Bills
| 3.23.22

Should Medicare Be Expanded to Establish a Public Option for Individual & Small Business Health Insurance? (S. 981)

Do you support or oppose this bill?

What is S. 981?

(Updated June 28, 2020)

This bill — the Medicare-X Choice Act of 2019 — would build on the Medicare framework to establish a public option on the individual and small business health insurance exchanges.  The Medicare-X plan would cover essential health benefits, including pediatrics and maternity care, to align with other plans on the exchanges established by the Affordable Care Act (aka Obamacare). It would also make Advance Premium Tax Credits and Cost-Sharing Reduction (CSR) payments available to enrollees.

Medicare-X would be phased in as follows: 

  • Beginning in 2021, this bill would make Medicare-X available in areas with one or fewer options on the ACA Exchange. The Medicare-X plan would also be available in rating areas with a provider shortage or lack of plan competition, such as Health Professional Shortage Areas (HSPAs) and rural areas. 
  • By 2024, the plan would be available in all rating areas. 
  • Finally, in 2025, it would be available on the Small Business Health Options Program Exchange. 

The Health and Human Services (HHS) Secretary would have the authority to contract with outside entities to process claims or administer additional components of the plan. This would include contracting with entities that currently administer certain functions for Medicare. This bill would also direct the HHS Secretary to gather data from State Insurance Commissioners to set adequate premiums. 

Some key specifics of this bill are outlined below.


SUBSIDIES FOR PREMIUMS

This bill would eliminate the subsidy cliff by extending premium tax credit eligibility to those at and above 400% Federal Poverty Line (FPL). Individuals at 400% FPL would pay 9% of their income toward the “benchmark plan,” increasing to 13% of their income at 600% FPL and above.

For those below 400% FPL, this bill would reduce the percentage of income they’re expected to contribute to the benchmark plan by 0.5%.


REINSURANCE

This bill would authorize three years of funding for a national reinsurance program at $10 billion per year. 


PROVIDER NETWORK REIMBURSEMENT RATES

This bill would require that providers participating in Medicare and/or Medicaid also accept Medicare-X patients. It would direct the HHS Secretary to enroll additional providers, such as pediatricians and OB/GYNs, to provide their specialized services. Providers would be reimbursed at Medicare rates, with flexibility for the HHS Secretary to reimburse up to 125% of Medicare rates for hospitals and physicians in rural areas. 


PRESCRIPTION DRUGS

This bill would authorize the HHS Secretary to negotiate drug prices under Medicare Part D and allow the public plan to participate in those arrangements. The HHS Secretary would be encouraged to use value-based payment arrangements for prescription drugs. 


DELIVERY SYSTEM REFORM FOR AN ENHANCED HEALTH PLAN

The bill would direct the HHS Secretary to use outcomes-based alternative payment models that are aimed at care coordination for patients with chronic conditions. It would also encourage providers to use innovative technology, such as telehealth and remote patient monitoring, and integrate social services like food, housing, and transportation. 

This bill would also authorize the HHS Secretary to establish a grant program to fund broader experimentation with accountable communities for health in order to integrate social needs in health care delivery services. 


FUNDING

This bill would set premiums to cover the plan’s full actuarial cost, including administrative costs. 


TRADITIONAL MEDICARE

This bill wouldn’t have any effect on benefits offered through Medicare Fee-for-Service (FFS), Medicare Advantage or the Medicare trust fund.

Argument in favor

Using the existing Medicare framework to create a public option for health insurance coverage will help create more competition in the health insurance marketplace and give people in rural and undercovered areas another option for medical coverage.

Argument opposed

This plan would be tremendously costly to hospitals and healthcare providers, which makes it a nonstarter. It could also be a step along the road to single-payer healthcare that would eliminate employer-sponsored plans, which many Americans are happily on now.

Impact

Americans seeking health insurance; Americans seeking a public health care option; Medicare; Part D drug pricing; hospitals; health providers; Medicare and/or Medicaid providers; and the HHS Secretary.

