Democratic presidential candidates are pushing bold health care reforms. Leading the way is Senator Bernie Sanders’ “Medicare for all,” cosponsored by a half-dozen other presidential contenders.
Covering all uninsured Americans, and replacing our wasteful, often incomprehensible patchwork of insurance with comprehensive, no-cost coverage under a trusted public program is indeed tantalizing. Enlarged to cover dental and long-term care, Sanders’ proposal promises comprehensive benefits without premiums, deductibles, or coinsurance (saving the average Medicare couple $11,000 per year) and ending annual and lifetime benefit caps.
But there are risks in “Medicare for all.”
First, major service bottlenecks are sure to arise, as 20 million uninsured Americans gain coverage — or 30 million, if immigrants’ advocates win the battle — and another 210 million move from the cost-sharing of the current Medicare and private insurance systems to free medical care. Problems with access to care would inevitably lead to some form of rationing of care.
Second, private insurance companies charge high premiums and in turn pay high rates to health care providers. Hospitals are the largest providers (35 percent of our medical spending), for which commercial insurers’ payment rates average 67 percent higher than Medicare’s. As private insurers disappear, slashing such payments represents a big part of the savings needed to fund Medicare-for-all benefits. But at the lower payment rates, hospitals would experience an average decrease in revenues of 16 percent. The losses would be felt unevenly. Many rural hospitals — often the largest employer in town — might well close.
Of course, Medicare fees to hospitals could be raised, new rates phased in, and/or exceptions granted, but these would only hasten the bankruptcy of the Medicare Trust Fund, now projected to be insolvent in 2026. Imagine the endless battles over how to trim, tailor, and end-run these cuts.
Third, “Medicare for all” would also disrupt the largest sector of the US economy (18 percent of GDP). Beyond the loss of 500,000 insurance industry jobs, it would produce major shifts in income and employment for some 16 million physicians, dentists, psychologists, social workers, physical and occupational therapists, nurses, medical technicians, administrators, scientists and hospital/nursing home employees of all types. That’s one in eight US jobs, more than retailing or manufacturing.
Shifting 100 percent of individual care onto public financing means adding, by most credible estimates, about $30 trillion over a decade to the federal budget. By comparison, federal revenues in taxes totaled $3.3 trillion in 2018. Nothing remotely approaching this scale of economic transfer has ever been attempted.
Fourth, even if some companies eventually raised workers’ wages, returning to workers the money these companies had been spending on health benefits, many employees would end up losing on the trade as their personal taxes increased. Ironically, Sanders’ own state of Vermont enacted legislation and authorized detailed planning for a single-payer system, only to shelve it in 2015, once the price tag was revealed. It would have taxed individuals an additional 9 percent and corporations 11 percent. The immediate certainty of higher taxes outweighed the possibility of future wage gains for voters.
Finally, there is what might be called the opportunity cost of this massive shift to public financing. For a small fraction of $30 trillion, we could fund sweeping public health initiatives via subsidies for housing, food, or education that would improve the overall health of the population.
Notably, Medicaid already provides the dental, long-term care, and comprehensive medical benefits without premiums, deductibles, coinsurance, or annual and lifetime benefit caps which an imagined “Medicare for All” promises. Indeed, there are currently 70 million Americans insured by Medicaid, 10 million more than are currently covered by Medicare. Truth in marketing, Sanders’ proposal ought to be called “Medicaid for all.”
So perhaps the obvious alternative to all this disruption is adequate funding of the Affordable Care Act, our most ambitious health insurance reform in half a century. After all, the ACA has added health insurance benefits for 20 million uninsured Americans since 2014, guaranteeing access to decent coverage for anyone who doesn’t qualify for employer-sponsored insurance (160 million), Medicaid/CHIP, or Medicare. For relatively little public money, the ACA could continue to grow to cover the entire population. This is how we insured nearly every person in Massachusetts.
Dr. Michael Stein is professor and chair and Jon Kingsdale is associate professor of the practice in the department of health law, policy and management at Boston University School of Public Health.