Starting With Curious

In part 1, we explored the current US healthcare “system” in all its Byzantine complexity and unsustainability.  “Medicare For All” has become the standard by which nearly all potential 2020 presidential candidates (at least the Democrats) are being judged.  But what exactly does it mean?

Recall that Medicare is the current federal insurance program primarily for the elderly.  All Americans over 65 are eligible, and costs are paid primarily from Medicare payroll taxes and premiums paid by enrollees.  Payments for hospital services, doctor fees, and prescription drugs are made according to a set fee schedule (with adjustments for local factors), with some cost sharing to enrollees.  It is, essentially, a single-payer system for older Americans.  However, private insurance has a role.  First of all, enrollees can choose either traditional Medicare, where payments are made directly by the government, or Medicare Advantage, in which private insurance companies are contracted by the government to provide the benefit.  (In this arrangement, the private insurer can offer additional benefits, typically by negotiating lower payments to providers in exchange for narrowing the provider choice for enrollees.)  Also, traditional Medicare beneficiaries can purchase supplemental private insurance known as Medigap to pay for services not covered by Medicaid, or to offset some of the cost sharing.

So, what is Medicare For All (MFA)?  There are at least five different basic variations on this theme, and people supporting any of these have claimed to be in favor of MFA.  Here is my (admittedly simplified) synopsis, along with my alternate name to help distinguish them:

1. Medicare for All. This is the bill officially introduced by Bernie Sanders in the Senate and Pramila Jayapal in the House under the name “Medicare for All,” and truly represents, well, Medicare for all.  Literally.  It would in large part extend the current Medicare program to all US residents except veterans and Native Americans (see below).  It would be financed and administered at the federal level, paid completely by taxes.  It would not only replace Medicaid (the federal-state program for the poor and disabled), it would replace all employer-provided and ACA exchange private insurance.  While the government would be the sole payer, providers would be independent rather than government owned.  This makes it most similar to the Canadian system, as opposed to the British National Health Service where hospitals and physicians are government-run.  (These bills would, however, retain the Veterans Affairs and Indian Health Services, which are fully nationalized as it is.)  It actually goes quite a bit further than the current US Medicare system in that there would be no premiums, no cost sharing by individuals, and no role for private insurance or managed care organizations.
2. Medicare for Many, Opt-Out version (officially, Medicare for America). In many respects similar to number one, but employers could continue to offer private insurance, and people receiving this could opt out of the Medicare system.  The version that has been introduced also retains the Medicare Advantage options, thus preserving a role for private insurance companies.
3. Medicare for Many, Opt-In version (there are several similar competing bills, such as Choose Medicare). In these flavors of MFA, Medicare would be a federal public plan available to anyone on the healthcare marketplace (“the exchange”).  Anyone could purchase this instead of a private plan, with the same subsidies though the cost to purchase would presumably be lower than for commercial insurance and therefore this would attract many people, including a large number who currently receive insurance from their employer.
4. Medicare for More (known officially as Medicare at 50). Keeps the system more or less as is, but lowers the eligibility age to 50.
5. Medicaid for More. This is similar to #3 above, but uses the federal-state Medicaid program to provide a public option rather than the purely federal Medicare.

Got all that?  Good.  In my third and final installment, I’ll share some thoughts on where we might go with all this.

My son Evan, when he worked on political campaigns, liked to say “yard signs don’t vote.”  You need to actually convince voters to support your candidate and get them to cast a ballot.  In a similar, though less catchy, way, one might say “slogans don’t create policy.”  Access and affordability of health care remains one of the top issues on the minds of Americans, and it is likely to have a marquee role in the 2020 elections.  The phrase “Medicare For All” has attracted a lot of attention from candidates and media, but what exactly does it mean, and how would it play out as policy?

To explore this question, I want to start with an overview of our current “system.”  I put that word in quotes because in reality we don’t have a health care system, we have a health care hot dish, a patchwork of various private and public methods of payment and delivery.  Let’s start with payment.  The annual spend on health care in the US is about $3,500,000,000,000 ($3.5 trillion – but it looks more impressive with all those zeroes, doesn’t it.)  Although the largest individual slice of that is from private insurance, cumulatively, public spending is almost half.  In fact, surprisingly, as a percent of GDP, government spending on health care in the US is almost the same as in other industrialized countries; the difference is we also spend far, far more from private sources.  Here is the breakdown (numbers may not add to 100% due to rounding):

