Sen. Sanders (Ind. VT) has proposed “Medicare For All”.
Now, that is NOT exactly what he is proposing. What is Sen. Sanders proposing? In fact, what is “Medicare” or for that matter, what is “Medicaid” and how do they relate to Sen. Sanders proposal?
Now, let’s examine what all this means.
- What is Sen. Sanders proposing?
What Sen. Sanders is proposing is NOT strictly speaking “Medicare for All,” as it is not Medicare as that program exists now. (See Section 2, below, for an explanation of Medicare as the program exist now.)
Sanders's plan would offer first dollar coverage for physician services, hospital care and optical and dental services. It would shutter the existing Medicare and Medicaid programs after a transition period and transfer their patients into the new program. It would also prohibit employers from offering plans of their own. It would, however, leave the present Veterans Administration ("VA") facilities in place as well as those of the Bureau of Indian Affairs ("BIA").
It is interesting to note that Canadian Medicare does not offer optical or dental benefits. It is also worth noting that many socialized medicine systems require, at least nominal, co-pays to control utilization.
Sanders says generally that the expected $138 trillion cost per year would be paid for by a 2.2 percent tax on households and increased taxes on more affluent Americans and increased estate taxes. Sanders' proposed "Medicare for all" differs significantly from the current Medicare system.
- What is Medicare (and why is it doing all these terrible things to healthcare?)
Medicare Part A and Part B is a circa 1966 BlueCross/Blue Shield 80-20 Plan. With Part A (Hospital Services) and Part B (Physician Services), Medicare pays 80% of the bill, with the patient (you) being responsible for 20%.
To illustrate, if your bill is $100,000.00, Medicare pays $80,000.00 but you are responsible for paying $20,000.00. This is how indemnity insurance works. This is also one reason why managed care, which generally uses discounted fee-for-service to lower provider fees in return for patient volume, largely came to supplant indemnity insurance in the 1990s.
Now, in 1965, when Medicare (and Medicaid) passed, experience rated insurance was becoming a norm, where actuarially similar people had common rates and, therefore, older (and probably sicker) people were at a disadvantage and younger healthier people got a better deal. (The alternative system, pervasive before the early 1960s, was community rating, which PPACA has made a default national norm in the individual market for health insurance today).
In 1965, Medicare meant that people over 65 could, at least, get insurance like other people had (most people in 1965 had indemnity insurance, if they had it at all, and HMOs were still known as “Pre-paid Group Practices” and existed mostly on the West Coast [such as the “Pre-paid Group Practice of Puget Sound,” the first of these entities]).
Unless the patient (you) can afford a good Medi-gap Plan or have Retiree coverage you can use as a secondary payer to help cover the 20% or you are poor enough to be dual eligible for Medicaid, you probably can’t afford the 20%. For less affluent seniors, the Medicare premium takes up a larger and larger slice of monthly Social Security payments. This is not like, for example, Canadian Medicare, which is (apparently) first dollar coverage (it comes out of taxes, however).
Now, there is a Medicare Managed Care Plan (Part C or Medicare Advantage). It is a public/private partnership where private carriers run Medicare managed care plans. However, these plans are generally more expensive as to the premium, although they cover more. (The logic is analogous to a Silver plan versus a Bronze Plan in the Exchanges, higher premium in return for a lower deductible and broader coverage.) The other issue with these plans, as to seniors certainly, is that not everyone is healthy enough to be a participant in such a plan, which are selective based on health staus (sometimes derided as "cherry picking" healthier seniors).
Medicare does have a prescription drug benefit (Part D) and has since 2003. It is a complex plan (the infamous “Doughnut Hole”) that gives less benefit than most commercial healthcare plans. For lower income seniors who are not dual eligible with Medicaid, participating with other public programs may be advantageous for many people, such as EPIC in NYS. You might even be able to get lower prices for prescription drugs through a discount retailer like Wal-mart.
Given the above, what are some other approaches to universal coverage, that might be better than either Sen. Sanders proposal, existing Medicare or PPACA?
- Would "Medicaid for all!" Work better?
One better approach might be Medicaid for all.
Medicaid is (and always has been, since 1965) a first dollar coverage program. As with what Sen. Sanders is proposing, there are no co-pays and no deductibles. Medicaid expansion under PPACA has made being on Medicaid more acceptable and reduced any stigma.
Medicaid has always dealt with people of all ages, unlike Medicare which has always covered people 65 or older and the totally disabled, like end-stage renal patients. .
Medicaid, like the universal Canadian Medicare program, is a state-federal program (there, federal-provincial). Many single-payer systems are NOT national programs but are administered on a more local level. Canadian Medicare is a federal-provincial program. The British National Health Care System (“NHS”) is comprised of an NHS for Scotland, an NHS for England and Wales and an NHS for Northern Ireland. The Scandinavian systems are generally administered on a local council (or, at least, regional) level.
