The Angry Old Man just got an email message that said “How do we win transformational change like single-payer, Medicare-for-All? By ignoring the voices that say big change is ‘not realistic,’ pursuing bold ideas, and energizing the public around a grand vision.”
Hello? Do you really want to boldly pursue a grand vision that isn’t realistic? If somebody says it’s “not realistic,” you have to make it realistic.
To begin with, “Medicare for All” is not single-payer. Medicare covers 80 percent of most doctors’ visits and procedures, leaving the patient to pay the other 20 percent. Some of those procedures can be pretty expensive, and even 20 percent is prohibitive for some people. That’s why we have “Medigap” insurance—to cover the remaining 20 percent. Just plain “Medicare for All” would have to include insurers—who are other payers—to provide “Medigap” coverage.
Then there’s the question of how to pay for it. That’s not something you can just brush off. Total healthcare spending in the U.S. is about $4 trillion a year, give or take a few hundred billion. That’s the amount of the expenses in the entire federal budget. Those expenses already include about $1 trillion for healthcare, so we’re talking about adding about $3 trillion to the federal budget, raising the expenses to around $700 trillion. Revenues are budgeted at about $3.3 trillion a year, leaving a deficit of about $700 billion. If we’re not going to increase the deficit, we have to add another $3 trillion to the revenues—that is, we have to almost double the revenues. Who is going to pay that? How will the taxes or fees be assessed?
The next question is an easy one: what happens to the employer programs that already pay for insurance for employees and retirees? Actually, when a retiree becomes eligible for Medicare, the employer-provided insurance becomes Medigap insurance (or a Medicare Advantage plan). If and when we get Medicare for All, the same thing can be done for all employees.
Minor question: what happens to all the Medicare Advantage plans, which are wonderful for patients and insurers but costly for the government?
Now we come to the biggest question of all. As long as there are many payers, there’s a market in healthcare, the market sets a “reasonable and customary” price for every procedure, and Medicare can base its payments on that market price. But when there’s a single payer covering 80 percent or more of the cost, there’s no market price to base the payments on. Somebody in a government office has to set the price for every single procedure. If the price for a procedure is too high, it will be overused; if the price for a procedure is too low, it will be underused or not used at all. And if payments overall are too low—which is what we can expect from a budget-conscious government—people will decide not to go into the healthcare business, and we will have to have healthcare rationing. The question is: how can payments for medical procedures be set so that nothing goes wrong?
The basic idea of markets is that when there are many suppliers and many buyers, the market sets the price. In the case of monopoly, one supplier and many buyers, the supplier can set the price high and some buyers must do without. If, as in the “Medicare for All,” you have monopsony, one buyer and many suppliers, the buyer wants to keep the price low and some providers can’t stay in business at that price. If there are too few providers, you need rationing, and some people will have to do without.
If you’re sure “Medicare for All” is realistic, go for it. If not, tread carefully.