1. Private insurance (35% of total spending). As I said, this is the largest single source.  Most of this is provided by employers, with the cost of the premiums split between the employer and the employee.  It also includes private insurance obtained by individuals on the so-called Affordable Care Act-created exchanges or marketplaces.  Of the 167 million Americans covered by private insurance, roughly half are in for-profit plans (e.g., United HealthCare, Aetna) and half in not-for-profit plans (Kaiser, many Blue Cross/Blue Shield).
2. Government insurance (41%). While the total here is higher than for private, it actually includes multiple different programs:
3. Medicare (20%). This is a government insurance plan for elderly and certain disabled individuals; essentially all people 65 and older are eligible for Medicare, which covers some 62 million people. It is akin to the Canadian single-payer system (which is also called Medicare): government pays for the care, but is not the provider.  Medicare is paid for and administered entirely by the federal government, which pays for medical services either directly to providers, or indirectly through various private insurance companies which act as a sort of middleman (via “Medicare Advantage” plans).  The government share of the funding comes from a dedicated Medicare payroll tax, and individuals also pay a monthly premium based on their income.  Payment rates to providers are established nationally.  Importantly, while the figures are different for hospitals and physicians, overall the total reimbursement from Medicare tends to be less than the actual cost of providing the care, by 8-10%.
4. Medicaid (17%). Like Medicare, this is a government insurance plan, but with some key differences. Eligibility is determined by income, rather than age; this is a plan primarily to cover the poor and some others with disabilities, totaling approximately 68 million people.  More importantly, this is a joint federal-state program.  Funding comes from a combination of federal and state sources, and the program is administered by the states, so while there are common standards set by the federal government, states have a good deal of flexibility to set eligibility criteria, benefits, and reimbursement rates to providers.  On average, the gap between Medicaid payments and the actual cost of care is larger than for Medicare, about 12-15% less, though in some states like Minnesota it is as much as 30% less than the cost. (The tradeoff is that Minnesota covers more people; we have very few uninsured.)  As with Medicare, payments may be made directly to providers, or indirectly via insurance companies who contract with the state to provide Medicaid managed care.
5. Veterans and military (4%). The Department of Veterans Affairs and Department of Defense run systems more like the British National Health Service where government is not only the payer but the provider for some 15 million people.
6. Individuals (10%). This includes out-of-pocket cost sharing (copayments, deductibles, coinsurance) for those people with one or more of the forms of private or public insurance above, as well as the cost of care for the 27 million people who remain uninsured.
7. Other (14%). This includes a host of things including public health programs, Indian Health Service, school health, worker’s compensation, liability insurance, etc.

A few key observations (and I will want to get back to these in part 2 of this blog):

1. The system is very complicated, even in this ridiculously oversimplified rendition. (I don’t even get into the issue of people who qualify for more than one, such as the elderly poor who may be on both Medicare and Medicaid, or kids with disabilities who may have both Medicaid and private insurance.)  And while most other countries have managed to figure out how to provide universal coverage at a lower cost than the US, their systems are also relatively complicated.  None of them is easily described by a simple slogan.
2. It is incorrect to say we do not have a government health system in the US. As you can see, government spending is as high as private.  Moreover, when you account for tax deductions for employer-provided insurance and health savings accounts, subsidies for exchange-based plans, etc., the government’s indirect spending (tax expenditures) is another $280 billion on top of the direct spending of $1.1 trillion.
3. On the other hand, while health spending in the US is predominantly by the government, providers are primarily private: roughly 54% of hospitals are private not-for-profit, 24% private for-profit, and 22% public.
4. Government sources of insurance do not cover the cost of providing care; doctors and, to a greater extent, hospitals tend to lose money when treating patients under Medicare or Medicaid. This has worked thanks to cost shifting.  For decades, private insurance has paid higher reimbursement to make up for the difference.  This has been a sort of social compact, stabilizing the system.  As the shortfalls from government programs grow, and costs of private insurance outpace inflation, this social compact is unraveling.

I’ll let you digest that for a couple of days and then consider “Medicare For All.”  Spoiler alert – it’s not as simple as it sounds.

You’ve all no doubt heard by now of the Washington state senator who claimed nurses sit and play cards all day. At first I was outraged like everyone else.  But then I thought about it.  Now, I don’t know about the sitting part, but nurses do play cards every day.  Each day they come in and are dealt a new hand, never knowing what it’s going to contain, and they do their absolute best with whatever cards they get.  Moreover, you can never tell whether they got dealt a straight flush or a nine-high – they keep the same steady, compassionate, determined, get-it-done look regardless.  It may just be a metaphor, but nurses are the best darn card players I know.

On a more serious note, in my 30+ years in pediatric health care, I have had the opportunity to work with thousands of nurses, and my respect and appreciation for them and what they do grows every year.  For those of you who are nurses, you have my utmost gratitude.  I hope you have a happy Nurses Week.