Medicare For All. Can It Work?

Summary

• Who was the first Medicare recipient?

• Was the Affordable Care Act really a government takeover of health care?

• The consequence(s) of Medicare For All.

Little has galvanized public opinion like the debate over health care.  Note: we can replace “health care” with “medical care” to be more accurate.  Oddly enough, good health care often bears no relationship to the cost of medical care. The debate has evolved into discussions of universal coverage via the single payer, Medicare for all model.

Where It All Started

The genesis of government in health care began more than five decades ago with the passage of Medicare legislation. Former President Harry Truman was the initial Medicare beneficiary in 1965. Medicare, funded at the Federal level, faces the challenges of a shrinking population of workers paying taxes along with an increasing population of beneficiaries facing higher health care costs. Additional burdens will fall upon the program when inevitably higher unemployment ensues during the next recession — shrinking Medicare tax rolls further.  Even without recession, the Medicare trust fund is expected to exhaust by 2026.  We also understand that the term Medicare trust fund is an oxymoron.

Public Opinion Shifts

Sharp divisions in social mood and public opinion have a distinct movement and rhythm. As I outlined in Escaping Oz: Navigating the crisis, our most recent divisions began in 2000 or 2007. For the purposes of this discussion, let’s use 2007, which signified a significant top in the stock market and the beginning of the Great Recession. It follows that we’d have an angry populace and health care would rightly be an issue receiving much attention given its affordability and availability.

Affordable Care Act

Ten years ago, the nation debated a significant reform of the system with the Affordable Care Act (ACA). The public’s passion at the time wavered between controlled and not-so-controlled rage. Here’s an example of what Missouri Congressman Russ Carnahan faced in a town hall in 2009 when he suggested the ACA would save $6 billion over a ten-year period.

There were many that felt the ACA was a government takeover of health care.  As I noted in Escaping Oz: An Observer’s Reflections there were 54 million covered by Medicare in 2014.  Not only are there more people in the program today, but a greater percentage of the population is participating, reflecting the graying of America.  There are 73 million covered by Medicaid and the Children’s Health Insurance Program (CHIP).  Veterans eligible for benefits number some 20 million and the ACA added another 20 million.  Using these figures, which are higher now, implies 52% of Americans covered by a government-sponsored plan through single payer or single provider.  Evidently, government is well-entrenched in the healthcare business.

Health Care Realities

This past spring, presidential contender Senator Bernie Sanders introduced Medicare For All legislation.  Naturally, managed care stocks tumbled after the announcement.  Whatever your view of Senator Sanders’ proposal, we can assert the following about health care:

1. Few people shop for medical services.

2. Few people are aware of a service’s costs until they receive a statement from their carrier.  There are changes being proposed here.

3. Health insurance covers events that aren’t well-suited for insurance in general — think routine visits.

4. Insurance carriers offer little incentive for good health care practices.

5. We have a plethora of programs (Medicare, Medicaid, CHIP, VA, ACA, Employer Coverage) doing the same thing.

We’ve gone from health care spending comprising 5% of GDP in 1960 to over 18% today.  Even in social welfare democracies, health care consumes 10 to 12% of GDP.

How many of you reading this receive employer-provided health insurance?  How many of you would be willing to pay taxes on this benefit?

Our system consists of providers maximizing billing and insurers minimizing payment.  Meanwhile, health care customers don’t think about costs and let the third parties sort it out.  There’s probably no other industry that has this arrangement and its built-in moral hazard.

Medicare For All

I outlined several potential paths for health care in my writings though I’ll focus on the Medicare For All.  Can it work?  The political will is present.  Supporters of the Sanders plan have defined health care as a right.  Those believing health care is a right will also conclude that government must offer it.  Prior to 2016, such a discussion would have met skepticism or hostility.  Today, it’s a mainstream issue in the 2020 election and will be part of the Democratic party platform.  Health care as a right folds into my theme in Escaping Oz: An Observer’s Reflections when I distinguish between freedom OF and freedom FROM.

Logistically, implementing this plan will be fraught with complexity.  Remember the initial IT challenges of the ACA?  This will be a more difficult implementation.  What about cost?  I’d like to believe that a consolidation of all government plans under a single entity should produce cost savings.  Money spent on private health care today would be redirected towards higher taxes to fund the new program.  How that exchange washes out is anyone’s guess.  Whether the new plan results in higher costs or is cost neutral will largely be irrelevant to its proponents.  A more politically progressive government, which is what a new presidential administration would resemble, will wrap their arms around Modern Monetary Theory (MMT), giving them license to spend whatever is necessary.

Once Medicare for all is implemented, we’ll see the development of a two-tier health care system as I described in my book.  Everyone will have the “free” version available.  Those with greater means will opt for private health care or health care on a cash basis.  That care may be provided in the United States or elsewhere.  In my part of the country, I witness chiropractors who, today, no longer accept insurance.  Imagine a world where government controls pricing for all health care services.  And if government outlaws private, cash only health care, it will simply shrink the supply of care and produce its attendant problems.   The world is replete with examples of single payer or single provider health care in other nations and supply/demand crucibles are well understood.

It’s intellectually dishonest to argue that the ACA or even a Medicare For All was or will be a new government takeover of health care — they’re more than halfway to that end.  Yes, Medicare For All can work, though it will introduce Americans to the realities of economics from which they’re often shielded.