Cost of S. 981

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sen. Michael Bennet (D-CO) reintroduced this bill from the 115th Congress to create Medicare-X, a public plan that would offer families, individuals, and small businesses additional, low-cost health insurance choices and create more competition in the marketplace:

“It is a disgrace that people’s lives are upended daily in our country because they have no health insurance. We need to cover everyone, reduce costs, and improve quality—and Medicare-X is the best way to accomplish those objectives. Medicare-X starts in rural areas because the market there is failing too many Americans. And by using the existing Medicare framework, it provides a new, affordable option without adding bureaucracy. There is no excuse for us not to finish what the ACA started and close the coverage gap in America through Medicare-X.”

In an April 2019 conference call with reporters, Sen. Bennet argued that this is a practical way to achieve universal coverage: 

“I just think this is a much more practical way to try to achieve the objective – which is universal coverage and a primary reduction of our expenditures on health care – than, frankly, any other proposal that’s been made since the Affordable Care Act was passed.”

Sen. Bennet argues that this plan is superior to single-payer plans that’d eliminate employer plans: 

“180 million people in America get their insurance through an employer-based plan and Medicare X gives people the opportunity to decide whether they want to stay on that plan. Some of the other plans take away insurance from those 180 million.”

Original cosponsor Tim Kaine (D-VA) adds:

“Our goal is more health care options and lower costs. With those priorities top of mind, we introduced Medicare-X to give Americans more quality, affordable health care choices, especially in rural communities that face a shortage of insurance options. This bill takes additional steps to reduce premiums, increase coverage, and make health insurance more affordable. I want to make sure that Virginians – and all Americans – can get the care they need.”

Sen. Kaine argues that Medicare X would be much cheaper than for-profit insurance, as “CMS needn’t collect a profit, they don’t have to return to shareholders. The cost of this nonprofit insurance policy would be dramatically less than for-profit insurance.”

U.S. PIRG supports this bill. Its High Value Healthcare Campaign Director, Lance Kilpatrick, says: 

“Too often, Americans have too few choices for health insurance. With such limited options, Americans pay too much for too little in health benefits. And in many rural areas, they must choose between one insurance option or no insurance at all. On the other hand, millions of Americans love Medicare for delivering quality care at a reasonable price. The Medicare X Choice Act would provide the rest of the country with the chance to choose insurance similar to Medicare that delivers excellent medical treatment at a fair cost. By providing competition to private insurance plans, the bill will encourage other health care providers to innovate by cutting wasteful spending on useless procedures and tests, reducing administrative overhead and delivering higher-value services. This bill would also help the millions on Medicare, because it would allow Medicare to negotiate prescription drug prices, which reduces costs for everyone. Polls continually show that Americans across all demographics want the choice to stay with their existing plan or opt into a Medicare-based plan, if that’s better for their family. Medicare X would give them that possibility. We applaud Senators Bennet and Kaine for offering this practical solution for people who struggle with astronomical health care costs and for driving forward a value-based care system.”

The Guttmacher Institute notes both strengths and weaknesses of this bill in its analysis. It says this bill’s strengths are: 

  • Creation of new insurance options to encourage competition, expansion of ACA premium subsidies and funding of a nationwide reimbursement program, all of which could lower insurance costs and expand coverage; 
  • Application of current ACA protections, including subsidies and antidiscrimination rules, to the new public option; 
  • Coverage requirements for contraception, maternity care and other services; and
  • Provision of new investments in delivery system and payment reform, including efforts to reduce health disparities, expand the use of telehealth and integrate health care with programs addressing social determinants of health.

However, the Guttmacher Institute also notes a few weaknesses of this bill: 

  • Lack of a provision specifically designed to address sexual and reproductive health;
  • That existing federal and state abortation coverage restrictions would apply to the Medicaid-X plan, which would mean abortion coverage would be banned in at least half of states; and
  • Maintenance of the ACA’s existing restrictions excluding undocumented immigrants and DACA recipients from buying coverage, with or without government subisides.

