Payment Reimbursement and Managed Care

‘Medicare for All’: Do the numbers

May 15, 2019 4:10 pm

At this point, there isn’t even a shared understanding of what “Medicare for All” means. Some versions would be more accurately described as “Medicare for More,” because they would allow various groups, such as people over 50, to buy into the Medicare program while stopping short of universal coverage. 

Other “Medicare for All” proposals envision a single-payer healthcare system in which one government-run plan provides healthcare coverage to all Americans. Some hint at “Medicare Advantage for all,” or some combination of traditional Medicare and Medicare Advantage. 

Under universal-coverage proposals, which are the focus of this column, individuals would spend much less on healthcare and the federal government would spend much more.

Ideology versus fact

You may believe that “Medicare for All” is the right direction for our country. You may believe that healthcare is a human right. You may believe that the profit motive should be taken out of healthcare and that creating a government-run program is the best way to do that.

Or you may believe that it’s essential to avoid a government takeover of the healthcare system. You may believe that the private sector can do a far better job with healthcare than the government can. You may believe that maintaining individual choice is paramount.

My purpose here is not to dissuade anyone from their beliefs. (I will leave that to social media … ) My purpose is to point out the importance of distinguishing beliefs based on ideological convictions from assessments based on facts. We will never come to a meeting of the minds if the prerequisite is changing one’s ideology. 

When we consider the facts, the debate becomes much more productive. And right now, facts — specifically, in-depth analyses such as cost projections — are in short supply.

The cost projection challenge

In a New York Times (NYT) analysis published in April, five economists and think tanks from across the political spectrum were asked to estimate total healthcare expenditures in 2019 under a “Medicare for All” type plan. The results were all across the board, to say the least. 

Estimates differed by as much as $730 billion per year, or about 3% of GDP. Even the difference between the most expensive and second-most expensive estimates was characterized as being larger than the budget of most federal agencies.

It’s not surprising that cost estimates vary so widely at this stage. They are based on very different assumptions about how much the proposed system would pay providers, reduce drug spending, increase utilization and cut administrative costs. 

By drilling down into issues like these, analysts will be able to develop more meaningful cost estimates. For example, in the NYT analysis, how did one estimator arrive at a projected 31% reduction in drug costs while another projected only 4%? Going forward, glossing over issues like these will render policy debates all but pointless. 

And not only the cost of the program is up for debate — so is how it would be paid for. More likely than not, funds flows would shift from insurance premiums to tax payments. To date, no proposals have included a detailed tax plan, in part because any tax plan must be predicated on solid cost projections for the services the tax would support.

Ratchet down the debate

Healthcare is a large part of our economy. It is also an industry that touches our soul. We cannot afford for the debate to be superficial. If we jump into the fray with only a vague notion of costs, we’ll be spinning our collective wheels. 

As healthcare leaders, we must do better. We have the expertise to examine the issues through a finance and economics lens as well as a human lens. As the tone of debate about this and related healthcare issues intensifies in the months ahead, leaders will have opportunities to elevate the discussion by redirecting conversations to the concrete rather than the ideological and by grounding debate in facts. 

Americans will continue to have different beliefs about the proper role of the federal government in healthcare. Whatever your beliefs may be, there is still no such thing as a free lunch; someone always has to pay. As it stands, paying for “Medicare for All” would require a blank check. Regardless of how worthy the cause may (or may not) be, blindly writing a blank check is never a good idea. Let’s do the numbers.


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