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Blue states' health plans risk industry backlash

California Gov. Gavin Newsom
California Gov. Gavin Newsom (Photo: Stephen Lam/Getty Images)

As blue states roll out ambitious plans to expand public health care coverage, they’ll have to walk a fine line to keep the health care industry — with its lobbying and advocacy muscle — on board.

The big picture: Industry groups like doctors and hospitals generally support efforts to cover the uninsured, even through public plans that aren’t very lucrative. But once policymakers start trying to use those programs to cut prices throughout the health care system, industry can become a powerful enemy.

Where it stands: Several blue states are considering new policy options.

  • Washington Gov. Jay Inslee and Democrats in the Colorado legislature have proposed new public insurance plans.
  • A handful of other states, led by New Mexico, are exploring ways to let people buy into Medicaid if they’re not poor enough to qualify for the program but also can’t afford coverage on their own.

Between the lines: Public insurance programs like Medicare and Medicaid generally pay doctors and hospitals less than private insurance does. Providers can live with those rates when the alternative is a patient going uninsured, and the provider not getting paid at all.

  • “I don’t anticipate major, highly visible opposition to straight-up public plan expansions for populations currently not covered or underinsured,” said Chris Jennings, a Democratic health care consultant.
  • Industry's "desire is to navigate to something that enables the market to operate side by side with government subsidies. There’s a level of comfort around that," health care consultant Dan Mendelson said.

The other side: In the past, Democrats have viewed public insurance options as a competitive force — a way to build market clout and drive prices down across the board.

  • That’s why the health care industry helped to kill a public option in the Affordable Care Act. Industry opposition also defeated cost-control measures in California last year. And it could do the same to Democrats’ new plans if they attempt any real cost control.
  • “I’d expect substantial health industry pushback to the idea of expanding publicly-sponsored insurance. The industry will see it as threatening, and the camel’s nose under the tent,” the Kaiser Family Foundation's Larry Levitt said.

Yes, but: Cutting costs is politically difficult, but polls show it’s voters’ top health care priority — above expanding coverage.

  • “I think we’ll be able to evaluate how much of a cost containment caucus there really is, either at the state or federal level," Jennings said.