Some Thoughts on Medicare for All

By November 14, 2018 Commentary

With the change in control of the House of Representatives we can expect to see attempts to actually pass the so-called “Medicare for All” plan.  This a really, really bad idea, being pushed with the same misleading information and omitted facts, just as the ACA was, and ignoring the laws of human economic behavior.  The most important omitted fact is the impact on provider incomes.  Let me take you back to the analysis of international health spending comparisons carried in JAMA in March of this year, and on which we blogged.   (JAMA Article)    Note figure 5 carefully.  It is a comparison of various aspects of a health system and ranks countries on those factors.  Look closely at the numbers of primary care doctors, specialists and nurses per unit of population.  The US is at or below the average for developed countries.  Look at the number of hospital and long-term beds.  We are below the average.  We don’t have a utilization problem.  Now look at pay for physicians and nurses.  We pay primary care doctors 1.6 times the average; we pay specialists 1.7 times the average; and nurses only get 1.2 times the average.  Our clinicians are the highest paid among all countries, by quite a margin.  And they have the highest ratio of their pay to the overall average pay for all jobs.  So how do you think Medicare for All keeps its enormous cost from being even more enormous?  That’s right, by proposing to very drastically slash clinician pay, by 25% to 40% over current reimbursement from the private health plans that would be eliminated, as everything would be reimbursed at Medicare rates.  How do you think doctors, many of whom have crushing student debt burdens, will react to that?  What kind of people are we going to get to be physicians in that pay environment and how motivated are current physicians going to be?  And the same applies to facility providers, like hospitals, many of whom do face financial pressure.  The changes proposed would sink many of those institutions.  But you don’t hear about that.

Everyone needs to look carefully at one of the few halfway objective analyses of the Medicare for All plan and its financial ramifications.    (M4A Analysis)   Even if you were able to successfully reduce provider reimbursement as suggested, it would add $32 trillion to the federal debt over 10 years, to government spending that is already unsustainable.  You could not cover this cost even if you doubled individual and corporate tax collections.  Under a more realistic scenario where you have to maintain current levels of reimbursement, the cost is even more staggering.   Now proponents of Medicare for All claim that it would actually reduce health spending overall, by reducing the private and state expenditure while boosting federal outlays, but even under their calculations the reduction is very small.  But again, this assumes the provider payment cuts would be implemented.  That will never happen, it can’t happen because it would eliminate a large portion of provider capacity and cause severe access issues.  You have to assume that there will little or no reduction in private payment rates to provider and paying for current Medicaid services at Medicare rates would actually increase spending.  On a blended basis, where services are paid for at a single rate that reflects the proportionate rates for Medicare, Medicaid and private payers, Medicare for All would increase health spending by well over $300 billion a year.  The Medicare 4 All proposal also makes absurd assumptions about savings on prescription drugs and administrative expenses.  If we know anything about government programs, it is that they increase everyone’s costs.

And anyone who doesn’t look seriously at the effects on access of national health insurance systems everywhere is delusional.  Long wait times and denied services would become standard.  Like everything in health care, dealing with health costs is complicated, but this particular proposal would be a disaster in every respect.  There may be a role for government in health care, but it should be to try to restore some semblance of free-market structure and transactions to the industry.  That would result in lower costs, better quality and better access.

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