Is Medicare for All an Option?

One for all

♦ This is a long article as it should be, considering how all Americans could be affected. You might want to jump ahead:

The Candidates' Plans, What is Medicare?, Medicare Parts, What is Medicare for All?, Costs are high, Who pays for it?, What is a Public Option?, Washington State's Public Option, Behind the scenes of Medicare for All

Medicare for everybody

There is a lot of talk about expanding Medicare for everybody and reducing the role of insurance companies. The public is struggling with the idea of cutting out insurance companies even though no one likes them.

♦ There is a fundamental difference between insurance companies and Medicare. Insurance companies are in the business to make money while Medicare’s role is to facilitate care for people.

• Some people fear losing what works well for them while others worry they will have to pay more taxes and someone else will benefit.

Two phrases have been kicked around a lot: “Medicare for All” and “Public Option.” Both can be very confusing.

Not everyone understands what Medicare is. On top of that, the words “Public Option” are being used to describe a variety of plans, some similar to Medicare while others continue to rely on insurance companies to be nice.

The candidates’ plans

• Senator Bernie Sanders has a plan that would do away with all private health insurance. For a long time, he has been championing “Medicare for All” now.

• Senator Elizabeth Warren’s would like to have Medicare for All eventually. She has shifted toward a slower approach emphasizing a transition period that would make it optional for most of her first term in office.

Supporters like Sanders and Warren argue that Medicare for All would not create new healthcare spending, but rather would simply shift current spending — and, potentially, ultimately reduce overall spending and save money. Estimates vary but there does appear to be some truth to the claim that there would be significant savings compared to the current system.

♦ Medicare for All supporters maintain that while taxes would have to help pay for such a system, many Americans would see their overall healthcare costs go down because they would no longer be paying current costs like premiums and meeting deductibles.

Should either Sanders or Warren win the nomination they are going to have to simplify this explanation if they are to win over middle-class America.

• Mayor Pete Buttigieg calls his plan Medicare for All Who Want It. His plan would keep employer-sponsored insurance and private individual plans while creating a government plan, a public option, which any American could join.

Mayor Pete also wants to cap Medicare beneficiaries’ out-of-pocket expenses, something few people talk about. Interestingly, he proposes to attack ‘surprise billing’ practices. His plan would require that all providers at in-network hospitals be billed as in-network even if the doctors or labs are out-of-network.

• Former Vice President Joe Biden speaks of “building on the Affordable Care Act.” Even strong supporters of Obamacare understand Mr. Biden is chasing a fantasy when he promises a better version 2.0 will cure all. To appease more progressive voters, he is also proposing a form of public option which sounds a lot like Sanders-lite.

Biden’s campaign now says, “Whether you’re covered through your employer, buying your insurance on your own, or going without coverage altogether, the Biden Plan will give you the choice to purchase a public health insurance option like Medicare.”

• This is a bit different than most public option talk in the sense that they are saying someone who can receive insurance through an employer could possibly choose instead to buy into the Biden public option. Conservatives view this idea as a slippery slope toward a single-payer system.

♦ The concept of a public option does not have much chance of succeeding unless it carries with it the power to set prices and a requirement that providers accept it. This is pretty wishful thinking considering the influence of the insurance industry and large providers.

What is Medicare?

Medicare is a form of national health insurance begun in 1966. It is administered by the Centers for Medicare and Medicaid Services (CMS). It primarily provides health insurance for Americans aged 65 and older, but also for some younger people with disabilities, as well as people with end stage renal disease and amyotrophic lateral sclerosis (ALS or Lou Gehrig's disease).

♦ Medicare currently covers close to 60 million individuals. Medicare’s enormous scale confers genuine administrative and purchasing efficiencies.

Medicare spends up to seven times less than private insurers on administrative costs. It also pays hospitals 40% less and providers 2 to 3.5 times less than private insurers do for the same services.

Medicare’s Parts

Medicare is broken down into parts. The different parts of Medicare help cover specific services. They are Part A, Part B, Part C and Part D.

• Medicare Part A (Hospital Insurance) - Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. In 2020, Part A has a deductible of $1,408. Part A is provided at no cost.

• Medicare Part B (Medical Insurance) - Part B covers certain doctors' services, outpatient care, medical supplies, and preventive services. In 2020, Part B has a deductible of $198. Part B has a monthly premium. In 2020, most people will pay $144.60 per month. Higher-income beneficiaries are required to pay a little more. About 7% of Medicare beneficiaries pay more due to their income.

♦ Original Medicare pays doctors and hospitals according to set prices determined by CMS. Most hospitals are required to accept Medicare patients but many doctors refuse to see Medicare patients due to low reimbursements.

• Medicare Part C – These are private Medicare plans called Medicare Advantage plans. Medicare Part C is administered by private insurance companies contracted with CMS to provide Medicare beneficiaries with everything that Original Medicare (Part A and Part B) covers. These plans often provide extra benefits as well.

