How much would a public option cost?

A new analysis by the Urban Institute, a liberal-leaning think-tank, says that introducing a public option health care plan would increase coverage by 1.2 million and save the federal government $12 billion a year.

The public option was one of three left-leaning policies the group assessed as part of the study. The other two: capping provider payment rates or extending Affordable Care Act premium tax credits to those above the current income limit.

By limiting provider payment rates, the study found, federal spending would drop by more than $19 billion a year. It would also reduce the amount spent by each ACA enrollee by about 22 percent, or $150 per month. The reduced costs would lead 312,000 more people to enroll in coverage, the study projected.

Related: Public options in health care making entrance via states

Currently, those with incomes above 400 percent of the federal poverty line are not eligible for premium tax credits. The great majority of ACA enrollees have incomes below the threshold and are not affected by major increases in the sticker price of health plans, since the federal government has set the price of their plan based on their income. Those with the lowest incomes generally do not have to pay more than 2 percent of their earnings toward a plan, while those right below 400 percent FPL pay no more than 9.6 percent.

The study estimates that allowing higher-income people to claim the tax credit would increase enrollment by 912,000 and lower average per-enrollee premium spending by 18 percent, or $130. However, it would also increase federal spending by more than $8 billion.

If Congress were to expand tax credits, it could help offset the new spending by limiting provider payments or putting in place a public option that pay providers less than commercial plans. In either case, the rates could be set “lower than the current private insurer average but still somewhat higher than Medicare’s rates.”

The study authors argue that high provider payments in some areas of the country can be blamed on a lack of competition among hospitals, due in some cases to mergers.

Read more: 

• 5 notes about Washington’s public option, for agents
• 4 approaches to expanding health care (and only one is Medicare for All)
• Nonprofits look for health care reform, but maybe not Medicare for All