The Colorado Sun notes that the reimbursement rate this bill proposes could be an issue for medical providers: 

“Medicare generally pays better than Medicaid across the country. But it still pays well below what doctors and other providers can get from private insurance companies. The bill would, though, allow for payments 25 percent above normal Medicare rates to doctors and hospitals in rural areas.”

The conservative group Colorado Rising Action opposes this bill. Its spokesperson, Lindsey Singer, says: 

“A public option brings the government even more intimately involved in our health care decisions, and threatens to run out the few existing private insurance options from under-served areas.”

America’s Health Insurance Plans (AHIP), which views this as a path to single-payer healthcare, opposes this bill. It says, “Medicare X is a slippery slope to government-run healthcare. The American people want healthcare that works for them – not a one-size-fits-all health care system.” The National Association of Health Underwriters (NAHU), which “strongly opposes all forms of single-payer healthcare and is committed to promoting employer-sponsored health coverage and preserv[ing] Medicare, Medicaid, and other existing health programs,” also opposes this proposal. 

In an April 2019 tweet, President Trump said that congressional Republicans were working on “a really great HealthCare Plan” to be voted on after the 2020 elections, “when Republicans hold the Senate & win back the House.” However, he has yet to offer specifics about the plan.

Senate Majority Leader Mitch McConnell (R-KY) has dubbed Medicare for All “the Democrats’ Medicare for None” proposal. In an interview with POLITICO, he signaled his plan to attack this Democratic proposal and indicated that he isn’t interested in leading Trump’s effort to make the GOP the “party of healthcare.” 

This legislation has 11 Democratic Senate cosponsors. Its House companion, sponsored by Rep. Antonio Delgado (D-NY), has 18 Democratic House cosponsors. As of August 8, 2019, neither bill had received a committee vote. Given Trump’s and McConnell’s positions, this bill is unlikely to pass in the Republican-controlled Senate.

Last Congress, this bill had 10 Democratic Senate cosponsors and didn’t receive a committee vote. Its House companion, sponsored by Rep. Brian Higgins (D-NY) with nine Democratic House cosponsors, also didn’t receive a committee vote.

This bill is one of several pieces of legislation in the 116th Congress seeking to expand public insurance options. Other proposals include: 

  • Medicare for All Act of 2019 (S. 1129), sponsored by Sen. Bernie Sanders (I-VT), which would collapse Medicare, Medicaid, and private insurance into a universal health care system; 
  • Medicare at 50 Act (S. 470), sponsored by Sen. Debbie Stabenow (D-Mich.), which would allow non-Medicaid individuals ages 50-64 to buy in to Medicare; and
  • State Public Option Act (S. 489/H.R. 1277), sponsored by Sen. Brian Schatz (D-HI), which would allow individuals to buy in to Medicaid through the ACA marketplaces.


Of Note: When this bill was introduced in the 115th Congress, Vox’s Sarah Kliff explained how it fits into the existing healthcare system, versus how single-payer proposals would radically change the healthcare system: 

“Medicare X and single-payer represent distinctly different views of the future of American health care and what role the federal government ought to play. Medicare X fits neatly into the system that exists right now. It slots into the Affordable Care Act’s marketplaces and Medicare’s doctor network. Single-payer, by contrast, is a much more radical change—one where a government health plan is not a choice but the only option available. It abolishes the Obamacare marketplaces as well as employer-sponsored coverage.”

In a study for the American Hospital Association and Federation of American Hospitals, KNG Health Consulting found that this proposal could reduce payments to hospitals by $800 billion over 10 years and significantly disrupt the existing health insurance exchanges. KNG Health Consulting also found that this proposal would result in only a modest increase in insured consumers.

A Medicare public option was included in several drafts of the ACA. However, it was ultimately stripped from the final legislation due to political opposition from moderates such as then-Sen. Joe Lieberman (I-CT). Now, it’s a relatively popular proposal among Democrats, and several versions of a Medicare buy-in have been introduced in recent Congresses. 


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / Bill Oxford)