Medicare for All

As some of you may know I work in the healthcare field and have for over 40 years. While I am not the smartest guy on the planet a lot has rubbed off on me over the years. Not the theoretical trash but the real world, "here's how it is done" stuff.

All this press and debate about Medicare for All (MFA) has caught my attention and I feel it is my duty to educate my readers on just what all this means. The Democrats and many others are touting this as the best way to fix the US healthcare system. The press has jumped on it also and I fear most Americans don't really understand what it will mean. Since this will undoubtedly be a big part of the 2020 Presidential Election, I thought we should take a closer look.

The Current US Healthcare Landscape

Here is what US health care coverage looks like today:

·       Approximately 20.5 million people get coverage through Health Exchanges (primarily individuals)

·       Approximately 42.8 million folks get coverage through Medicare. 75% of those carry some form of supplemental insurance on top of that

·       Approximately 65.1 million people are covered through Medicaid plans offered by each state

·       Approximately 4.6 million people are covered by VA/other public system

·       Approximately 156.2 million people get their coverage through their employment (better known as the private sector)

o   Within this group approximately 62 million are in fully insured plans and 94 million are covered in partially self-funded plans (more on this distinction later)

·       That leaves approximately 28 million folks “uninsured”. (All have the safety net of care at hospitals and clinics around the country)

Since most Americans are covered in the private sector and the majority like their plans (over 60%) the issue here is not coverage but cost.

Medicare as it sits today covers primarily folks over 65 and those that are disabled. Medicaid is administered by each state but heavily funded by the Federal government. This program saw the greatest growth from Obamacare and it did impact the uninsured populations in many states. The Exchanges provide plans for primarily individuals who are not in a group plan with their employer. Despite significant press, these Exchanges did not increase individual coverage by as much as expected. Finally, there is the VA system. We all know this system has many challenges and has been under scrutiny for some time.

The primary problem with our private - public health system is the cost. We pay more for healthcare than any country on earth. We pay more than the next two highest countries combined. Sadly, our health outcomes do not show we are getting our moneys worth. 

According the World Health Organization (WHO) we ranked 28^th in outcomes versus all countries in the world.

It is also very important for readers to understand that many countries offer Private/Public systems for healthcare. Unfortunately, the press does not focus on this and so many are led to believe that most countries have single payer programs. Supplementing national health care systems as we do with Medicare is critical in most countries.

Some Basic Health Insurance Facts

The majority of health insurance costs are those of the providers – doctors, hospitals, diagnostics, drugs etc. This is called the provider cost or cost of care. The administrative portion of healthcare is much smaller. This includes administrative costs, sales costs, underwriting, marketing, reinsurance, profit and other expenses. The fact is about 85% of every health insurance dollar goes to paying providers. The remaining 15% is used for admin portion outlined above.

In a fully insured health plan, the insurance carrier takes all the risk but also all the gain. Most carriers make between 3-4% in profit but have huge revenue bases which allow them to carry significant overhead. In a fully insured plan, the carrier develops the plan designs, rates them, sells them, chooses the vendors they work with and keeps the gains from underwriting profits. Since their risk is great, they have to maintain huge financial reserves to protect against major losses. They do make money from investing these reserves but all of it regulated heavily by each state insurance department.

In a partially self-insured program, the employer is in charge. They become the plan sponsor and hire professionals to help them run the plan. By doing this have much more control and avoid some taxes and mandates which add to costs. By designing their own plans and choosing their own vendors they can customize their program to match the needs of their specific employees. They pay claims as they go so cashflow is also improved versus paying fixed premiums only. They purchase reinsurance known as stop loss to protect them against major losses or over utilization of the plan. When all this is packaged the cost for the plans are less than fully insured programs and can be managed far better over time. This is the reason over 60% of all private sector employees are covered by self-funded plans and that number is growing.

It is important to understand these basics before we look at Medicare-for-All.

