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If Congress does create a new, government-backed health insurance plan, the plan will probably wind up paying doctors and hospitals at rates that are comparable to what private insurance pays.

Liberal Dems in the House had been pushing a version of the public option with rates tied to Medicare, which typically pays less than private insurance. But some doctors and hospitals have said they lose money when they treat Medicare patients, and centrist Dems had balked at basing the new insurance program’s rates on Medicare.

Under the bill Nancy Pelosi is rolling out today, doctors and hospitals would negotiate the rates they’re paid by the public insurance plan. The bill Harry Reid will bring to the Senate floor is also likely to include a public plan that would pay negotiated rates.

Private insurers also negotiate their payment rates with doctors and hospitals. A public plan that paid negotiated rates “would pay providers of health care at rates comparable to privately negotiated rates,” CBO said earlier this year in its analysis of a Senate bill. Such a plan would also charge premiums that would be at least as high as the rates charged by private insurers that would compete against the public plan in health-insurance exchanges, CBO said.

Bonus Payment: The House bill would also increase the number of people eligible for Medicaid — and Medicaid pays doctors and hospitals at rates that are lower than private insurance.

See the rest here: 
How Much Would Public Option Pay Doctors, Hospitals?