Medicare for All: Choice and Affordability for None

The term “Medicare for All” has increasingly become a rallying cry in the Democratic Party. The motto has become even more resounding as Republicans struggle to reach a consensus on what free-market healthcare reforms may look like. While Medicare for All is used frequently in politics and in the news, it can mean different things to different people. For example, it generally means the end of privately run health insurance in favor of a government-run, single-payer system, but could also mean providing a “public option,” where there is a government-provided healthcare alternative to the current private insurance plans, or “Medicare Buy-in,”  where citizens would be eligible to buy into Medicare at a certain age under 65.

Regardless of definition, creating a healthcare system that devastates the free, private market and results in anti-competitive government bureaucracy goes against American ideals, as well as the patient. Furthermore, basing this government-run healthcare system on the Medicare Program, as evidenced in the following sections, may actually harm American ideals and patients.

Benefit Misconceptions & Misrepresentations
What Medicare Does and Does Not Cover
Created in 1965, the Medicare program was intended to provide healthcare coverage to Americans over 65 and certain disabled populations. Currently, Medicare covers approximately one in five—or 60 million—people in the U.S. Traditional Medicare consists of Medicare Part A and Part B. Medicare Part A covers inpatient hospital visits and related care; Medicare Part B covers physician visits and outpatient services. Medicare Part D covers outpatient prescription drugs, and beneficiaries can sign up for Part D coverage through private plans that contract with Medicare. Medicare Part C is also known as Medicare Advantage, which is a privately run health plan where beneficiaries receive all Medicare-covered Parts A and B benefits and typically Part D benefits, in addition to other services.¹

While Medicare for All is viewed as comprehensive healthcare for all Americans, Medicare leaves out many important services that a seemingly all-inclusive healthcare plan would, and should, provide. For example, traditional Medicare does not cover long-term care services, most dental care, most eye care, most cosmetic surgery, most hearing care, and marriage and family therapist services, among other services.²

Rise in Privately Managed Medicare Advantage Plans
Ironically, if politicians want to look to Medicare as the healthcare design of the future, they should look no further than the fastest growing part of Medicare: Medicare Advantage. Enrollment has significantly grown over time, with almost 35 percent—or 20 million—Medicare beneficiaries enrolled in a Medicare Advantage plan.¹

By design, Medicare Advantage plans provide more comprehensive coverage than traditional Medicare plans. As with the private health insurance market, beneficiaries have the ability to choose from a variety of Medicare Advantage plans, and most importantly, they can choose a plan that best fits their health needs, lifestyle, and budget.

Medicare by the Numbers
Comparing Medicare and Private Insurance
Medicare Part A is financed primarily through payroll taxes, and almost all beneficiaries do not have a Part A deductible. Beneficiaries currently have a Part A inpatient hospital deductible of $1,364, as well as additional co-insurance costs. Medicare Part B is financed through a combination of general revenues, beneficiary premiums, and interest. The standard premium is currently set at $1,626 per year, with an annual deductible of $185 and coinsurance of 20 percent.³ These figures do not include costs associated with Medicare Part D prescription drug coverage, which can contribute to hundreds of extra healthcare dollars each year.

Premiums for enrollees in private insurance, on the other hand, are (on average) $6,896 per year for single coverage, but individuals themselves only pay $1,186 per year after factoring in employer contributions. The average deductible is $1,573 for single coverage.⁴ Data shows that comprehensive private health insurance, which makes up almost 70 percent of the insurance market in the U.S., is actually cheaper than traditional Medicare, which still requires supplemental health coverage for many basic services. For a system that is perceived as “broken,” the data shows private health insurance is more cost effective than the Medicare program.

How Will We Pay for this Long Term?
Currently, Medicare provides coverage for all “medically necessary” care for beneficiaries, a vague term that results in a system that discourages cost cutting and cost effectiveness and has led to an expansion of costly healthcare services.⁵

As a result, Medicare spending for current beneficiaries is already unsustainable, without even considering a possible Medicare expansion. Based on projections in the 2018 Medicare Trustees report, Medicare Part A funding will be depleted by 2026.⁶ This is also due, in part, to an aging population, and more healthcare dollars from hard working Americans will be required to keep the program solvent for the next generation. To put the current payroll tax into perspective, for example, an average American worker contributes about $1,537 per year to Medicare Part A through payroll taxes⁷—or about $66,000 over a typical working lifetime.
Again, that is to sustain only one-fifth of the U.S. population. Expecting American workers to finance Medicare for All at rates beyond current payroll tax levels, and pay additional costs in Part B and Part D on top of that, is both unrealistic and unjust.

