July’s Democratic presidential debates left seasoned health policy professionals confused, struggling to understand both the candidates’ policies and the differences among them. But working families should find Democrats’ health care debate taxing for another reason. For all their vows that Americans can obtain unlimited “free” health care while only “the rich” will pay, the major candidates are writing out checks that will end up on middle class families’ tab. The Committee for a Responsible Federal Budget believes the tax increases Sen. Sanders has proposed to date will pay for only about half of the more than $30 trillion cost of his single-payer scheme he envisions. Other candidates fare no better in realistic plans to pay for their utopian health care promises.
Medicare buy-in is seen as a moderate proposal, but it would set off a domino effect of cost shifting that would leave few people untouched. It would mean that services for more people would be covered by insurance that reimburses providers at below-cost Medicare rates, placing more pressure on providers to negotiate higher rates with private insurers to offset the loss in income. Such a shift would place upward pressure on individual market premiums. Providers would also try to limit the number of Medicare patients they see, making it more difficult for today’s seniors as well as the buy-in populations to access care.
Medicare for All’s sponsors claim it would reduce administrative costs and produce huge savings. “Private insurance companies in this country spend between 12 and 18% on administration costs,” says Sen. Bernie Sanders (I-VT). “The cost of administering the Medicare program … is 2%. We can save approximately $500 billion a year just in administration costs.”Not so fast. Glenn Kessler, a fact-checker for the Washington Post warned backers of Medicare for All to be “cautious” in relying on “the administrative cost saving” as a talking point, and PolitiFact rated Sanders’ statement as “half true” […at best.]
What Bernie Sanders is proposing is not Medicare for all. It is far more generous—and more expensive. It would be funded much differently. And its relationship with private insurance would be nothing like today’s Medicare. Sanders would, in fact, replace the current Medicare program and it would effectively eliminate private health insurance. You can call it many things—from ambitious to unrealistic. But please don’t call it Medicare.
The health reform plan Sen. Harris unveiled this week tries to appear more moderate but it is just a bit slower path to “Medicare for All.” She would get there over 10 years—after she would be out of office, should she be elected and reelected. Grace-Marie Turner of the Galen Institute breaks down the consequences: “Sen. Harris’ plan is a clear pathway to a single-payer, government-run health system that would eliminate choices, more than double personal and corporate incomes taxes, and drive hospitals and physicians into bankruptcy.” Like other candidates, she seems to believe that private insurance could survive alongside a ‘public option’ or ‘Medicare buy in.’ Both have unlimited calls on taxpayer resources, the ability to dictate prices, and no costs of capital. Private insurance would quickly wither.
Sen. Kamala Harris raised her hand in the June Democratic presidential debate when the moderators asked who would eliminate private health insurance. Then she backtracked. Harris says she’ll provide a “commonsense path” for folding everything from Medicaid to employer insurance into the federal system. Her website says employers could offer either private Medicare Advantage plans or dump workers into Medicare for All. She wants her plan to appear less disruptive than the Sanders bill, yet the obvious conclusion is that it would still blow up traditional employer-sponsored insurance and eventually put everyone on a single federal health program.
|A public option is not a moderate, compromise proposal. Its inevitable consequence is the death of affordable private insurance. Government insurance options mainly erode, or “crowd out,” private insurance rather than provide coverage to the uninsured. Jonathan Gruber, the Massachusetts Institute of Technology economist credited with designing ObamaCare, showed in 2007 that when government insurance expands, six people go off private insurance for every 10 people who go on public insurance. And the public option would cause premiums for private insurance to skyrocket because of underpayment by government insurance compared with costs for services.
Joe Biden’s new health-care plan is supposed to show his moderation, but there was strong pushback from Sen. Bernie Sanders who wants a full single payer system. If you cut through the spin, the only debate Democrats are having is whether to eliminate private health insurance in one blow or on the installment plan. Biden supports a new government insurance plan that would “compete” with private insurance. We use quotation marks since a government insurer with zero cost of capital and political backing starts with an unbeatable advantage. The public option would undercut competitors on price, stiff providers with low reimbursement rates, and crowd out private insurance over time. Voila, single payer!
As the administrator of the two largest public health-care programs in the country, Medicare and Medicaid, I can say these programs face major fiscal challenges. Those who seek to expand them do so because of their expected lower price tag on premiums. But there’s a simple explanation that makes the low cost considerably less alluring: Public programs pay health-care providers less than private payers. Low prices imposed on doctors and hospitals can’t stop health-care costs from rising. Someone has to pay the bill—namely, Americans who purchase their coverage directly or through their jobs. In turn, this causes doctors and hospitals to attempt to make up the lost revenue by charging higher prices to private insurers, resulting in higher health insurance premiums for everybody else.
The prices of health care services are a key consideration in the debate over “Medicare for all” and related single-payer proposals. The term prices refers to the allowed payment per unit of service. In the broadest versions of these reforms, in which commercial insurance plans would transition into a universal Medicare–like program, physicians and hospitals face the prospect of receiving Medicare prices for all patients they serve. Relative to the status quo, in which commercial insurer prices generally exceed Medicare prices, this price reduction could have important consequences for clinicians and patients.