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May
28

Medicare for all – not so fast

I’ve been asked to do a point-counter point with Jacob Hacker, one of the more vocal supporters of a Medicare-for-All program.
It’s my contention that Hacker overstates the case for Medicare, and in so doing weakens the case for a public plan option. Specifically, he argues that Medicare has lower administrative costs and does a better job holding down medical trend. I disagree.
Medicare has an unfair advantage over private plans: it doesn’t need to maintain reserves, earn profits to attract capital, or pay premium taxes. These result in big dollar ‘savings’ over private plans. It is also important to note that Medicare’s cost structure is dramatically different in other ways.
1.) Medicare has no underwriting or sales expenses or marketing costs. No commissions, either. This saves a lot of admin dollars. This differential would disappear in a health connector-type system, with the playing field leveled by dramatically reducing commercial healthplans’ marketing costs and elimination of their underwriting expense.
2.) Medicare has one-time enrollment and dis-enrollment, and greatly simplified eligibility processes. This cuts their costs, but would not continue under a connector model.
There’s more here.


2 thoughts on “Medicare for all – not so fast”

  1. Joe, I largely agree with you, though take issue on a couple points:
    1. Medicare does in fact have reserves, though they go under the name of the “Trust Fund” that is created through payroll taxes. In fact, Medicare Part A has enormous reserves that are far larger than any private insurer. When people talk about Medicare becoming “insolvent” in 2025 or whatever year, they are referring to the depletion of the reserve/Trust Fund. I go into a lot more detail on this in the comments to this earlier post on THCB: http://www.thehealthcareblog.com/the_health_care_blog/2009/01/eric-novack-has.html
    2. While the connector will greatly increase efficiency, it will not eliminate advertising. In some ways, we have the equivalent of a connector already for tons of products in the form of online “stores” like Amazon and EBay. Obviously, that doesn’t remove the need to advertise.
    I say this just in the interest of fairness. My own take is that we should go with something closer to the Dutch model and have heavily regulated private payers, armed with tools to control provider costs and reimbursed in a risk-adjusted way to put the emphasis on prevention rather than cherry picking.

  2. Joe, If I recall correctly you were or are a single payer advocate? I have not kept up with the “debate” as well as I would have liked. Is the public plan option the next best thing, in your opinion? (I too like the VA model but I am a single payer fan).

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Joe Paduda is the principal of Health Strategy Associates

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