Universal Health Coverage vs. Medicare for All
The Democratic debates featured a split between those supporting Universal Health Coverage (building from the base of the Affordable Care Act, ObamaCare) and those supporting Medicare for All. There is a huge difference that needs to be understood as voters begin to assess these issues being espoused by the candidates. There is a vast amount of misinformation being spread on all sides that really confuses people.
Medicare for All as outlined by Senator Sanders will cover all services for all persons with no copays or deductibles. See http://www.luciensblog.com/blog/2019/1/31/understanding-medicare-for-all?rq=understanding%20medicare%20for%20all It will use private doctors and hospitals to deliver the care to patients. It will eliminate any role for private insurance (including Medicare Part C) and replace Medicare and Medicaid. Medicare will be upgraded to cover all services with no copays or deductibles (Medicare does not now cover dental care, vision care or most long term care); Medicaid will disappear. Doctors and hospitals will be paid on a fee for service basis; their reimbursements will be based on their reasonable and necessary costs and their traditional fee schedules. Patients will have unlimited and unrestricted choice of their own providers. It will be financed by taxes; this will require more than doubling the amount of federal taxes devoted to health care. See http://www.luciensblog.com/blog/2018/10/19/financing-medicare-for-all?rq=financing%20medicare%20for%20all Employers and individuals will no longer pay premiums; instead they will pay taxes. Patients will no longer pay copays and deductibles when they see a doctor, get a prescription filled or go to a hospital for services, instead they will pay taxes. Senator Sanders and Senator Warren are the strongest proponents of Medicare for All, and Senator Warren made the strongest case for it. Mayor DiBlasio and Senator Booker also indicated strong support for Medicare for All. On the plus side, it’s an upgrade in coverage for nearly every American; on the downside, it’s very, very expensive, and the doctors, hospitals, drug companies, employers and insurers all hate it.
Universal Health Coverage will keep Medicare, Medicaid, private insurance and the Exchanges (this is the way that over 300 million Americans already have their coverage) and use the existing Medicare or Medicaid program as the “public option” available to all through the Exchanges. An individual can choose their existing coverage or they can choose the “public option”. There are two advantages to this approach: 1) it does not take away anyone’s existing private coverage, and 2) it costs a lot, lot less than Medicare for All because you don’t have to pay for all the costs of replacing private insurance, and patients’ out of pocket copays and deductibles. I assume that anyone selecting the “public option” takes their employment contribution with them into the Exchange. Vice President Biden, Senator Klobuchar, Representatives O’Rourke and Delaney, Governors Inslee and Hickenlooper all prefer this approach because it is much lower cost, far less disruptive, and much easier to execute – both politically and programmatically. It has one big drawback – the lack of direct public control over rising medical costs.
What exactly are we trying to fix, what is broken? First, covering everyone (true universal coverage), and second controlling America’s very high and rising health costs.
In light of the ACA coverage expansions which reduced the uninsured quite dramatically, who exactly is still uninsured and why? In states like Florida, Georgia and Texas that have not enacted the Medicaid expansion; it’s primarily low income US citizens who are uninsured. Texas for example has a 19% uninsured rate and over two thirds are US citizens. https://stateofreform.com/featured/2018/12/new-report-texas-has-highest-rate-of-uninsured-people-in-the-nation/ Georgia and Florida have uninsured rates of about 13%, and very high percentages are US citizens. By contrast, Kentucky, which adopted the Medicaid expansion, now has an uninsured rate of about 5%. https://ccf.georgetown.edu/2018/09/14/florida-uninsured-rate-increases-tops-national-average/ https://www.albanyherald.com/news/local/georgia-s-uninsured-rate-climbs-fourth-highest-in-nation/article_03b53a75-580d-5559-a4a5-d8f81b37a8fb.html
In those states like Texas, Florida and Georgia, which account for the bulk of the nation’s uninsured, Republican Governors and legislators will not take the generous 90/10 federal matching rate offered to states under the Affordable Care Act. I do not understand how offering the “Public Option” in the Exchanges is going to help cover the very low income uninsured in those hold out states still declining the Medicaid Expansion. There needs to be a different approach to covering the uninsured in some of the deepest red states in the deep South; only Louisiana, Kentucky, Arkansas and Virginia have adopted the Medicaid expansion; in the other Southern states rural hospitals are closing because their finances are in such tough shape due to the failure to adopt the Medicaid expansion.
