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Aug
30

Medicare for All – explaining what it means and what it would cost

Yesterday we gave a brief overview of Medicare – the various parts and pieces.

Today – what exactly is the plan, who would pay for it, and how much would it cost?

Sen. Bernie Sanders, (I VT) is the original MFA (Medicare for All) advocate, and most other candidates echo his plan – which is pretty simple:

  • Everyone is enrolled in MFA
  • No one pays copays or deductibles
  • You can choose any healthcare provider
  • It isn’t really “Medicare” for all, but rather a simple “everything is covered” plan
  • Funding would come from:
    • higher taxes on high-income earners
    • re-instatement of the estate tax
    • payroll tax of 6.2% for employers
    • 2.2% income based premium for individuals and families
    • taxing capital gains as ordinary income
    • repealing tax exemption for premiums etc.

There’s been a lot of press about this, with claims and counterclaims muddying the waters  – but the net is this:

Sanders’ plan would enroll pretty much everyone.

The plan would save costs by:

  • reducing total provider compensation by 11% – 13% (physicians make a lot more money here than they do in most other countries)
  • it would do this by setting flat reimbursement rates – today employer plans pay about 40% more than Medicare, and much more than Medicaid (generally speaking).
  • However, reimbursement would be higher than today’s Medicaid rates.
  • MFA advocates note that administrative costs would be a LOT lower, as doctors and hospitals wouldn’t need the big IT operations and personnel required to track down payers and get reimbursed

MFA would be phased in over four years.

What would it cost?

That’s a tough one – the CBO won’t score it.

One Koch-funded research center came out with a report that said it would A) cost $32 trillion over ten years, and B) reduce total US healthcare costs by some $2 trillion while covering 30 million more folks. (yes, this was Mercatus’ higher estimate, but they fudged other numbers to make costs look higher, so I’m going with that figure)

Bernie and other advocates, claim savings would be higher – so the total cost would be lower.

However you slice it, you have to remember that employers and individuals would no longer be paying over a trillion dollars for healthcare every year via payroll taxes and premiums and deductibles and copays.

And yes, you’d save a lot of money by reducing provider reimbursement to Medicare rates.

Who and what gets disrupted?

Insurance companies. It isn’t clear who would administer this program, perhaps the current companies that handle much of Medicare. However, many or most commercial health plans, Medicare Advantage plans, Managed Medicaid plans (disclosure I am on the Board of one – Commonwealth Care Alliance) would shrink or disappear entirely.

Revenue Cycle Management – this huge industry would become obsolete overnight.

Millions of workers – no longer needed to handle the morass of regulations and insurer requirements

Pharma – Bernie would negotiate with pharma and medical device companies – as every other country does – to get the lowest possible prices.

Brokers and consultants. Ouch.

Remember – the US healthcare system is enormously inefficient, overall delivers mediocre-at-best results, and is not sustainable.

What does this mean for you?

Opponents of MFA would be well served to come up with a better answer than MFA, because that MFA is getting traction.

 


9 thoughts on “Medicare for All – explaining what it means and what it would cost”

  1. First, a disclosure: I am a fiscal conservative/social moderate who tends to vote Republican. That said, I see the merits of MFA and would support it. A big advantage of MFA is that the infrastructures to collect premiums and pay claims already exist. That’s where Obamacare failed, adding to the morass that already existed rather than simplifying things. Additionally, political landmines created by ideological divides could also be avoided by deliberately not expanding the list of covered services within Medicare, but allowing the supplemental market to cover contentious things like birth control and abortions.

  2. Joe,

    My reviews of the book, “Health Care Under the Knife” goes into how single payer would work, and how we got into this mess. It also looks at some single payer plans in other countries, and how the IMF and World Bank sabotaged them. Recently, we learned about a group in Hawaii forcing politicians there to lie to constituents about supporting single payer, only to turn around and pledge to the industry that they oppose it and are for for-profit health care. Another group in CA is attempting to kill a bill there for single payer, and they are well funded. I believe that until it collapses from its own weight, MFA will be a long shot.

  3. Joe, you make great points. The “military industrial complex” that dominates U.S. health care (of which many of us are a part) and its diversion of resources away from hands-on care is a major flaw in the current (and growing) health care delivery system. As you know, hands-on health care providers don’t see very much of what is spent in the name of “medical costs.” For many, Medicare rates – in their pockets – might represent a raise, because middlemen currently skim a lot off the top.
    There is a school of thought that the government is not very adept at efficiency. Thus, the diversion of resources might likely continue. Specifically, how would an MFA program reverse this trend? Hiring private third-party(ies) to administer benefits simply localizes the hemorrhaging. Do you think our elected officials have the political will to resist the pressure that is sure to try its best to dilute an MFA concept?
    You also point out one of the fundamental MFA funding issues that would need an immediate solution when you remarked that, “Millions of workers – (would be) no longer needed to handle the morass of regulations and insurer requirements.” Those folks along with the brokers and consultants, managed care companies, those in the revenue cycle management industry and a smattering of insurance company/health plan employees will likely be out of jobs. American is resilient and they’ll find work – eventually – but the employee taxes that might currently be scored as helping pay for the MFA, would no longer be available while they are looking. What am I missing here?

    1. Steve – thanks for the comment.
      I disagree with your characterization of “middle men”. When you look at actual data, healthcare providers take the vast majority of “medical spend”. For example, MLR requirements for Exchange plans dictate rebates of administrative expenses above high thresholds.
      RE Medicare, it is THE most efficient payer system in the nation, with the possible exception of VA Medical Services. Admin expenses are a few percent. Most Medicare FFS services are, in fact, administered by commercial entities. Th FEHBP is also quite efficient from an admin expense perspective.
      You are quite correct about the employment impact of a single payer system. I’ve written on this here before. A poorly managed transition would make the manufacturing employment losses pale in comparison.

  4. Have you heard any feedback from Amazon, Berkshire Hathaway, and JP Morgan partnership to create a new healthcare delivery model. Would this model fall under MFA?

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Joe Paduda is the principal of Health Strategy Associates

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