Many Advantage plans include prescription drug coverage. Nearly all have reduced deductibles and a maximum out-of-pocket. Part C plans rely upon a network of doctors and hospitals to control costs in the same way that traditional health insurance is structured.

• Supplemental Insurance – Original Medicare does not have out-of-pocket spending limits. Instead of joining a Medicare Advantage plan many Medicare beneficiaries buy private supplemental insurance to cover out-of-pocket costs.

• Medicare Part D (Prescription Drug Coverage) - Part D adds prescription drug coverage. Medicare did not originally cover outpatient prescription drugs. This benefit became available January 1, 2006.

Medicare Part D has a monthly premium. The average premium in 2019 was $33.19. Part D plans usually have an annual deductible, copayments and coinsurance for specific drugs, a gap in coverage called the "Donut Hole," and catastrophic coverage once a threshold amount has been met.

Part D is provided by private companies that are authorized by CMS to sell Part D insurance. These companies are both regulated and subsidized by CMS. In order to have Part D coverage, beneficiaries must purchase a policy offered by one of these companies.

The Medicare Part D prescription drug program is voluntary. However, if you do not enroll in a Part D plan when you are first eligible and you cannot prove you had creditable prescription coverage then you will be subject to a late-enrollment penalty.

Likewise, if you drop a Part D plan and do not have any other prescription coverage you will be assessed a late-enrollment penalty should you decide at some later date to join a new plan.

What is Medicare for All?

Senator Bernie Sanders coined this phrase. It refers to a healthcare system in which all Americans, not just seniors, will receive health insurance through the government’s Medicare system.

♦ Mr. Sanders envisions expanding original Medicare to cover everyone and to cover more services. He also speaks of eliminating most deductibles and copayments.

Medicare for All would not be able to eliminate private health insurance as many people claim. It would greatly reduce the power and profits of insurance companies. Insurance companies would promote supplemental insurance and the shift to Medicare Advantage plans would certainly continue.

♦ In truth, there are many possible flavors of Medicare for All.

• Mr. Sanders’ Medicare for All is quite similar to the healthcare system in Canada. There, doctors and hospitals remain private, but everyone gets insurance from the government. No one is asked to pay any money when seeing a doctor. The Canadian healthcare system is informally called Medicare.

• Major problems with Medicare for All are funding and reimbursement. Power players: doctors, hospitals, health insurers and their politically connected lobbyists will fight tooth and nails to stop Medicare for All because they don’t want to lose money.

Over the years, doctors have banded together and hospitals have become so large they can demand higher reimbursements from companies like Anthem. This has led to exorbitant charges and a huge disparity for the same services.

♦ In a Medicare for All world, CMS would set the price for reimbursements and providers would have to take it or find other patients.

Costs are high

There is no debate that federal spending on health care would rise dramatically under Medicare for All. Based on two independent estimates, the program would add about $32 trillion to the federal budget over the next 10 years.

Elizabeth Warren put her Medicare for All price tag at $20.5 trillion over 10 years -- $10 trillion less than most estimates -- paid for with a series of new taxes on the wealthy.

• A counter argument to such a high price tag is, if we do nothing the current system will cost $50 trillion over the same time period. That’s the government’s estimate of total healthcare spending across the board, both public and private, over the coming decade.

♦ Medicare for All would shift a lot, but not all, of the private spending over to the government.

Who pays for it?

The payment scheme for Medicare for All has not really been explained very well. Employees and employers could save a lot of money by not having to pay insurance companies a premium every month. But the details as to how to funnel some of that money into the government coffers have not been worked out.

♦ The government would need to collect more money to pay for Medicare for All. Taxes would need to go up for someone.

Sen. Sanders has suggested a 7.5% payroll tax from employers and a 4% one from workers. Mr. Sanders’ plan sounds worse than others but it is probably more realistic.

• Mr. Sanders argues that workers would actually pay less money overall because they would no longer have to pay for health insurance. This could very well be true since most workers today are having far too much deducted from their paychecks for insurance while getting far too little in return.

Under Sen. Sanders’ plan households making over $29,000 a year would see a tax hike, and there would be a variety of tax changes that would fall primarily on the well-to-do, such as higher rates on capital gains and a wealth tax on the top 0.1% of households.

• Sen. Warren says she can fund Medicare for All without raising taxes on the middle class. Instead, among other things, she would have a wealth tax on the ultra-rich.

Sen. Warren’s plan calls for a 6% wealth tax on people with more than a billion dollars. Her plan would also have employers pay higher taxes to the government, which she says would replace what they currently pay toward private health insurance.

• Sen. Warren says middle-class Americans would no longer pay health insurance premiums or copays and would also not pay any new taxes to replace those costs. However, they would pay taxes on whatever extra take-home pay they would receive because of her plan.

