If Congress were to expand tax credits, it could help offset thenew spending by limiting provider payments or putting in place apublic option. (Photo: ShutterstocK)

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

The public option was one of three left-leaningpolicies the group assessed as part of the study. The other two:capping provider payment rates or extending Affordable Care Actpremium tax credits to those above the currentincome limit.

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

Related: Public options in health care making entrance viastates

Currently, those with incomes above 400 percent of the federalpoverty line are not eligible for premium tax credits. The greatmajority of ACA enrollees have incomes below the threshold and arenot affected by major increases in the sticker price of healthplans, since the federal government has set the price of their planbased on their income. Those with the lowest incomes generally donot have to pay more than 2 percent of their earnings toward aplan, while those right below 400 percent FPL pay no more than 9.6percent.

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

If Congress were to expand tax credits, it could help offset thenew spending by limiting provider payments or putting in place apublic option that pay providers less than commercial plans. Ineither case, the rates could be set “lower than the current privateinsurer average but still somewhat higher than Medicare'srates.”

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

Read more: 

• 5 notes about Washington's public option, foragents
• 4 approaches to expanding health care (and only oneis Medicare for All)
• Nonprofits look for health care reform, but maybenot Medicare for All