Important Facts About Medicare for All

What is not talked about is that plans like the ones outlined below, would do a number of things that would disrupt the US health care system significantly and have a massive trickle-down effect on our economy. The Bill in the House currently has 107 co sponsors (which is actually less than the 124 sponsors it had last year). Please review the various proposals we have listed below. Here are few things to consider about MFA:

·       Medicare pays medical providers considerably less than private insurance. In many cases 100% + less. Most providers only survive fiscally by shifting costs from private pay patients to cover the shortfall from Medicare and Medicaid. Some hospitals have 3 out of 4 beds which are government pay and they are struggling to survive. Doctors get paid significantly more from private payers and most could/would not stay in practice if they had only Medicare or Medicaid reimbursements. Even the best PPO discounts are significantly higher paying than Medicare or Medicaid. Since some of the plans call for Medicaid expansion, we should note that Medicaid pays provider even less than Medicare. The Center for American Progress estimates that hospitals need to be paid at least 20% more than the Medicare rate and doctors need to be paid at least 10% more to make those businesses viable – which would make it even more difficult to finance MFA.

·       If Medicare or Medicaid became the standard payment, we would see a massive shift in the number of providers available and the experience/quality of care. First all the specialists (the highest paid providers) who are close to retirement age would accelerate and retire rather than fight for fiscal survival under Medicare/Medicaid. This would create a decrease in available specialists but even worse the disappearance of a lot of perhaps the best medical practitioners in the country. Fewer people would want to become doctors as the earning potential would be severely minimized. We are already over 30,000 doctors short in Primary Care today not to mention other specialties.

·       Today the health insurance industry and its sub industries employ millions of people in high paying jobs. US Bureau of labor says it was over 2 million in 2017. If Medicare-for-All or other proposed programs became the standard most of these jobs would go away. Yes, some would survive as the government would have to contract with several big insurers to help them administer this new program. However, the pay scales would have to decrease as the government will pay the big insurers considerably less than they make now. The trickle-down effect of losing millions of jobs would have a major impact on the US economy. Add to this that many of the 16 million medical industry jobs would go away or see significant decreases in compensation. Everything from doctors, nurses, technicians, and more. The impact would be more significant than losing the entire auto industry and that threat caused one of the worst economic recessions in modern history..

·       The standard of care would decrease. Since many top providers would leave medicine this “brian drain” would impact outcomes. Additionally, many remaining providers would switch to private concierge medicine where they can get paid better and directly by patients who can afford it. Many hospitals would fail. A lot of them in smaller metro or rural areas causing people to have travel long distances for care. Quality would decline as doctors would be forced to see more patients thus having less time with each. This would lead to errors and changes in treatment patterns (less holistic). Since the US medical outcome results are already very low this could create a national medical crisis.

·       Wait times for care would skyrocket. We would now mirror England and Canada or other socialized medical programs around the world.  In the US metro areas it now takes an average of 24 days to get a doctor’s appointment according to a Merrit Hawkins study. This up from 18.5 days just a four years ago. Currently the average wait to see a physician once you are in their office is about 20 minutes. And the average US physician spends 13 -15 mins with each patient. From my experience the American people would not stand for this. Example - 6 months for an MRI or certain surgeries. This could even result in deaths as we have seen from the recent VA issues.

·       Since all prescription drugs in Medicare are paid for through private insurance plans (Medicare Part D) this process would have to changed as well. Those premiums would have to converted into additional payroll taxes and of course the government would add to them for their “overhead”. Also, over 1/3 of all Medicare recipients get there Medicare benefits from private Medicare Advantage plans. This would have to change as well affecting millions of seniors and again increasing costs.

·       Benefit changes would have to be made. Medicare does not cover many things younger Americans will need. Maternity is a good example. This would add tremendous costs to Medicare and increase its cost considerably. These costs would have to be included in any Medicare-for-All proposal and would further increase taxes. Also we might have to have a bifurcated system as seniors do not need some of the benefits younger member do. Since Medicare is due to go bankrupt in 7 years it is hard to see how we can expand it's benefits considerably, have no real premiums, no copays or deductibles and fund it through payroll taxes?

