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Exclusive: Early Cbo Score On Public Plan. It's Good!

A lot of conservative Democrats, not to mention Republicans, express two big concerns about health reform. They're worried that reform will cost too much. And they don't want a government-run insurance plan.

It's about to get a lot harder to make those two arguments simultaneously.

According to a pair of Capitol Hill sources, preliminary estimates from the Congressional Budget Office suggest that a strong public option--the kind that the House of Representatives is putting in its reform bill--should net somewhere in the neighborhood of $150 billion in savings over ten years.

The sources cautioned that these were only the preliminary estimates, based on previous discussions--that CBO had not yet issued final scoring on language in the actual bill. But the sources felt the final estimate would likely be close.

Exactly how the plan produces those savings is, obviously, a key question. The reason--well, a reason--centrists and conservatives don't like a public plan is that they fear it will use the government's bargaining leverage to force doctors, hospitals, and drugmakers to accept unfairly low reimbursements. Private insurance would go out of business, since they couldn't compete; meanwhile, providers and producers of medical care would struggle to stay afloat.

Advocates of a public plan (myself included) think those fears are overblown--and that there are ways to make sure a public plan doesn't have that effect. But if the CBO is scoring significant savings, then chances are the House version gives the public plan the kinds of power conservatives and centrists fear.

But, for now, the bigger story is the number. At a time when finding the $1 trillion it will take to finance coverage expansions remains the major challenge of reform, the discovery of $150 billion in potential savings is an important--and encouraging--piece of news.

Update: Ezra Klein with a very important caveat:

It's important to remember, though, that this really is preliminary. As I understand it, this is an expected score of the public option on its own. The final score will go up or down depending on the interactions between the public option and other elements of the final bill. If the Health Insurance Exchange is open to only the uninsured and small businesses, for instance, then fewer people will have access to the public option, and so there will be less savings. Conversely, if the exchange is large, and dominated by the public option, then CBO might decide to put all dollars spent in the exchange on the federal budget. That could increase the "cost" of health-care reform by trillions of dollars, making it look like the public insurance option is expensive, even as it's actually saving $150 billion. Thus does budgetary accounting rule our world.

Also, it's worth remembering this is actually less savings than some other, outside projections had shown--most likely because the House bill wouldn't let the public plan reimburse at the same rates as Medicare. (Most likely, it will be Medicare rates plus some fixed increment.)

--Jonathan Cohn