Just an update to that letter on Friday from Raul Grijalva’s office to Nancy Pelosi, asking her for various elements to be added to the manager’s amendment of the House health care bill. One of those pieces is that Grijalva wants to add a ceiling for the negotiated rates that the Secretary of Health and Human Services would have to negotiate with providers on the public option. There is already a ceiling on negotiated rates in the House bill: the average of all reimbursement rates of private plans in the exchanges. But Grijalva basically wants the growth of those rates to be capped, making sure that they don’t get tied to the same rates of health inflation that we see in the private market. Grijalva’s office released the following comment:

We want the cap tied more firmly to Medicare rates so that it doesn’t keep rising forever alongside private insurance rates. If we make the “cap” the average of all payments made by qualified health benefit providers, as the bill currently does, there’s a real risk of the public option having to pay more and more every year as medical inflation marches forward. If the public option chases skyrocketing medical costs indefinitely, it won’t work.

As Suzy Khimm notes, this is essentially a back-door way to ensure that provider rates are lower in the public option than in private plans over time, which would presumably have an impact on prices.

But there are additional ways to bring about the same effect, particularly by strengthening the risk-adjustment mechanisms in the exchange. As I noted on Friday, the reason that public option premiums may skew higher than private plans seems to be entirely because of patient dumping in the private market, and a sicker pool of customers for the public option. Risk adjustment, where payments are made to those who take potentially sicker customers to smooth risk among the total pool, is among the best ways to fix this.