This study models how a public option or capped provider payment rates would affect coverage, premiums, and spending, showing that lowering provider prices can significantly reduce costs, with tradeoffs depending on how widely reforms are applied.
The study shows that the central driver of high U.S. healthcare costs is price, not just usage. Private insurers pay hospitals about 2.4× Medicare rates, meaning the same service can cost more than double depending on the payer. ⭐ This gap creates the foundation for large potential savings if prices are brought closer to Medicare levels.
Rather than isolating one policy, the study demonstrates that outcomes depend on how much and how broadly prices are lowered.
In more limited reforms—often involving a public option in the nongroup market—lower prices are introduced through competition, leading to meaningful but contained effects, such as premium reductions around 28% on average, with some areas seeing up to 40% declines, but only modest changes in overall coverage and system spending.
As reforms expand to employer-based insurance or apply more direct limits on provider payments, the effects grow significantly. Employer spending falls by 4% to 15% ($38.9B–$142.9B), and under broader price constraints, total savings can reach over $200 billion, with additional gains for households and the federal budget.
The key takeaway is that the debate is not about whether a public option or price regulation is used, but about how aggressively and widely prices are reduced across the system, since that ultimately determines the scale of savings.