In states like California and New York, many of the remaining uninsured are low income undocumented workers (in California they account for over 60% of the remaining uninsured). https://www.gothamgazette.com/opinion/8503-new-york-94-percent-health-insurance-coverage-best-of-four-biggest-states and https://www.chcf.org/publication/2018-edition-californias-uninsured-progress-universal-coverage/ Undocumented persons were not and are not eligible for federal payments for essential benefits coverage under the Affordable Care Act expansions. Offering a Public Option in the Exchanges is not going to be much help in covering low-income undocumented unless there are substantial subsidies accompanying them; this will be highly politically controversial, but necessary to get all American residents covered. California has already covered low income undocumented children and will soon cover low-income young adults through Medicaid, using state only funds. Another approach would be coverage through their employers.
Without accounting for the undocumented, California has an uninsured rate of about 3%, and almost all of these are individuals who could be covered through Covered California, the state’s Exchange, – about one million in total, of whom half have incomes too high for the premium assistance subsidized coverage. Individuals not enrolling in Exchange coverage primarily cite “cost” as the reason for not enrolling; premium assistance ends at 400% of FPL, leaving those with higher incomes no help with their high premiums; this is particularly a problem for larger families and for those 55 and older. California has just passed a budget authorizing the expenditure of state funds to offer premium assistance for Exchange eligible individuals with incomes up to 600% of the federal poverty level (FPL) – over $150,000 for a family of four or $75,000 for an individual and to increase them for individuals with incomes between 200 and 400% of FPL. California will at the same time reinstate the tax penalty for those who fail to enroll.
The Public Option could offer lower priced coverage in the Exchanges, primarily because it will pay providers at Medicare rates, rather than at commercial private insurance rates. This will make coverage more affordable for those choosing the Public Option, but might backfire and conceivably reduce the premium assistance and cost sharing subsidies for those choosing plans other than the Public Option. Many subscribers who are understandably very price sensitive are choosing bronze plans (high deductibles and very large copays) in the Exchanges and are then very unhappy when they must pay the large out of pocket in order to access health care. (Subscribers in the Exchanges can choose from among bronze, silver, gold and platinum levels of coverage that respectively cover 60%, 70%, 80% and 90% of expected medical costs.) The Public Option could offer more affordable coverage with lower copays and deductibles due to the advantages of Medicare pricing. In my view premium assistance and cost sharing reductions under the Affordable Care Act) are going to need to be expanded in the ways proposed by House Democrats in order to put Exchange eligible purchasers on a more equal footing with those covered through their employers. http://www.luciensblog.com/blog/2019/3/27/strengthening-the-affordable-care-act?rq=strengthening%20the%20affordable%20care%20act
As for adopting the Sanders Medicare for All Plan in order to cover the remaining uninsured, which it would certainly do, there are many far less expensive options and ways to cover the remaining uninsured. I would suggest auto-enrollment in Medicaid or the Exchanges and collection of an individual’s share of premium through the tax systems — in other words all who are uninsured would be automatically enrolled in the plan of their choice and their premium shares are paid along with their taxes).
Controlling rising health costs is very different between the two competing approaches. Medicare for All uses provider rate regulation by the federal government as its primary tool to control rising costs; whereas Universal Health Coverage uses price competition between plans and among providers. Medicare for All uses fee for service and free choice of providers; Universal Health Coverage relies on value based purchasing through narrower networks. Universal Health Coverage uses patient copays and deductibles; Medicare for All eliminates them.
The big problem with the Universal Health Coverage approach is that the competitive model is working particularly poorly in rural areas with natural provider monopolies and urban areas with provider consolidation (local oligopolies). The big problem with the Medicare for All approach is its over-reliance on only one technique -- federal rate setting -- to the exclusion of all other effective cost control approaches; this would produce a distorted set of financial incentives for health care providers.
The proponents of Medicare for All overstate the case that the profits of drug companies and insurers are the reasons for America’s high and rising health costs. They do contribute, but it's the very high reimbursement rates of doctors, hospital, drug companies, nursing homes, medical supplies and every other aspect of American health care that explain why we spend twice as much per capita as other developed nations do. While it’s more than fair to blame some drug companies and some insurance companies for jacking up their prices and price gouging consumers, this is not the primary reason for our overpriced health system. American politicians, heath insurance companies and state and federal regulators are simply overwhelmed by the raw powers of the medical industry.
Prepared by: Lucien Wulsin
Dated: 7/2/19