What Medicare for All Could Mean for the United States

The notion of a government medical plan option to compete with private plans arose during the discussion around formulating the Affordable Care Act (Obamacare).  At the time it seemed a stretch too far and was discarded.  Bernie Sanders pushed the issue again in the 2016 campaign, generated some backing for a government single payer plan, and in September 2017 formally proposed the Medicare for All Act of 2017 (S.1804).  Now that liberal Democratic candidates are gearing up their campaigns for president in 2020, the idea of Medicare for All is receiving serious attention, at least from some candidates.  Kamala Harris, for one, came out publicly in favor and immediately received blowback from conservatives who derisively claimed that it still is, and always will be, a step too far.  But is it?

Polling is said to indicate that liberal-leaning voters have moved more to the left then they were two years ago and much more than they were when Obamacare was constructed.  It seems Medicare for All will at least receive the consideration it deserves.  It is a way to provide adequate medical care to everyone, and it has the potential to deliver that care at a net lower cost.

A group at the University of Massachusetts at Amherst, the Political Economy Research Institute (PERI), analyzed the characteristics of the plan proposed by Sanders and produced Economic Analysis of Medicare for All.  If one follows the link to the article one gains access to 200 pages of analysis.  The study provided this summary.

“This study by PERI researchers Robert Pollin, James Heintz, Peter Arno, Jeannette Wicks-Lim and Michael Ash presents a comprehensive analysis of the prospects for a Medicare for All health care system in the United States. The most fundamental goals of Medicare for All are to significantly improve health care outcomes for everyone living in the United States while also establishing effective cost controls throughout the health care system. These two purposes are both achievable. As of 2017, the U.S. was spending about $3.24 trillion on personal health care—about 17 percent of total U.S. GDP.  Meanwhile, 9 percent of U.S. residents have no insurance and 26 percent are underinsured—they are unable to access needed care because of prohibitively high costs. Other high-income countries spend an average of about 40 percent less per person and produce better health outcomes. Medicare for All could reduce total health care spending in the U.S. by nearly 10 percent, to $2.93 trillion, while creating stable access to good care for all U.S. residents.”

The report concludes that this is not a costly new federal program; rather, it is a means of expanding coverage while saving money. 

“Working from the relevant research literature, we estimate that, through implementation of Medicare for All, overall costs of providing full health care coverage to all U.S. residents could fall by about 19 percent in the first year of full operations relative to spending levels under the existing system. The most significant source of cost saving under Medicare for All will be a series of structural changes. These will be in the areas of: 1) administration (9.0 per­cent savings in total system costs); 2) pharmaceutical pricing (5.9 percent savings in system costs); and 3) establishing uniform Medicare rates for hospitals, physicians, and clinics (2.8 percent savings in system costs). We therefore estimate that these three areas of structural change under Medicare for All can achieve, overall, about 17.7 percent in total system cost savings relative to the existing U.S. health care system.”

The addition of service for uninsured and underinsured people is an added cost that brings the net savings down to about 10%.  As the study summary indicates, most advanced countries provide coverage-for-all that produces superior health outcomes than our system at about 40% less cost.  Given that, one should assume that even greater savings can eventually be sought.

Applying the Medicare throughout the healthcare system imposes standardized compensations for procedures covered under Medicare.  This should lower revenue per patient as part of the cost savings of the program.  The study suggests that the elimination of the administration burden of dealing with insurance companies will allow physicians to treat more patients in the same amount of time (and there will be more patients).  The study also assumes that lower pharmaceutical prices will be negotiated to bring costs more in line with those in other advanced countries.  Such savings are already being realized in Medicaid and the Veterans Administration.  Insurance companies should be the biggest losers because much of their current functionality will disappear, but they might also continue to play a role as providers of supplementary services not covered by the basic Medicare for All plan, much as they do now for Medicare Advantage Plans.  There will be many who will oppose changes of such magnitude.

The time might not yet have come for such a momentous transformation of our healthcare system, but the time has come to discuss the positives and negatives of such a move.  If we don’t begin serious discussion of the issues, change will never happen, and we will be forever burdened with overly expensive and dismally inefficient healthcare.