If I Were Running: Medicare 4 All
August 3, 2019, Part 3
In the first two parts, I have shown that the current system for insuring American’s health is irrational, expensive and unsustainable. I have also shown that Medicare 4 All is the only cost-effective way to cover all Americans with comprehensive insurance. To conclude this series, I will look at what a Medicare 4 All plan would look like, and what parts can be open to discussion.
I have satirically told some friends that there is no need for thousands of pages of legislation to reform American health insurance. A one-page bill will do. It would simply read, “Section [pick the section that defines eligibility for Medicare] of the Social Security Act is amended to delete the words ‘age 65 and over.’“
In other words, we already have a system of paying for the health care of senior Americans that works, so let’s just start with that. Ask anyone you know who is covered by Medicare and they will tell you that they are very happy with it. It covers most everything, virtually all doctors, hospitals and pharmacies accept it without question, and the out-of-pocket costs are fairly minimal. So, to minimize disruption, it seems like a good place to begin.
To be clear, there is a premium for Part B (hospital) coverage, generally withheld from Social Security retirement payments, which would remain. Many, if not most, Medicare recipients also buy a supplement policy from private insurers to cover the 20% of Part B costs that Medicare does not cover, and that would remain an option.
Health insurance premiums would be replaced by a tax (more on that later in this article). There would be no deductibles. We may want to institute minimal co-pays to reduce the natural tendency to over-use a service that is free, but they should be minimal. Economists and actuaries could recommend the appropriate level of co-pays, but I am thinking of numbers like $10 for a prescription, $20 to $50 for a doctor visit, $100 for a hospital visit, whether to the emergency room or for an admission.
There it is — simple, effective, comprehensive and building on an existing infrastructure.
How would we pay for this service? As I described earlier, a new tax would replace, and be much lower than, the premiums that are currently being paid by employers, employees through cost-sharing formulas, and individuals in the open market. I suggest that this be a payroll tax, again starting with a system that is already in place for Social Security and Medicare. Unlike the current FICA tax, which is split equally between employers and employees, I would impose the majority of this tax on employers, who are currently paying most of the health insurance premiums.
The exact amount and allocation of this new tax can be open to discussion. I suggest that 90% be an employer tax and 10% be an employee tax to reasonably mirror the current allocation of health insurance premiums. Because of the efficiencies inherent in a one-payor system, this tax on employers should still be less than most currently pay for insurance premiums.
Over a few years, we can make tweaks to the system. Hospitals tend to complain that Medicare reimbursement is insufficient for long-term sustainability. Health providers continue to accept Medicare patients primarily because of the volume, which will obviously increase. Most health care providers should find that the elimination of the bureaucracy needed for billing under the current system, even current Medicare reimbursement should be more in line with their costs. With the increased efficiency of the overall system under Medicare 4 All, and the elimination of the profits now earned by health insurers, if increased reimbursements are needed to ensure quality care in all regions of the country, there should be money to do that.
Medicare supplement policies may, at some point, be folded into the overall Medicare 4 All system. The 80/20 split on payments for Part B may have been a result of compromises needed to pass Medicare originally, and would have to be justified if it is to continue. Let’s leave that debate for another day while we move to Medicare 4 All with the fewest number of changes from the current Medicare plan.
How should we deal with the current employees of health insurers, many of whom would find themselves out of work? First, with supplemental insurance included in the plan, there would remain a smaller private insurance industry that would employ some of them. Second, although the Social Security administration is remarkably efficient at handling Medicare, they would need to hire new employees. Some health insurance employees would certainly have the experience and expertise to qualify for these jobs. Third, I think that the federal and state governments should take this transition as an opportunity to help build a 21st century economy. Let’s identify businesses of the future, in collaboration with employers throughout the country, and spend some money in retraining health insurance employees in those fields. Green energy, software coding, and space exploration come to mind. Finally, I am sure that some health insurance employees will take this change as an opportunity to launch new businesses, which we could encourage with low-cost financing. Of course, our current safety net of unemployment coverage remains. No major transition like this is completely smooth and free of bumps, but it is eminently manageable.
I am advocating for a quick and complete change to Medicare 4 All, not a public option or a lengthy transition.
The public option, while seemingly popular in opinion polls, simply does not work. The major cost savings of Medicare 4 All comes from the elimination of the extremely inefficient system with scores of health insurers, each with dozens of plans. A public option only adds to that inefficiency. Also, it does not provide the assurance that everyone will be covered. Some of those who are faced with buying insurance in the market, which would include Medicare as an option, will, for a variety of reasons, fail to do so.
Disingenuous conservatives who tout the freedom for people to buy only what they need (e.g. young males don’t use the system so they are more likely to not buy insurance; families beyond child-bearing years are more likely to not buy insurance for pregnancy) miss the entire point of insurance. Everyone needs to be in the system for every health service to spread the costs. The vast majority of health care costs are incurred in the final few years of life. If we set up a system where younger, healthier people are not paying into the system, we predictably will not have the money to pay for the inevitable costs for the elderly. Of course, covering younger people also has the advantage of providing security that they will have health insurance if they are in an accident (the leading cause of death for young people), tragically get cancer, or otherwise find themselves outside of the norm.
Disingenuous conservatives also argue that we need the free market in health insurance. I believe that everyone’s life experience shows the error of this approach. If you are sick, you visit your doctor (you don’t shop around for a new doctor each time) and follow their advice. Most people do not have the expertise to diagnose and treat illnesses beyond the common cold and flu and they sometimes damage the entire society (anti-vaccers) when they try. If you are in an accident, you do not tell the ambulance driver to get prices at the local emergency rooms before deciding where to go. Medicare 4 All may be able to improve the efficiency of some health services by encouraging competition where appropriate. For example, if Medicare is paying for all prescriptions, they will soon have huge amounts of data on the costs from competing drug manufacturers, which they can publish for all to see. But overall, medical care is simply not an industry where the free market is the most efficient way to provide needed services.
Labeling Medicare 4 All as “progressive” or “socialist” is a red herring. As these articles have argued, it is simply the most effective, logical and cost-efficient way to provide health insurance in America, and we need it ASAP.
