candidates including former Vice President Joe Biden and former South Bend, Indiana, Mayor Pete Buttigieg have pitched public-option plans that would allow, but not require, people to buy into government-run plans similar to Medicare.

The idea is to boost competition by allowing people to choose between private plans and a government-run plan — and reduce costs.

Only one state, Washington, is implementing its own version of a public option, but other states are considering it.

Cascade Care, a hybrid system in which the state will contract with an insurer to administer a public-option plan, will debut in 2021. The state will attempt to control costs by setting payment rates at 160% of what Medicare would pay for the same service. Colorado is proposing a similar idea.

This version is different from the presidential candidates’ proposals because an insurance company will be responsible for running the public-option plan — not the government. But, ultimately, Washington will give its residents a new health insurance option, and that’s not the case in California, said Billy Wynne, chairman of the Wynne Health Group, which recently launched the Public Option Institute, a group analyzing the implementation of public-option programs.

But in California’s defense, he said, what constitutes a public option “is in the eye of the beholder.”

Peter Lee, executive director of Covered California, is also calling the exchange a public option. He argues that public-option plans assume different forms, just like single-payer or Medicare for All proposals.

On the exchange, “plans don’t compete on their own terms; they compete on our terms,” Lee said.  So, “is a public option only a government plan, or is it a public program that sets the rules of how private plans compete?”

Linda Blumberg, a health policy fellow at the Urban Institute, hazards an answer: While Covered California actively negotiates with health plans to keep premiums down, it “doesn’t quite have the spirit of a public option” because it doesn’t bear the financial risk that insurance companies do.

Newsom’s Healthy California for All Commission, which is debating how to get every Californian covered — with an emphasis on single-payer — gathered in Sacramento last month for its inaugural meeting. The commissioners briefly discussed the possibility of implementing a public option as a steppingstone to achieving universal coverage.

But the concept didn’t get much love, and some commissioners suggested that instead of creating a public option, the state should strengthen existing public programs. One commissioner said the idea of a public option had already fizzled.

“Whatever happened to Vanilla Ice, and whatever happened to Tiny Tim and Miss Vicki? Whatever happened to public option?” asked Dr. Robert Ross, president of the California Endowment, a foundation that focuses on expanding health care access among Californians. “It just kind of went away.”

The closest thing to a functioning public option in California, under the traditional definition, may be the L.A. Care Health Plan, a public, nonprofit insurer equally available to Los Angeles County residents with Medi-Cal, the state’s Medicaid program for low-income residents, and to those who earn too much to qualify for Medi-Cal.

John Baackes, the plan’s CEO, said L.A. Care functions like the public-option plan described in the U.S. House version of the Affordable Care Act, before it was axed in the Senate. “Their definition of the public option was a public entity that did not have shareholders that would compete with commercial insurers in the individual market,” Baackes said.

L.A. Care, created to serve Medi-Cal patients, later opened to individuals and families who purchase their own insurance through Covered California or the open market.

For some time, Baackes said, the plan was the lowest-priced option in the Los Angeles area.

“Our enrollment skyrocketed because this is a very price-sensitive market, but in 2020, we were underbid by competition,” Baackes said. “To me, that’s exactly what the public option was supposed to do: put pressure in the marketplace. So I’m saying if you want to see how it works, look here.”

This story was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

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California Covered California Elections Insurance States