September 7th, 2018
This article first appeared on Forbes.com HERE
Quite a few Democratic candidates for office this year are campaigning on the idea of enrolling everyone in Medicare. It’s not just the left. A significant number of doctors in the American Medical Association are for it. Public opinion polls show that 70 percent of Americans like the idea.
Here are ten things you need to know.
- 1. Medicare is not really government insurance.
Almost everybody on the political left thinks that Medicare is a government plan – one that is completely different from private insurance. Yet that view is wrong.
Although Medicare is largely funded with tax dollars, it has never been a strictly government program. Medicare’s original benefit package copied a standard Blue Cross plan that was common back in 1965. And Medicare has always been privately administered – in many places by Blue Cross itself. That’s the same Blue Cross that administers private insurance sold to non-seniors.
Moreover, in recent years, one-third of all seniors – and perhaps as many as half of young seniors – are enrolled in plans offered by Humana, Cigna, UnitedHealth care and other private insurers under the Medicare Advantage program. These private plans are virtually indistinguishable from the private insurance non-seniors have.
- The most successful part of Medicare is run by private insurers.
A study published in Health Affairs finds that the Medicare Advantage program costs less and delivers higher quality care than traditional Medicare. Moreover, within the Medicare Advantage program the most successful plans are the ones administered by independent doctors’ associations. These plans are showing that integrated care, coordinated care, medical homes and electronic information sharing actually work – to keep patients healthier and improve medical outcomes.
But there is nothing special about Medicare in this regard. These are private sector innovations that are also available to non-seniors under contract with private insurers
- Medicare is often the last insurer to adopt innovations that work.
In 2003, the benefit structure of Medicare looked pretty much the same as it did 40 years earlier. But in 1965, drugs were relatively inexpensive and their impact on care relatively modest. Through time, they became more expensive. They also became the most cost-effective medical therapy. When Medicare began covering drugs (through Part D) in 2004 it started providing coverage that virtually all private insurers and all employers had already offered years earlier.
Medicare has also been slow to adopt technologies that are becoming more common in the private sector. It won’t pay for doctor consultations by phone, email or Skype. It won’t pay for Uber-type house calls at nights and on weekends, although the cost and the wait times are far below those of emergency room visits. Nor will it pay for concierge doctor services, now available to seniors for as little as $100 a month – despite the potential to improve access and reduce costs.
After years of foot dragging, Medicare now pays for telemedical services which link hospital specialists with patients in rural areas. But it won’t pay for those same services in urban areas – where most people live.
- Medicare has wasted enormous sums on innovations that don’t work.
Medicare has spent billions of dollars on pilot programs and demonstration projects, trying to find ways of lowering costs and raising the quality of care. Many of these efforts have focused on integrated care and coordinated care. Yet instead of finding places in the health care system where these techniques seem to work (e.g., private Medicare Advantage plans), Medicare set out instead to reinvent the wheel. Three separate Congressional Budget Office reports concluded that these efforts would be unsuccessful, and those predictions seem to be vindicated by the test of time. Other efforts to change hospital behavior appear to have raised costs rather than lower them.
- Most seniors in conventional Medicare are participating in stealth privatization, even though they are unaware of it.
By far the biggest recent change in Medicare has been the Obama administration’s stealth program to privatize conventional Medicare and enroll seniors in managed care programs called Accountable Care Organizations. At last count, there were 32.7 million patients enrolled in an ACO, mainly people who think they are participating in traditional Medicare.
The reason for the word “stealth” is that President Obama never used the words “privatization” or “managed care” even though ACOs are mainly private entities with essentially the same economic incentives as the hated HMOs of the 1980s and 1990s. Not only did the Obama administration never tell seniors they were participating in a grand experiment, it is illegal for an ACO to tell a senior he or she is actually enrolled!
This experiment has largely been a failure. Without the tools routinely used by Medicare Advantage plans (including the right to transparent communication with patients) ACOs are neither saving money in the aggregate nor are they improving the quality of care.
Democratic candidates for office often rail against the idea of privatizing Medicare. AARP frequently parrots the same message. Yet most seniors who think they are in traditional Medicare are actually in a private sector ACO. It was Democrats who put them there with legislation that AARP supported!
- There is nothing Medicare can do that employers and private insurers can’t do.
For many years the Physicians for a National Health Program argued that a single payer health insurer would be a monopsonist (a single buyer) in the market for physicians’ services. It could therefore use this power to bargain down the fees it pays to physicians. Putting aside the puzzle about why a doctors’ organization would advocate putting the financial squeeze on themselves and their colleagues, the whole idea turns out to be wrong.
Medicare doesn’t bargain with anyone. It simply puts out a price and doctors can take it or leave it. But private insurers can do that too. In fact, they can put out a take-it-or-leave-it price lower than what Medicare pays. That’s what has been happening in the (Obamacare) health insurance exchanges, where the only profitable insurers have tended to be Medicaid contractors who pay Medicaid rates to providers.
Unfortunately, that means that enrollees are often denied access to the best doctors and the best facilities.
Obamacare insurance, for example, excludes MD Anderson Center in Houston (cited by US News as the best cancer care facility in the country), Southwestern Medical Center in Dallas (rated as the top medical research center in the world by the British journal Nature) and the Mayo Clinic in Rochester, Minnesota.
Employers and private insurers could be far more aggressive in keeping prices than they are today and far more aggressive than Medicare is. Canadians who come to the United States for knee and hip replacements (because they get tired of waiting in Canada) pay about half of what Americans typically pay. Employers and private insurers could offer the same service to patients who are willing to travel and to pay up front.
MediBid is a service that offers patients a national exchange where providers submit competitive bids that are routinely less than what Medicare pays.
- Medicare for all would be costly.
“Medicare for all” sounds attractive to some people because it suggests you are going to get something for nothing. But, when pressed, even Bernie Sanders admits there is no such thing as a free lunch
A study by Charles Blahous at the Mercatus Center estimates that Medicare for all would cost $32.6 trillion over the next ten years. Other studies have been in the same ballpark and they imply that we would need a 25% payroll tax. And that assumes that doctors and hospitals provide the same amount of care they provide today, even though they would be paid Medicare rates, which are about 40% below what private insurance has been paying. Without those cuts in provider payments, the needed payroll tax would be closer to 30%.
Of course, there would be savings on the other side of the ledger. People would no longer have to pay private insurance premiums and out-of-pocket fees. In fact, for the country as a whole this would largely be a financial wash – a huge substitution of public payment for private payment.
But remember, in today’s world how much you and your employer spend on health care is up to you and your employer. If the cost is too high, you can choose to jettison benefits of marginal value and be more choosey about the doctors and hospitals in your plan’s network. You could also take advantage of medical tourism (traveling to other cities where the costs are lower and the quality is higher) and phone, email and other telemedical innovations described above. The premiums you pay today are voluntary and (absent Obamacare mandates) what you buy with those premiums is a choice you and your employer are free to make.
With Medicare for all, you would have virtually no say in how costs are controlled other than the fact that you would be one of several hundred million potential voters.
Remember also that there is a reason why Obamacare is such a mess. The Democrats in Congress convened special interests around a figurative table – the drug companies, the insurance companies, the doctors, the hospitals, the device manufacturers, big business, big labor, etc. – and gave each a piece of the Obamacare pie in order to buy their political support.
As we show below, every single issue Obamacare had to contend with would be front and center in any plan to replace Obamacare with Medicare for all. So, the Democrats who gave us the last health care reform would be dealing with the same issues and the same special interests the second time around.
It takes a great deal of faith to believe there would be much improvement.