Medicare For All, Really

I'm intrigued by the proposal of "Medicare For All."  First, there's Donald Trump's op-ed about it – frankly, if Trump is against something, I'm definitely willing to consider being for it.  It's not a guarantee, but it's a strong recommendation.  But having read the details of Sanders' proposal, I'm not convinced this is the right way to go.

In short, the proposal expands Medicare to cover most categories of health expenses, eliminates all cost sharing outside of minimal prescription expenses, and prohibits the sale of health insurance that overlaps with what the new-Medicare covers.  States and employers remain free to provide additional coverage at their own expense, if desired, though it's not immediately obvious what coverage is left.

There are some noticeable issues, though – to begin with, eliminating all consumer costs associated with healthcare creates perverse incentives in several ways.  I worked at Microsoft in the era of "no premium, no deductible, no co-pay."  And usage was astronomical.  One of my doctors routinely did an $800+ procedure (coded as surgical) on every office visit, and when I protested about the cost, her response was, "Well, insurance pays for it, right?" While I support empowering doctors to recommend and pursue whatever the patients need, there needs to be some level of incentive to avoid milking the system.  One mechanism for that is consumer pushback.  If you pay something, you're incented to care about the price.

And because we can't actually go without any limits, if the government is the sole payer, those limits will flow to the government.  Republicans often raise the specter of "bureaucrats controlling what procedures you can get," and that might actually be an issue if the government is the only payer.

There's also the political pragmatics of the situation – insurance is a huge business, and mostly-outlawing an entire branch of the economy is problematic.  Sure, the federal government already pays two-thirds of the healthcare costs in the US and it's not a big step conceptually for it to pick up the other third, but the businesses in the middle would go up in smoke overnight.

Instead, I'd like to propose a slightly more moderate design.  Rather than Sanders' no-premium, no-deductible, no-copay model – much as I enjoyed having that insurance at Microsoft – I think I'd hew closer to how Medicare currently works.

I like Sanders' expanded list of coverage – medical, dental, vision, etc. should all be covered.  There should be no premiums; this should be funded out of a combination of payroll taxes and repealing the federal tax subsidy for employer-provided health insurance.  Preventative care should be included.

But instead of having no copay, let's retain Medicare's current 80% payment rate.  This enables the insurance industry to exist, and permits consumer choice about the level of coverage they need (or employer choice about the level of coverage to offer when attracting new employees).  Just as seniors currently choose between Medicare Supplement plans that cover the other 20% fully (at a higher premium) or hardly at all (with a very low premium) or forego supplemental coverage altogether, leave that to the market to decide.

The most critical pieces of a universal coverage system, in my mind, are two-fold:  First, a healthcare crisis should never render a family insolvent.  Therefore, unlike present-day Medicare, there should be an out-of-pocket maximum – say, $10,000/year/person and $20,000/year/family.  After this point, and only after this point, the federal government pays fully.  This has the follow-on effect of dramatically lowering private insurance premiums, because there is a known worst-case payout.  (This is currently achieved through "reinsurance" policies, where an insurance carrier takes out its own insurance against overall claims in a group exceeding a certain threshold.)  While $10k-20k is still a harsh blow, it's a finite number.

Second, financial difficulties should never make someone unable to access necessary care.  Therefore, Medicaid plans should operate with similar qualifications to those expanded under the ACA, but providing a sliding scale of secondary insurance to those who cannot afford to pay for the other 20% of their healthcare.

But how do we get there?  Sanders' plan calls for a quick phase-in, suddenly replacing one system with another over a four year period.  I'm not sure that will work.  I'd propose moving in stages:

• Expand existing seniors' Medicare – cover more things, add an out-of-pocket maximum.  This causes the Medicare Supplement market to adapt to the new style, getting insurers ready for how things will work for all Americans eventually.
• Introduce an out-of-pocket maximum to cover all Americans – no pre-OOP-Max coverage for non-seniors, but begin to rein in the possibility of medically-induced economic catastrophe.  This is effectively the above plan with a $10k/person deductible.
• Universal preventative care.
• Gradually reduce the deductible by $1k/year, giving the medical and insurance industry time to adapt to the changing payment landscape.

Now, obviously, this is still a huge cost to the government.  But it feels like a more manageable step, and it plays better to America's love of a capitalist market giving a range of choices to the population.

And if we want to move to single-payer in the future, great!  Let the government offer its supplement, at-cost, and compete with the other providers.  If the government truly can do it better, it will win in the market as it should.