Medicare for All is No Easy Fix

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I have shied away from weighing in on the flurry of health proposals being discussed as part of the Biden Administration’s big spending bill. So many proposals have been floated, and I can’t handicap their odds of enactment better than you.

However, the resurgence of Medicare for All measures makes me think that some version of this proposal will be included in the measure the Senate hopes to pass via a simple-majority reconciliation bill.

Medicare for All falls far short of Progressives’ hopes for a single-payer overhaul of U.S. health insurance. But it has broad public support and, at the very least, could be an important stepping stone toward more substantive changes.

Medicare for All also can mean different things, and represents an interesting horse-trading vehicle for Congressional discussion and possible compromises. For example, it might encourage many of the roughly 180 million people now covered by employer health plans to switch to Medicare.

While this may seem a good thing, America’s employer health insurance providers are rightly concerned that it would undermine if not seriously weaken employer health plans, according to a recent analysis by the American Benefits Council (ABC).

Lower-income, younger, and healthier workers are the most logical ones interested in a public option. Any large-scale shift would force employer plans to raise rates on their remaining members, who by definition would have costlier medical bills. This kind of adverse selection response could feed on itself, leading to a worst-case death spiral for some employer plans.

Still, I expect serious consideration of Medicare as a public option for employees and those covered by other forms of private insurance (i.e., the Affordable Care Act exchanges). Giving people such a choice creates good optics for Democrats, although it may not lead to a lot of change so long as the option is voluntary.

Doctors and hospitals have long complained that Medicare’s accepted payment rates are too low. Employer plans pay rates nearly 2.5 times higher than does Medicare. The appetite for medical providers to serve Medicare patients clearly is supported by the higher prices they collect from employer plans. The prospect of millions of employees switching to lower-cost Medicare is a  major threat to providers.

More to the point, Medicare for All might not really change the huge profit incentives now enjoyed by the insurers, drug companies, and equipment providers that dominate the market for Medicare coverage. If you expect doctors and hospitals to flock to serve people with public-option plans if they feature low reimbursement rates like Medicare, you might want to color yourself naive.

And if you assume that Medicare for All would mean more government-provided health insurance, tack on another credulity demerit. Private companies dominate this market and are often the preferred partners of government Medicare and Medicaid program administrators.

This tangled web of mutually beneficial deals has cemented the continued escalation of U.S. health spending – now about twice as high per person as in any other developed economy. And it has made health care a darling on Wall Street.

If Medicare for All simply provides more of the same, it might appear as progress to some by expanding the pool of people with health insurance. But it might have nothing to do with badly needed health reforms that would change the trajectory of U.S. health spending, reduce the volume of unneeded care, and align the care that is provided with better health outcomes for people with health insurance.

To be sure, something does need to be done here. The pressures for higher health spending will only get worse. The AMC analysis includes a solid summary of future health trends. Here are a few sobering excerpts:

  • Health care utilization is not driving spending growth, price is driving spending growth. Patients are using the same or lower quantities of health care but are paying more for it every year.
  • Spending on hospital services accounts for 44 percent of total personal health care spending for the privately insured; hospital price increases are key drivers of recent growth in per capita spending among the privately insured.
  • According to the Centers for Disease Control and Prevention (CDC), 90 percent of the nation’s $3.8 trillion in annual health care expenditures in 2019 were for people with chronic physical and mental health conditions.
  • By 2030, an estimated 83.4 million people in the U.S. will have three or more chronic diseases—compared to 30.8 million in 2015.