♦ A recent poll by the Kaiser Family Foundation found that nearly 70% of Americans favor Medicare for All when they hear it would eliminate health insurance premiums and reduce out-of-pocket costs.

Approval plummets to below 40% when people are told they might have to pay more in taxes and that private health insurance would be eliminated.

What is a Public Option?

A “Public Option” is drastically different from a single-payer health care system, Medicare for All.

Under a single-payer system, everyone in the country would have health coverage provided by the government, and private insurance largely would cease to exist. Like Medicare, the government would act as the insurer; doctors and hospitals would operate privately, receiving payments from public funds under such a nationalized health insurance system.

• Although many of the Democratic presidential candidates have expressed varying degrees of support for a Medicare for All plan, nearly all have also endorsed creating a government-sponsored health plan, known as a public option.

The more moderate candidates are pushing for a public option. Several have said they would add such a plan to the Affordable Care Act exchanges.

♦ A public option plan would compete with private insurance not replace it.

Most candidates are not clear as to how they would structure their public option. Ideas kicked around have called for creating a federal healthcare plan, something like Medicare, but for people under age 65. Individuals and small businesses would be able to buy such a plan just as they would purchase a healthcare plan from a private insurance company.

A public option would be available to people who buy their own health insurance. That eligible group would include anyone who doesn't get insurance through their job or who doesn't qualify for other government programs, like Medicare or Medicaid.

♦ Progressives supported the public option as a transition toward a single-payer system, while conservatives say they oppose it as a government “takeover” of health care. The takeover word is for the news shows to play up the “we are pro-business” line of the GOP.

Some seeking the nomination do see a public option as an initial step towards a Medicare for All-type overhaul. But others say the best way to extend coverage to more Americans is to offer a public plan and also increase federal subsidies for Affordable Care Act policies.

♦ Opponents say that private insurance companies would have a hard time competing against a public option, which they say would be less expensive and would eventually drive private companies out of business.

In theory, a public plan could be unfair competition if it was granted the power to force doctors, hospitals and other providers to accept payments that are far below what private insurance plans pay; like Medicare now does.

• In all likelihood no public option would be given the power to force prices upon providers. It is more likely that a public option will follow the model set by Washington State, but with support in the form of tax dollars.

Washington’s Cascade Care

The state of Washington will have a public option plan starting on January 1, 2021. Washington’s plan is called Cascade Care. The state is not getting into the insurance business.

Washington is creating more of a hybrid public-private system where the state will contract with private health insurers to administer the plans, but the state will control the terms to manage costs. Perhaps it is best to call it a state-sponsored plan.

Washington State doesn’t have the clout that Medicare does. The state does not have huge numbers of participants yet with which to pressure providers for lower prices. Their public option is in the infancy.

♦ Washington’s plans must rely on providers to want to participate. To do this they had to come up with a plan that reimburses providers at a rate higher than Medicare does. Washington settled on a reimbursement scheme that would pay 1.6 times what Medicare normally pays.

Washington’s experiment is an attempt to increase offerings on the exchange without requiring additional state spending on health care. Democratic promoters of Cascade Care were hoping for lower premiums and lower out-of-pocket costs. Unfortunately, to offer attractive enough reimbursements Washington’s plans will not be able to offer as low a premiums as first envisioned.

♦ It is tough to have a public option without tax dollars to support it. Other states have tried something similar only to abandon them due to lack of funding. Time will tell if Washington can avoid committing tax dollars to support their plan.

Behind the scenes of Medicare for All

There is one thing about a single-payer system that is seldom mentioned but which could have major ramifications for the folks in power. It is voter registration.

How could the healthcare debate involve voter registration? Well, it all has to do with a health insurance ID card.

• Canada has single-payer system where every individual has a "Health Insurance Card." This ID card can be used to vote. The GOP greatly fears, as they should, a national health insurance ID card.

The GOP has been working feverishly to purge voter registration lists leading up to the 2020 elections. Numerous court battles have been and continue to be fought over this.

Voter purging and the closing of voting stations heavily affects black voters who traditionally vote Democratic. Stacy Abrams continues to speak of her loss in the Georgia gubernatorial election as an example of voter purging focused on favoring her opponent.

• A nationwide health insurance ID card could easily be turned into a voter registration card, suddenly registering huge numbers of Democratic-leaning voters. If that should happen, GOP control of the Senate and many state legislatures would be in jeopardy.

Democrats are hesitant to bring this point up but GOP leaders are well aware of the danger.

Summary

Regardless of the approach taken – Medicare for All or Public Option - providers will resist new insurance options that may move more patients into plans paying lower rates.

Here is the quandary of healthcare cost containment. Healthcare spending and its growth cannot be reduced without either paying less or reducing the quantity of services provided.

The healthcare industry likes the idea of government-subsidized health care but hates the idea of government price controls.

Political scheming will continue.