The Congressional Budget Office this week put out their list of provisions that would reduce the deficit and one big one is a strong public option. The CBO found that a public option based on Medicare would reduce the deficit by $158 billion through reduced spending and increased revenue.
The reason a public option would be so effective at reducing the deficit is that it would significantly lower premiums for millions of regular Americans and businesses. This would, in turn, reduce the amount of subsidies the government would need to spend to make insurance “affordable.” From the CBO:
In the Congressional Budget Office’s estimation, premiums for the public plan would be between 7 percent and 8 percent lower, on average, during the 2016–2023 period than premiums for private plans offered in the exchanges—mainly because the public plan’s payment rates for providers would generally be lower than those of private plans. In addition, the public plan would be likely to have lower administrative costs than private plans. However, CBO expects that the public plan would be less inclined than private plans to use benefit management techniques (such as narrow provider networks, utilization review, and prior-approval requirements) to control spending. […]
One rationale for adding a public plan to the exchanges is that it would help reduce premiums for some individuals, families, and employers who would buy insurance through the exchanges but would not qualify for subsidies. Premiums would be reduced both because the public plan would be one of the lowest-cost plans available in many areas and because adding a low-cost option would increase the competitive pressure on private plans,leading them to decrease their premiums.
A public option would inherently make insurance cheaper for people, and the government could use the deficit reductions to pay for increased exchange subsidies which would bring down what regular people need to pay even further.
By not including a public option Democrats effectively decided to force individuals to pay unnecessarily high premiums and now it has come back to bite them.