EDITORIAL: Public option promises are a bill of goods

Gov. Steve Sisolak said last week he’ll sign a bill that makes Nevada the second state to offer a “public option” for health insurance coverage because “there’s an opportunity to get health care coverage available for more Nevadans.” Proponents also claim the legislation — which doesn’t kick in until 2026 — will reduce health care costs.

It is likely to do neither and is actually a first step toward government-run health care.

Under Senate Bill 420, insurance companies that offer Medicaid or workers’ compensation policies in Nevada will be required to also offer lower-cost plans on the Obamacare exchange starting in five years. Those plans must cost 5 percent less than similar private-sector offerings, rising to 15 percent less by 2030. Details in terms of what coverages the plans must offer will also be dictated by the government.

The cost savings are purported to come from lower administrative costs and the negotiating clout governments have to rein in provider prices. But this ignores the obvious cost-shifting involved.

If the state mandates pricing below market costs, insurance companies and health care providers will react by passing those losses on to private-sector consumers, who will face rising prices. This is precisely what has been going on for decades with existing government health care programs. The American Hospital Association estimates that hospitals lost $75.8 billion treating Medicaid and Medicare patients in 2019. The National Bureau of Economic Research found that hospital cost-shifting had increased private payer rates by 1.6 percent.

Doctors and hospitals may also simply refuse to see patients covered under the public option, and businesses may look to save costs by pushing employees off company-sponsored plans and into the exchanges.

Washington’s experience is instructive in this regard. In 2019, the state became the first to implement a public option amid promises of lower costs and more efficient delivery of care. While there are differences between Washington’s approach and the Nevada bill, to date, the results haven’t matched the hype. “Premiums aren’t dropping as predicted in Washington state’s first-in-the-nation experiment with offering health insurance plans based on Medicare rates,” Bloomberg Law reported in August.

The report continued: “Providers, especially hospitals, have been reluctant to agree to rates based on Medicare payments, which are lower than rates paid by employers and commercial health plans.”

Capping prices by government fiat has never proven an effective means of cost containment — in health care or anywhere else. Don’t expect the laws of economics to be repealed in the next five years.

As for Gov. Sisolak’s notion that Nevada’s public option will help more residents secure insurance, don’t count on it having a significant impact.

About 11.5 percent of Nevadans have no health insurance, according to the Kaiser Family Foundation, placing the state among the top 10 for uninsured. Yet more than half of those people are already eligible for Medicaid or for subsidies on the Obamacare exchanges and have chosen not to participate. How is creating another state program going to help? More aggressive outreach through existing options would be easier and less expensive.

In addition, the Biden administration’s virus relief blowout expands insurance subsidies to those earning up to 400 percent of the poverty line, further encouraging individuals and families without coverage to purchase it. What indication is there that those who aren’t taking advantage of the generous federal handouts that are currently available would suddenly jump at the chance to sign up for state-run insurance?

In the long run, a public option is an exercise in wishful thinking that will undermine Nevada insurance markets, drive up taxpayer costs, reduce health care options and quality and burden state medical providers. Other than that, it’s a fine idea.