A number of Democratic contenders for president have signed on to the slogan, Medicare-for-All. There is confusion as to what it means and how to pay for it. Is Medicare-for-All a viable option? No, not at this time.
In 1965 Medicare was passed by congress and signed into law. The original Medicare program included Part A (Hospital Insurance) and Part B (Medical Insurance). Today these two parts are called “Original Medicare.” Over the years, Congress has made changes to Medicare including adding a Part C-Medicare Advantage and Part D-Prescription Drug coverage. Generally, Medicare covered those 65 and older. Any payments required would either be billed directly to the person or deducted from Social Security if the person was taking it.
When the Affordable Care Act was passed, Medicare-for-All was a consideration at the time but abandoned as a workable solution in that political environment. Now Democrats are introducing bills in both the House and Senate which would expand government-run health insurance to all and do away with the current system of employer-provided coverage. Yet there is a disagreement among the Democrats as to what approach should be taken: Some want a single payer system that would end employer and most private coverage. Others are supporting stepping stones to single payer, such as a letting people younger than 65 buy into Medicare.
A poll in January by the Kaiser Family Foundation found that only 37% of people support Medicare-for-All due to the fact that it requires higher taxes or eliminates private insurance. However, the selling point for Medicare-for-All is that the higher taxes would eliminate private health-care costs.
Medicare doesn’t cover 100% of all costs. People would likely have to buy supplemental plans to cover other medical expenses. Middle class families who cannot afford supplemental plans could be hurt with higher out-of-pocket costs than with private insurance. Medicare also doesn’t allow Health Savings Account contributions. Moreover, as employer-provided coverage is paid with pre-tax dollars, it reduces taxable income. Therefore, with Medicare-for-All, although there would be a benefit of universal coverage, many would be paying higher income and payroll taxes, thus lowering current take home pay and increasing out of pocket healthcare costs.
With the healthcare burden off employers, there is no guarantee those funds would be reallocated to higher wages or to higher employment or investments.
In an attempt to increase coverage, Congress has passed various laws providing for generous deductions for employers to provide healthcare coverage, thinking that the smaller employer would benefit through the tax incentive to provide healthcare coverage to employees. Still, a number of people in the U.S. did not have healthcare. The Affordable Care Act (ACA) was an imperfect solution that would increase healthcare coverage of the population. A Kaiser Family Foundation poll in January found the ACA is supported by over 51% of those surveyed.
Unless Medicare is readjusted to be more closely aligned with private insurance, from coverage to Health Savings Accounts availability to maximum out of pocket, etc., Medicare-for-All is not a practical solution at this time. In the meantime, Congress must reconsider the cuts in payments to medical providers for cost control. Many doctors dropped Medicare patients due to lost costs. The Medicare patient has become unaffordable.
For the average American, costs and taxes will increase with no measurable benefits other than full coverage of the U.S. population. Yet there has been no discussion as to what Medicare will do if a person fails to pay their premiums. How will the government collect premiums if the person has no income or income tax refunds?
From the employer perspective, private healthcare benefits are necessary. Although employers in the past were shying away from carrying the burden of healthcare, employers learned that healthcare benefits can be a deciding factor over salary and other benefits as an attraction and retention tool. That is important in today’s environment in the war for talent. In the end analysis, Medicare-for-All is a good soundbite but not a viable solution today.
Sources: Wall Street Journal 2/11/19, Kaiser Family Foundation 1/23/19