The Illinois’s health care reform implementation panel has released its initial recommendations. They concluded that the private insurer exchanges created by the new health care law are likely to be a relatively bad deal for low-income residents, and that the state would be able to provide them better and cheaper coverage through a new public Basic Health Plan, at less cost to the federal government. From the initial report (PDF):

The ACA allows states to contract for a coverage program for individuals and families with incomes between 133 percent and 200 percent of the poverty line. The state would receive federal funds to operate this Basic Health Plan equal to 95 percent of the cost of the premium, plus cost-sharing subsidies that would have gone to providing coverage for this group in the Exchange.

Because the Basic Health Plan would be operated under the same rules as Medicaid, the state would be able to maintain continuity of care across Medicaid and non-Medicaid programs. If properly designed, a Basic Health Plan could provide more affordable and comprehensive coverage than the Exchange. In addition, a state could provide Medicaid, CHIP, and Basic Health Plan coverage for working families, allowing them to keep the same medical providers if their income changes.

Private health insurance in American is extremely inefficient and more costly that public insurance. Basic logic dictates that a single public program directly collectively bargaining with providers for thousands of individuals is going to get a much better deal than one low-income individual with no market power and limited knowledge buying a product from a middleman.

Given this fact it is not surprising that this panel in Illinois came to the same basic conclusion as did the state boards in Pennsylvania and Connecticut. A government program can collectively provide these low-income people with better coverage that is cheaper for both them and the government than they would ever get if forced to use the new private exchanges.

The whole concept of the Obama health care law, relying on exchanges of exclusively private insurers, is extraordinarily wasteful. As a result, the people using it will end up paying more money for worse coverage at greater expense to the taxpayers. Hopefully a few states will use the Basic Health Plan waiver to protect at least some of their lower income residents from the huge rip-off these exchanges will be.