·       Finally, there is the issue of treatment decisions. In every national health care system, someone had to decide what is covered and what is not. That decision which is primarily in the hands of the treating provider today in the US would now shift to a government panel. All the expensive life saving procedures we take for granted today in the US would have to be reviewed and put through a cost-benefit analysis. Since there will be limited providers and hospitals and 28 million more folks needing care, rationing will have to happen. How and what it would be remains to be seen?                        

Medicare-for-all and Other Presidential Proposals

There are many proposals for this that are floating around. Sadly, most do not provide much detail and are primarily political platforms at this time. Bernie Sanders proposal which started this movement in 2016, is the most specific plan available today. Since Mr. Sanders has announced he is running for President along with a long list of Democrats, we will take a look at all of their ideas for Medicare-for-All, based on what we know today.

Sanders plan

This would give Medicare to all Americans no matter their current coverage – and it would eliminate all other duplicate coverage over a short time. You could buy private insurance which is non-duplicative but that really just means supplements. It would require all employers to pay into the Medicare system for their employees and the benefits of Medicare would be greatly expanded to cover things like maternity, dental vision etc. Sanders admits that the cost for this would be significant and estimates and additional 10% or more in taxes to fund it. It would replace the private health plans covering nearly 160 million Americans today.

Ocasio-Cortez Green Deal

This congress woman has proposed a far reaching overhaul of the United States as we know it today – from energy to education to travel and healthcare. We will not discuss the entire Green Deal here but just note she is in favor of national healthcare. The Green Deal is not very specific about how that will be done but does indicate that personal tax rates to fund this and other features would be as high as 70% . She has said that cutting the defense budget significantly would be a good way to fund the Green Deal. On early exploration it would appear this is fiscally impossible.

Harris Plan

Ms. Harris has said she would eliminate all private insurance. Her campaign folks have softened that by saying she is in favor of a plan that would migrate to that over time. In short, she wants national healthcare! She has not provided any details on how accomplish this or what the cost to tax payers would be. She has signed on to support the Medicare for All bill.

Some of the other proposed plans – The Incrementalists:

Booker and Warren plans

Mr. Booker says he would allow for private sector insurance to exist alongside an expended Medicare program. Ms. Warren says her goal is to cover all Americans and has signed on to Medicare-for-All and another similar plan. Neither have provided any details or how they will fund these programs. As with other proposals Medicare benefits would have to be expanded considerably and this would drive a much higher cost.

DeLauro and Schakowski

These two Congress people want to cover all the uninsured, replace Medicaid and Obamacare with Medicare. They would allow private sector folks to buy in if they chose to. They claim their plan is more realistic. We would assume that this expanded Medicare would also have significantly more benefits, like maternity and again the costs would be much higher. They have not provided further details or costs yet.

Murphy and Merkley

They call their plan the Chose Medicare Act and basically it allows anyone to buy Medicare that can afford it. They would add it as an option on the Obamacare exchanges and allow employers to buy in if they wanted to. As on all the above the Medicare expansion will drive up costs and not solve the uninsured problem.

We refer to these alternative plans as the Incrementalists since they want to build Medicare-for-All slowly rather than force it in one fell swoop like Senator Sanders and Harris.

Delaney Plan

Representative Delaney who is running for President, has said he wants universal government healthcare for all. He further states this coverage would be basic using Medicaid as the starting point. Then people could buy supplemental plans on top of the government program, like they do with Medicare. He is not in favor of expanding Medicare. He would pay for this new universal healthcare by eliminating the corporate tax deduction for health insurance. Which would in turn discourage employers from offering health insurance to their employees. There is no proof that this financing mechanism will be sufficient.

There are many other plans but all with a similar theme and very little if any details on how they would work or be financed. 

Summary

MFA is not realistic and would be nearly impossible to implement, virtually impossible to pay for and would cause huge disruption in our fragile healthcare system. While I applaud the supporters for wanting to provide healthcare coverage to all Americans, this is NOT the way to do it. There are better ways to get to this goal and still preserve our private/public health system while increasing quality and outcomes. Look for future blog posts on those plans. Till then tell your Congress people to quit wasting time on MFA and get realistic about US healthcare.