The 2020 presidential race has ignited a new focus on healthcare reform. On the left, 10 proposals have been put forth to expand Medicare or create a “Medicare for All” universal health insurance program. On the right, there are renewed calls for repeal of the Affordable Care Act without articulation of what would replace this plan and create options for the 26 million Americans currently uninsured. Furthermore, no remedy has been established to address rising premiums and those individuals with high deductibles, coinsurance, and copays, all of which render their insurance unusable because of the high out-of-pocket costs. In a recent speech, Seema Verma, administrator of Medicare and Medicaid, criticized Medicare for All plans and called a single-payer system the biggest threat to the future of the American healthcare system.
The US currently has the most extensive tax-financed healthcare system of any economically developed country without the benefits of universal coverage of its citizens. Everyone understands the costs of direct government tax-supported insurance programs like Medicare ($480 billion), Medicaid ($450 billion), and Tricare, the healthcare program for uniformed service members, but as Steffie Woolhandler, a cofounder of Physicians for a National Health Program, has noted, every municipal, state, and federal worker has tax-supported health insurance with a premium paid in administrative costs to private insurance companies to act as middle managers of the health benefit. These costs can be as high as 24 percent of total costs as opposed to the 2 to 4 percent administrative costs of Medicare. In addition, the US taxpayer supports the VA health system ($200 billion) and the Military Health System ($50 billion).
Employer-based insurance has been a major source of financing healthcare since the 1930s. It evolved at a time when healthcare costs were low and was institutionalized during WWII when wages were frozen and healthcare benefits were used to attract workers. Following WWII, labor unions fought for health insurance benefits as part of labor contracts leading to expansion of the private, for-profit health insurance market that used “experience ratings” to set premiums. Today, with the enormous costs of healthcare, the employer-based insurance system creates a competitive disadvantage for companies operating in global markets and financial risk for the individual.
The simple idea behind Medicare for All is the transfer of all the money we now spend for private insurance into a tax-based system with standard health benefits for all US citizens. Since we currently have a well-established system for collecting taxes, no new system for collecting premiums would need to be created, and administrative costs could theoretically be reduced. In an efficiently run system, a large tax increase (in excess of what we pay currently for insurance premiums) may not be necessary, and insuring the entire population would allow costs to be based upon community rating, since all (healthy and unhealthy) would pay into the system. However, there would be a requirement for change by all stakeholders.
The insurance industry would be radically changed, if not eliminated, under some Medicare for All proposals. The insurance industry employs tens of thousands of individuals and is part of stock market portfolios that fund retirement plans. Destabilization of the private healthcare insurance industry could have significant second- and third-order effects on other segments of the US economy. Some proposals would preserve a private insurance market under stricter regulation or provide co-insurance, creating a tiered system of care.
Patient/customers would also have to change. Seventy-five percent of Americans with health insurance receive coverage through employer-based plans. Although there has been a trend to shift more costs to the employees, and despite statistics that show the average time an employee stays with the same plan is two and a half years (because employers offer different products based upon negotiated rates and business analysis), most are satisfied with their employer-based insurance.
Healthcare providers will also need to change, as the collective buying power of a single payer will blunt the rise of reimbursements to providers, although they may benefit from a reduction in the varied requirements for quality measures and billing documentation now seen as problematic as a result of the myriad differing insurance company rules plaguing the market. The pharmaceutical industry will experience increased pressure from a single payer to moderate prices, and hospitals will need to adjust to reduced reimbursement rates.
Government will need to change as well. A universal health system cannot be subjected to the constant changing influences of party politics. For a universal health insurance system to work, an independent commission would need to be established with business rules that allow for efficient vetting of new therapies based upon scientific evidence of effectiveness. Such a system could address some social determinants of health and health outcome disparities.
So the question still remains: Is Medicare for All feasible? The current political and economic environment makes the likelihood of passage of such reforms slim, in large part because of stakeholder reaction to needed changes. However, it seems improbable that we can sustain the current illogical system with its high costs and poor outcomes. Furthermore, the current system does not comport well with American values and seems immoral that all Americans in need of care do not have access to appropriate care when required because of the inability to pay out-of-pocket costs. The private for-profit insurance system has no incentive to insure those individuals with chronic disease or preexisting conditions unless heavily regulated.
Perhaps the best course of action at this time is for politicians to define the process that will get us to where we need to be—universal healthcare—a process which can evaluate the negative impact of the shift to universal healthcare and develop plans to mitigate the consequences for certain stakeholders. The US cannot continue to be a world leader without a healthy society. We would all do well to reflect on the words of the ancient Greek physician Herophilus (325-255 BC), who aptly defined the importance of meeting the challenge of creating a healthy society when he wrote: “When health is absent, wisdom cannot reveal itself, art cannot manifest, strength cannot fight, wealth becomes useless, and intelligence cannot be applied.”
Jonathan Woodson, director of Boston University’s Institute for Health System Innovation & Policy, is a Larz Anderson Professor in Management and Professor of the Practice at the Questrom School of Business, and holds joint appointments as a School of Medicine professor of surgery and a School of Public Health professor of health law, policy, and management.