Medicare for All

It’s fairly obvious that the ACA (Affordable Care Act, otherwise known as Obamacare) leaves a lot to be desired. While it has substantially reduced the number of uninsured Americans, it still leaves 28 million uninsured (about 8.5%), which includes 4.4 million (about 5.3%) children, without healthcare insurance, most of whom can’t afford the cost of insurance or medical services. Additionally, there are the problems in assessing which healthcare plan to sign up for, enrolling in a plan, and getting reimbursed for claims when you are insured. Furthermore, the system is unstable as Congressional Republicans are constantly trying to dismantle the ACA causing insurance companies to charge higher premiums or bail out of the market to avoid the risk that the program is killed altogether.

Simply choosing which insurance policy to buy is a nightmare as there are about 35 insurance companies that provide healthcare insurance in the U.S. Each of those companies has a multitude of insurance plans that run the gamut from simple disaster insurance to full family coverage for nearly everything. Deciding which company and which plan is best for you is like finding your way around a major city without a map and no clue to your present whereabouts. So, wouldn’t it be better if there was just a single payer with a single policy that covered all your medical expenses, like Medicare for all?

Recently, Medicare for all has gained substantial traction with the public (54% of the public now support it) and, due to the efforts of Senator Bernie Sanders and others, it is gaining traction among many Democratic politicians. But in spite of the public support for Medicare for all, there is still a great deal of opposition to it.

The vast majority of arguments against Medicare for all are based on projections that it will cost the federal government $32 trillion over the next 10 years and is therefore unaffordable. So the question is, is that really true? Let’s examine the facts.

It is not possible to break down the $32 trillion projection as the analysis for this projection is not available. However, we can look at actual healthcare expenditure data for the most recent years and get a pretty good handle on the economic effect of Medicare for all for 2018 (if it had been enacted) and go from there.

The U.S. GDP for 2017 was about $18.6 trillion and the reported healthcare component of the GDP was 17.2% or $3.3 trillion. According to CMS1, 37% of the $3.3 trillion spent on healthcare in 2017 ($1.22 trillion) was paid by the federal government (fed), 17% ($0.56 trillion) by state and local governments, 11% ($0.36 trillion) by individuals (out of pocket expenses) and 34% ($1.1 trillion) by private insurance companies. If the fed were to pick up the tab for 100% of all medical expenses in 2018, it would cost the fed an additional $2.08 trillion ($3.3 trillion less the $1.22 trillion it is already paying and assuming that 2018 costs would be close to 2017 costs.) So yes, if we factored in inflation and stretched our imaginations, the 10 year cost could come to $32 trillion; but that completely ignores the rest of the picture.

First, $0.56 trillion could be recovered from the state and local government savings as they would no longer be required to pay out for healthcare expenses. That brings the balance to $1.52 trillion. Second, $0.36 trillion could be recovered from individual savings from out of pocket expenses bringing the balance down to $1.16 trillion. Then an additional amount could be recovered from the savings of individual insurance policy premiums. This number is not available, but we can get a handle on it from the following.

According to America’s Health Insurance Plans, the trade group for commercial health insurance companies, 80 cents out of every dollar paid in insurance premiums goes to pay medical bills meaning that 20% of insurance company revenues goes to operating expenses and profit. On that basis, insurance company revenues (from premiums) must amount to at least $1.375 trillion. Recovering this amount from savings of unneeded insurance premiums would bring the balance down to negative $0.215 trillion (a $215 billion surplus) at the end of 2018 that could be returned to taxpayers.

Now the above analysis does not include cost benefits from increased bargaining power that Medicare would have over the healthcare and pharmaceutical industries which, given that Americans pay twice as much for healthcare as the next most expensive country, should amount to substantial savings. So instead of projecting healthcare costs inflating at the current rates, in all likelihood, Medicare for all would bring down the future costs of healthcare, and instead of a projected $32 trillion deficit over the next 10 years, there should be a savings of at least $2 trillion over the same period.

There are also some intangible benefits such as the time and effort of filing (and disputing) claims, elimination of litigation costs, peace of mind, a healthier nation2, etc. I’ll leave it as an exercise for the reader to consider all the possible fringe benefits.

Now, in all fairness, I have omitted one factor. Medicare for all is not a win-win-win proposition. There are losers. Consumers would win and the federal, state and local governments would break even, but the insurance companies and many of their employees would lose (some employees would be absorbed into the Medicare system). Neither the loss of the insurance companies per se, nor their executive salaries, stockholder profits or lawyer fees concern me very much, but the loss of jobs of the rank and file employees does concern me. How far the $215 billion savings would go to cover the loss of jobs is hard to tell3, but we should find jobs for them. Hopefully, those jobs would be more beneficial to society than simply processing paperwork for insurance claims.

1 Center for Medicare and Medicaid Services

2 As a case in point, in spite of paying more for healthcare, the U.S. has the worst health statistics of all developed nations. Among them is maternal mortality which is 26 maternal deaths per 100,000 births. (The next highest is the UK with 9.2 maternal deaths per 100,000 births. Finland has 3.8 maternal deaths per 100,000 births.) More than half of all maternal deaths in the U.S. were preventable. As a single payer, Medicare for all should be able to apply greater pressure on hospitals to ensure that doctors and staff improve monitoring mothers’ blood loss, blood pressure and other parameters during and after childbirth and ensure that they provide proper treatment in time to prevent serious health issues or death. Medicare for all would also be able to encourage and pay for preventative healthcare which has been proven to improve people’s health and reduce overall healthcare treatment costs.

3 As a guestimate, if we assumed the average employee earned $50,000 annually and there was an overhead cost of 100% for a total cost of $100,000 annually per employee, the $215 billion would provide 2.15 million jobs.