I would like to give some additional perspective on the widely-touted Medicare for All (MFA) movement, which seems almost to have become a litmus test for being considered a competitive Democratic presidential candidate. Unfortunately, MFA, as it is used in the parlance of most advocates as well as the Democratic presidential candidates, skips over several important issues. These issues cut to the heart of whether or not MFA is a feasible approach to achieving universal health insurance in the United States. I want to emphasize that I make these points as a medical professional who is committed to the moral and public health importance of achieving universal health coverage. However, it is important to avoid heartbreak and backlash in the future (see, “if you like your health care plan, you can keep it”) in these discussions to be honest about the costs and benefits of plans under discussion. There are three fundamental issues with how Medicare operates and how MFA would impact the health care system.
Medicare is not a single payer system. As anyone who has had the least involvement with the medical care of someone over 65 knows, Medicare only pays 80% of allowable charges. That may have been sufficient in 1966 but medical technology advances and medical cost inflation over the last half-century, has made even 20% of many hospitalizations an unaffordable expense. Limits to Medicare are also quite extensive, including dentistry, eyeglasses, hearing aids, long-term services, and even limited days in the hospital. This includes the notorious, three-day inpatient stay requirement for rehabilitative services. As hospitals put increased effort into shortening inpatient stays, increasing numbers of patients are falling into this gap and being faced with having to pay for rehabilitative care on their own. Therefore, in order to avoid medical bankruptcy, non-indigent people who can afford it, should and many do purchase third-party insurance packages of various kinds. Indigent patients who qualify may also Medicaid to fill in these gaps; however, as in any system requiring individual initiative and payment, many individuals fall through the cracks and are still at risk of medical bankruptcy. This is a far cry for the “single-payer” model many progressives dream of.
Medicare payments are not sufficient to support the medical care system we have. Private health insurance pays substantially more for the same services than Medicare (often double or even more), and the difference is even more stark for Medicaid. It is an open secret that this difference accounts for the entirety of hospital operating margins, which pays for maintenance of the physical plant, equipment upgrades, and salary increases for employees. While overhead is somewhat higher in the private sector than the public sector, one should not assume that receipts from private health insurance go only to shareholder dividends or management salaries. Instead, much of the extra money that comes from private insurance is used to support different services, such as monitoring quality and assessing the need for care, which may have independent value.
In any case the difference in overhead between public and private institutions (say, 10%) is far exceeded by the difference in payment rates between private health insurance and Medicare (80-100% or even more). All of this additional payment from private health insurance is now going into medical care delivery. It is not too strong a statement to say that removing it would result in the collapse of the medical care delivery system in the US. That is not to say that our current medical care system is ideal or could not be improved, but removing private sector health insurance payments would cause a severe shakeout in terms of participants in and services delivered by the system. Marginal hospitals (many in underserved areas) would go bankrupt, technology purchases would be delayed, resulting in queues and rationing, and the quality of the workforce would decline. Advocates who claim the savings from MFA need to be honest about the changes in the medical care system that would result. Not all of these changes are necessarily bad but there will be major changes.
Who pays? At the current time, despite an effort to shift some of this burden to individuals, companies pay the bulk of the premiums for the private insurance sector. Medicare, on the other hand, is a hybrid government and individual system. A shift to MFA without figuring out a way to maintain these corporate payments into the system would result in a massive cost shift to individuals through taxes and co-pays. It is not true that this cost shift would equal aggregate individual insurance payments now. It could equal aggregate individual plus corporate insurance payments, but that is a different thing. In an ideal world, these payments could go to individuals through salary increases (decreased by the beneficial tax treatment of insurance premiums). But the influence of the corporate sector on the political system and the history of the last forty years of increasing returns on capital and decreasing relationship between worker productivity and salary make it unlikely and certainly not easy to maintain this cost burden sharing. It is much more likely that companies will simply pocket the insurance savings and leave the citizens’ health care needs to the government (i.e., taxpayers).
If progressives want to win the battle for universal health care through MFA, they will need to deal honestly with these three issues: gaps in Medicare coverage, insufficient Medicare payment rates, and maintaining the current burden sharing for health premiums between companies and individuals. A better strategy is to work through the Affordable Care Act, which for all its limitations, has been successful in reducing the uninsured rate. First, of course, to repair the damage done by two years of Republican rule, and then to deal honestly with the issue of “sticker shock” for ACA plans, through a combination of increased subsidies and further efforts to “bend the cost curve.” Fortunately, there is $1 trillion dollars over ten years that could be made available for subsidies by simply repealing the Trump administration tax cuts. Reforms introduced by the ACA have already shown some progress in cost control but there are certainly more gains to be made through a variety of value-based payment initiatives. Given the increasingly positive assessment of the ACA by the public, such a gradualist approach is both more likely to be successful politically as well as less traumatic for the sector, allowing it to incrementally adapt to economic incentives rather than going through a traumatic “all or none” transtion. In the end, our health system would like more like those in continental Europe, such as Germany or Switzerland, which are based on private insurance, than single payer systems like Canada or the United Kingdom. The former systems have been just as—or even more—successful in delivering high quality universal health care as the latter.
E. Kent Yucel is Chair of Radiology at Tufts Medical School in Boston MA. You can reach him by email at kyucel@tuftsmedicalcenter.org