Why Nevada’s modest public option bill is getting heavy attention

With among the highest rates of uninsured, the highest percentage of for-profit hospitals in the country, and care in the bottom third of affordability, Nevada—accustomed to its reputation for poor healthcare—is now gaining unaccustomed visibility for its innovative state health initiatives. 

In 2017, Gov. Brian Sandoval vetoed a bill that would have allowed anyone to buy into the state’s Medicaid program. Sandoval cautioned against “moving too soon” and risking the introduction of “more uncertainty to an already fragile health-care market.” Senate Bill 420, sponsored by Senate Majority Leader Nicole Cannizzaro and introduced late last month, picks back up on health care reform with a bill much narrower and more detailed than the 2017 Medicaid buy-in, unfolding over a longer period of time.

Nevada is among several states this year, including Colorado and Connecticut, considering a version of a public option, a government-run health insurance plan that competes with private insurance on the market. Washington passed a public option in 2019, and coverage began in January of this year.

The goal of the Nevada bill is to bring down healthcare costs. SB420 would establish a healthcare program overseen by the government but administered by private insurers. The program would offer plans that cover either 70 or 80 percent of medical costs. Roughly 7 percent of the population would be eligible to buy into the public plan: only individuals and small businesses qualify. The public option would initially be sold on the state health exchange  at a rate five percent lower than the benchmark private plan offered on the exchange, with the goal of reducing premium prices by 15 percent in the first five years. To reduce costs, the program would reimburse providers at a lower rate than private insurers do (at the Medicare rate or better). 

The plan would be available in 2026 to align with the Medicaid procurement process, when insurers compete for large contracts to administer Medicaid benefits. To bid on Medicaid, insurers would be required to bid on the public option plan too.

Nevada’s bill is only a quasi-public “public option” because the state would contract out the program’s administration to private insurers. The classic concept of a public option is a federal Medicarebuy-in, which would be publicly run and administered.

Washington State’s public option doesn’t have the state directly provide insurance, either: “It would be more accurate to call it a privately-administered plan with publicly influenced payment rates,” James Capretta, an American Enterprise Institute fellow who researches health policy, wrote last year. In other words, these public options are really private-public partnerships of sorts.

Jacob Hacker, professor of political science at Yale and “father of the public option,” noted to the Current by email that states don’t have the same public administrative infrastructure that the federal government does to directly provide insurance, so it is harder to say what a state-level public option would look like. At a minimum, Hacker says, a state public option would be a nonprofit plan in which “the government set the terms, ensured low cost-sharing and broad provider participation, and had full access to the data.” 

Matthew Fiedler, a fellow with the USC-Brookings Schaeffer Initiative for Health Policy, said that the essential question will be, once enacted, whether SB420 will try to fulfill the essential goals of a public option: to reduce the prices healthcare providers pay and to offer a lower premium option.

Opposition’s fear stretches beyond Nevada

Industry’s influence over the bill began long before it was drafted. The study that the legislature commissioned in 2019, by Manatt Health, expressly excluded Medicaid buy-in, citing lower rates for providers.

Manatt said that the selection of the two models they studied (one that would allow buy-in to Nevada’s state employees plan and the other a state-sponsored plan on the market) was based on legislative direction “as well as conversations with healthcare stakeholders throughout Nevada.” Provider rates in these two options “are understood to be much closer to rates offered by commercial insurers, and therefore are preferred by providers,” Manatt said in the study.

Despite industry input helping keep a stronger public option off the table, a lobbying force has still come out strongly against the bill, making familiar arguments against public insurance: that it would cause cost-shifting, reduce providers’ capacity to provide care by paying them less, and cost a huge amount from the government. National organizations, including Partnership for America’s Health Care Future Action, which was founded in 2018 to fight proposals for government-run health care, have been deployed to Nevada to lobby against the bill. The Nevada chapter of Americans for Prosperity, the Koch brothers’ political advocacy group, sent out mailers opposed to the bill which claimed that hospitals in rural Nevada and communities of color would be in danger of closing if the bill passes.

The opposition’s fear stretches beyond Nevada: They worry that public option models will spread, and that state examples could provide evidence to inspire federal legislation.

“What we’re seeing is really a national campaign, a lot of out of state money is being spent in Nevada, a lot of out of state money’s being spent in Colorado and Connecticut,” said Liz Hagan, director of policy solutions at United States of Care, a national nonprofit that has been involved this year with pushing the Nevada legislation. “They don’t want to see this ultimately happen federally, and so making sure that it doesn’t happen at the state level will ensure that that doesn’t happen.”

Some progressives argue that adopting a federal public option would help ease the transition away from private insurance toward a national single-payer model (a model in which the government would finance healthcare with a public, universal plan). Industry players worry that even SB420, which supporters frequently say will not upend the system, could spiral into something more threatening; that one foot in the door of public insurance could cause the fee-for-service model to cave in.

The lobbying efforts can seem incommensurate with the bill’s relatively modest mechanism and small percentage of the population eligible to enroll (but ambitious goals, such as 15 percent reductions in premium prices).

Adam Gaffney, former president of the single-payer advocacy group Physicians for a National Health Program, is skeptical that the bill will reduce costs while outsourcing administration. He tweeted that the Nevada “public option” (his quotation marks) would produce “no administrative savings,” and administrative savings are the chief source of savings in a single-payer model.

According to Hacker, the bill might even hurt progressive advocacy for a robust federal public option.

“You could see a plan that falls short being used as a case for not supporting the public option at the national level,” Hacker warned. The problems would be not with the public option as a concept, but with the plan’s “particular design and the inherent difficulties of building a public option at the state level.”

Washington state’s public option has already shown that some will be quick to pounce on any mistakes or shortcomings of state-level public option programs to condemn the public concept more broadly. Washington had higher premiums than expected in the first few months, which led Bloomberg Law to conclude that it spelled trouble for a national plan. The U.S. Chamber of Commerce wrote that Washington’s premiums prove a public option “is far from a silver bullet to reduce health costs and instead will likely make it harder for Americans to access health care services.” Several opponents of the bill in Nevada frequently cite Washington as evidence, too, despite the complex differences between the bills.

For Nevada, Hacker worries that the public option would not be able to reach its premium and cost reduction goals. To do so depends on achieving administrative efficiencies, he said, and bargaining for lower prices.

“I fear that, even if designed well, the public plan would not be big enough to achieve those efficiencies or lower prices,” he said. The challenge is getting small businesses and middle-income uninsured people to enroll to make the plan big enough to drive down costs. Lower income uninsured people qualify for significant ACA subsidies already, so the most “cost sensitive groups,” Hacker said, are those who are not receiving large subsidies. If Nevada can adopt robust outreach programs to reach these groups, SB420 might be able to expand coverage, and thus reduce costs.

Getting more and more people enrolled onto the public plan would make it more durable: “There could be a virtuous cycle in which the plan grows, gains leverage for efficiencies and price reductions, and then grows more,” said Hacker.

That cycle is, it’s safe to say, a nightmare for industry. “If you’re going to make change in healthcare,” Gaffney tweeted, “you’re going to make powerful people unhappy.”