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OPINION: Why "Medicare for All" Is A Lot More Affordable Than You Think

by teolagia, published

The idea of universal health care (Medicare for All) has surged in popularity since the 2016 Bernie Sanders campaign. Quite a few progressive candidates for the 2018 midterm elections ran, or are running, on a platform which includes Medicare for All.

The idea has generated considerable skepticism or opposition from both Democrats and Republicans. The counter-arguments are most often grounded in a concern for fiscal responsibility (“we just can't afford it”). Those from the liberal side, such the one recently posed by the editorial board of the Washington Post, which refutes the concern about cost and explains why Medicare for All would solve some of the most pressing problems in our health care system.

Medicare for All Would Be Cheaper

According to Senator Bernie Sanders' website, his plan would cost $4,202.87 per person per year, or that is a little over 42 thousand dollars per person over ten years. In comparison, the average American spent an annual total of $10, 345 on healthcare in 2016. Thus, on average, Sanders' plan would cost Americans less than half what they currently pay.

Certainly, Sanders’ figure may be overly optimistic. The Washington Post cited Charles Blahous, of the libertarian-leaning Mercatus Center, who found that the actual cost would be closer to $32.6 trillion over ten years. Even using this libertarian estimate of $32.6 trillion, Medicare for All would still be cheaper.

Indeed, that number translates to $9,928.5 per year per person. That's not much lower than what the average American spent on health care in 2016. However, those costs will increase significantly over the next ten years. The Centers for Medicare and Medicaid Services (CMS) estimate that, on average, Americans will pay $14,944 annually in 2023.

Saving $5000 per year, plus receiving all required medical treatment, would be life-changing for most Americans.

Who Should Shoulder The Burden of Risk?

With Medicare for All, the costs are obviously borne by society, rather than by individuals. Currently, the burden falls disproportionately on the poorest among us, who are less likely to have health insurance.

This rationale is an insufficient argument in favor of Medicare for All. Somewhere out there, a Republican uncle is retorting, “Why not pay for everything through taxes: clothes, food, vacations!”

In fact, medical insurance is different from other costs. That difference explains why publicly-funded health care would cost less than privatized health care. The major cost issue in the insurance industry is risk. In other industries, for example in agriculture, businesses know more or less what they will have to spend in the next few years. For every extra bag of potatoes they sell, farmers know how much profit they will generate.

However, for an insurer, every extra person may either be profitable or unprofitable. Their medical treatments might cost more than they pay in premiums. Alternatively, they may not require any medical services and thereby pay more in premiums than what the insurer has to spend.

On top of that, private insurers must ensure healthy profits and corporate growth. Managers have a fiduciary duty to maximize the company’s value. They must not only cover uncertain costs but also predictably generate enough profit to pay out encouraging dividends at the end of every quarter.

Therefore, insurers must charge more in premiums than the actual cost of paying their policyholders’ medical treatment. Who currently bears the burden of this risk? The individual policyholder, either through higher premiums or insurers' outright refusal to cover them.

With Medicare for All, the risk would be lower. Indeed, the risk would be spread across the whole population, which encompasses both people who require medical care and those who do not.

This mechanism explains why the Obamacare individual mandate was crucial to maintaining affordable premiums. The risk would be borne by society instead of the individual. Even bootstraps-type individualists must recognize that we can suffer accidents or incur medical costs through no fault of our own.

They most likely would draw the line of individual responsibility differently than, for instance, Americans who lean toward democratic socialism. In reality, almost every single person has an opinion about where to draw that line. Should society bear the cost of opioid treatment, of lung cancer treatment for a smoker, of back surgery for a construction worker? Medicare for All means: we don't have to worry about that line. It doesn't matter. If you have medical needs, you should receive care.

Cost-Cutting: Other Ways Medicare for All Would Be Cheaper

Medicare for All would save money for other reasons as well. It would eliminate administrative costs because the system would be streamlined. Second, tax dollars that the government already spends on health care would contribute to paying the costs.

For instance, tax breaks for health care would be eliminated, since they would become redundant and unnecessary. Finally, drug prices would be lower. In other countries, the government is able to more or less control drug prices.

Conversely, in the US, manufacturers set their own drug prices. Thus, we end up with profiteers such as Martin Shkreli ("pharma bro"), although he's merely a symptom of a profit-oriented health care system.

The Surmountable Problem of Medicare Losses

A problem that a Medicare for All plan would have to resolve is the fact that currently, hospitals incur losses from Medicare patients. This problem is multi-faceted, and a full response is beyond the scope of this article. A large number of factors affect hospitals' profitability.

In a Forbes article, contributor Robert Pearl, M.D. investigated why hospitals are losing "millions." He argues that revenue isn't the problem, though perhaps that is because of private insurers:

“How did some of the biggest brands in care delivery lose this much money? The problem isn’t declining revenue. Since 2009, hospitals have accounted for half of the $240 billion spending increase among private U.S. insurers.”

The problem, according to Dr. Pearl, is a history of systemic mismanagement:

“Hospitals have contributed to the cost hike in recent decades by (1) purchasing redundant, expensive medical equipment and generating excess demand,

(2) hiring highly paid specialists to perform ever-more complex procedures with diminishing value, rather than right-sizing their workforces, and

(3) tolerating massive inefficiencies in care delivery (see “the weekend effect”).”

Health care systems and policies are complicated. Gradual changes are difficult to sustain because every four or either years the White House can completely change course. Also, some changes don't work unless we go all the way (hence the individual mandate). We need both Democrats and Republicans to agree to a system-wide overhaul to make health care affordable and accessible to everyone.

The Income Inequality Issue

A final opposing argument to Medicare for All rests upon the distributional impact. The universal health care, by definition, includes everyone. Even billionaires could receive medical care for free. However, this contention misunderstands what is being proposed.

Firstly, high-income earners would contribute more taxes to fund health care. Even Trump's tax code kept the progressive tax, meaning that the tax rate is higher for the rich than for the poor.

Second, Medicare for All will not eliminate luxury health care, which will not be publicly-funded. Canada, Germany, and other countries with universal health care nonetheless have private hospitals and clinics for those willing to pay. Those who wish to utilize those services would be paying twice: once for private care and once for the public system via their tax dollars.

Why would they accept to pay for a system they don't need? For two reasons. One, their taxes are basically an insurance. If they lose their wealth, their family will still have access to health care. Tw0, that is how society works. We pay for roads we don't use, schools we don't attend, the salaries of politicians we don't like. We do so because it would be inefficient and disorganized for every person to pay individually for what they need at any given moment.

A universal health care system is going to be complicated. It's going to be imperfect. Policymakers will make mistakes alongside successes. But it should not be polarizing. The numbers add up. We would save money.

The sooner we start, the more people will be able to: never think twice about whether they can afford to bring their child to the emergency room; receive treatment and purchase life-saving medication; avoid soul-crushing debt; and, most of all, survive.

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