CBO: New Robust Public option could save $68 billion by 2020

By Ezra Klein | July 23, 2010

When people think of deficit reduction, they tend to think about spending cuts and tax increases. They don't think as much about saving money by putting more effective policies into place. But as the Congressional Budget Office's analysis of a new public option proposal from Pete Stark suggests, maybe they should.

Stark wants to add a public option to the exchanges that would start by paying doctors the rates Medicare pays plus 5 percent, and then grow with the cost of physicians' services. According to the CBO, this plan's premiums "would be 5 percent to 7 percent lower, on average, than the premiums of private plans offered in the exchanges." But that's not all!

"The proposal would reduce federal budget deficits through 2019 by about $53 billion," CBO says. And because the public plan is saving more money as time goes on, if you extend that out to 2020, the savings to the government are $68 billion. That implies a savings of $200 billion or so in the second decade. That's a lot of money, and it's in addition to the savings for consumers.

In theory, this town is going to have a serious conversation about deficits pretty soon. And a lot of it will focus on how we can reduce services or raise taxes. That's going to be ugly. So the few opportunities we have to save large amounts of money while also making life better for people shouldn't be missed.