Think tanks have begun to model out economic projections for Medicare for All, with estimates hovering around $32 trillion over 10 years.^8,9 While it is true that costs continue to rise in America with very little return, Medicare for All is not the answer.

Medicare for All Legislation
Several Democrats have introduced Medicare for All bills. On Feb. 27, U.S. Rep. Pramila Jayapal, along with 107 Democratic co-sponsors, introduced the Medicare for All Act of 2019. The bill would radically transform the U.S. healthcare system by creating a universal, single-payer health program that would replace most current forms of health insurance and provide comprehensive healthcare benefits at no cost to patients. As mentioned, the cost estimate of Jayapal’s bill is estimated at around $30 trillion over a 10-year period, yet the bill does not include a method to pay for the program. Jayapal has said funding could be raised through contributions from employers and enormous income tax hikes. This version of Medicare for All has the greatest support from the most progressive wing of the Democratic Party, with socialist champions U.S. Senator Bernie Sanders and U.S. Rep. Alexandria Ocasio-Cortez leading the charge for single-payer healthcare.

Other versions of legislation that some Democrats have deemed Medicare for All are Medicare buy-in plans. The Medicare at 50 Act, for example, would allow any American over 50 to buy into Medicare. The Choose Medicare Act, sponsored by U.S. Senators Chris Murphy and Jeff Merkley, would create a new Medicare plan (Medicare Part E) that would be available to individuals of all ages to buy. Under Murphy and Merkley’s plan, private health insurance would not be eliminated, but its viability would be threatened, as workers may be forced off employer insurance onto cheaper Medicare plans. Another plan called Medicare X, sponsored by U.S. Senators Tim Kaine and Michael Bennet, would expand access to tax credits, allowing all Americans to purchase Affordable Care Act (ACA) plans on the ACA individual and small-business exchanges. However, Medicare X would still pay doctors and hospitals the same low Medicare rates, which could further erode the healthcare system and patients’ access to quality care.

Political Dynamics of Medicare for All
All of these legislative proposals are similar in that they share the goals of enrolling more Americans in public health plans and giving the federal government more control over the healthcare system, though they differ in scope and how they move to achieve those goals. Particularly, these plans differ in their political feasibility, with some enjoying the support of most Democrats and others threatening to divide the party in half.

Progressive Democrats pushing for Medicare for All claim the bill enjoys significant popularity with the public. As the definition of Medicare for All, however, is particularly convoluted, most Americans are unaware it would eliminate their private health insurance. For that reason, moderate House Democrats in purple districts, and Senators who have to run in statewide races, are not totally on board. The Senate version of Jayapal’s bill, which is sponsored by Sanders, only had 16 cosponsors in the previous Congress. In the House, the New Democrat Coalition—a group of centrist Democrats—issued a statement against the bill, stating they want practical solutions to lower healthcare costs. Speaker of the House Nancy Pelosi has expressed skepticism about a single payer solution, particularly regarding its funding. Furthermore, the bill has received massive pushback from Republicans, rightfully deeming it a complete socialist overhaul of America’s healthcare system. Given those dynamics, single-payer does not have a shot at ever passing a Republican-controlled Senate or earning the approval of a Republican President.

With Democrats in control of the House, a less radical Medicare for All option could conceivably obtain enough support for passage. Democrats share an earnest goal of improving the ACA and expanding healthcare coverage to more Americans, but single-payer Medicare for All will continue to be a thorn in the Democratic caucus as it has become a litmus test for the emergent left-wing of the party, drawing the ire of many moderates. Already, a significant number of prominent 2020 Democratic presidential candidates have signed onto Sanders’ bill and endorsed some form of single-payer healthcare. If these liberal Democrats get their way in 2020, expect single-payer “private-healthcare-for-none” to be at the forefront of their agenda. 

References

1. http://bit.ly/mpo190581
2. http://bit.ly/mpo190582
3. http://bit.ly/mpo190583
4. http://bit.ly/mpo190584
5. http://bit.ly/mpo190585 [PDF]
6. http://bit.ly/mpo190586
7. http://bit.ly/mpo190587
8. http://bit.ly/mpo190588 [PDF]
9. http://bit.ly/mpo190589

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Jeffrey J. Kimbell, president and founder of Jeffrey J. Kimbell & Associates Inc., represents 35 clients in the life sciences community seeking legislative and policy remedies in Washington. Founded in 1998, the firm provides strategic solutions to hand-selected clients seeking creation, modification, or proper implementation of public law.

David C. Rudloff is a manager of government relations at Jeffrey J. Kimbell & Associates Inc.

Caroline P. Tucker is a manager of health policy and reimbursement strategy at the firm.