Medicare has separate fee schedules for different catchment areas and is regionally administered by separate regional contractors called “Fiscal Intermediaries” but Medicare does not have the level of local (state) input that Medicaid does.
The real problem with Medicaid is that many doctors and allied health professionals (unlike institutional providers, like hospitals and independent diagnostic and treatment facilities [“IDTFs,” like imaging sites]) do not participate (the buzzword is “par”) with Medicaid because of the very low reimbursement. The fact that physicians and allied health professionals in private practice do not tend to par is why Medicaid clients are often relegated to seeking care at the Emergency Department (“ED”) of a community hospital, a somewhat expensive proposition for Medicaid programs.
This point bears repeating: the main disadvantage of Medicaid is that physicians often won’t participate with it (“par”).
Hospitals often do, especially private, not-for-profit ones that are legally required in most states to do a certain amount of charitable work. Many excellent physicians, especially specialists, par with Medicaid because hospitals with whom they have admitting privileges do.
Other physicians, especially primary care physicians (“PCPs”) don’t par with Medicaid because the reimbursement is less than their costs in providing the care. (Primary Care is a volume business, generally requiring 6-10 patient encounters at a Level 3 RBRVS or higher to break even.)
Even with Medicaid Expansion, Medicaid remains largely associated with the Emergency Department of a Community Hospital.
- Towards a Bismarck System for the Gig Economy
Generally, the most highly regarded health care systems in the world are Bismarck Systems, such as those in France, the FRG and Japan. Those systems produce good outcomes for vastly less than the system (or, more accurately, "systems" in the US).
These systems are systems of mandated private insurance (in that way, similar to the Exchanges under the Patient Protection and Affordable Care Act ["PPACA" or, colloquially, "ObamaCare"]). However, in France, the FRG and Japan, these systems are employment-based for the most part.
Although employment-based insurance became common in the US during (primarily to avoid war-time wage and price controls) and after (largely due to union activism) World War II, it never became universal since many Americans were either self-employed or insured by small businesses that could not afford to provide such coverage.
Things like the 1973 HMO Act were an attempt to promote affordable coverage in this market.
This trend towards self-employment or employment in small businesses has increased since those days, notably with the rise of the "Gig Economy." Given this, PPACA's allowing insurance coverage to be available outside the scope of W-2 Employment, either through Medicaid Expansion or the Exchanges, was a positive trend.
However, the Exchanges also reduce the buying power the individual has in the health care market as the individual acts alone and not as part of a group. A business, even a small one, could often get a better deal on an "off the shelf" group plan and larger businesses could often set up self-insured plans of their own under the Employee Retirement Income Security Act ("ERISA").
The current Graham-Cassidy PPACA Repeal Bill seeks to take the money allocated to PPACA (both Medicaid Expansion and the Exchanges) and give it as block grants to the states to use to develop competing models of health systems delivery and finance. Graham-Cassidy increases the money that people can put away in Health Savings Accounts ("HSAs"), which are important given PPACA's bias towards high-deductible insurance (PPACA's seeming hostility towards HSAs was an inexcusable design flaw) and counteracts a flaw in Medicaid that tended to overfund profligate Medicaid spending in states like NYS and CA.
While making the system less a top-down federal program, Graham-Cassidy tends to make it a top-down state program.
In my opinion, the better approach would be to privatize PPACA funding into competing not-for profit Multi-employer Welfare Arrangements (“MEWAs”) under ERISA that would: 1) manage HSAs (mandated HSAs are the backbone of the excellent system in Singapore) for their participants and beneficiaries’ primary care needs; 2) design a plan of managed care insurance that would cover those illnesses relevant to their participants and beneficiaries needs; and 3) offer group high-deductible insurance for “Black Swan” Medical events.
As to group coverage under the Health Insurance Portability and Accountability Act of 1996, pre-existing conditions are not an absolute bar to coverage (substituting a waiting period) and as a system of multiple coverage would tend to overcome the life-time limit issue. As a self-insured ERISA plan, participants and beneficiaries could design their own plan to meet their needs and preempt state laws that might require “bells and whistles” that were outside the needs of the participants and beneficiaries, thus reducing costs.
By allocating people who are Medicaid clients to these Plans, they could wean this population off using the ED and help them find medical homes. If Medicaid reimbursement remained low, it would come as a package with patients for whom the reimbursement would be higher. Part of this money could also be used to fund this population’s HSAs (which, again, are the basis for the excellent health care system in Singapore).
By having competing not-for-profit plans, people could join better or more appropriate plans during open enrollment periods. By removing this coverage from the ambit of employment, there would be less of a fiduciary tension between the needs of the plan sponsor as an employer and the needs of the participants and beneficiaries.
This approach would also mean that the big buyers would be groups of patients, rather than employers or governments for whom providing health care is not a core task. Along that line, this would give patients greater market power in a market where both providers and payers are consolidating.