As the 2020 election looms closer, health care has choked out virtually every other issue to stand alone as the primary focus of several top-tier candidates in the Democratic primary race.
While Sen. Bernie Sanders (I-VT) and Sen. Elizabeth Warren (D-MA) have each put forward a “Medicare for All” plan, candidates like South Bend Mayor Pete Buttigieg and former Vice President Joe Biden have taken a softer position, proffering smaller ideas that would reportedly cost much less.
On Wednesday, I had the opportunity to speak with health care policy expert and American Enterprise Institute (AEI) Scholar Joe Antos about “Medicare for All.”
In part one of this two-part interview, Antos breaks down the complexity of the current Medicare system, and discusses the damage that a “Medicare for All” system could cause, such as rationing of care, the raising of taxes on the middle class, provider flight, an innovation drain, and more.
DW: “Medicare for All” is said by many people, especially on the Left, to be popular among Americans. Is this true, and if so, why do you think that is?
ANTOS: Well, if it is popular, it’s because people don’t actually understand what the consequences would be for them personally. Opinion polls conducted by the Kaiser Family Foundation and other organizations ask for respondents’ reactions to “Medicare for All” without explaining what that could mean in terms of access to care or higher taxes. The public at this point is responding to a phrase that sounds good but might not be. Would “Medicare for All” actually be something that people would welcome? I think the answer is no – based on what we already know about Medicare.
The traditional Medicare program is a not a great insurance program. Medicare’s structure is extremely complex, unlike any other health insurance available today. Its benefits are not up to the level most middle-class people receive through their employer plans. The program is hard to navigate, and most beneficiaries rely on supplemental coverage to fill in Medicare’s gaps.
To give you a few examples. Most private insurance requires a single annual deductible – perhaps $1,000 or $2,000 for a family plan. Medicare has multiple deductibles. If you are admitted to a hospital, you pay a deductible, which is $1,364 this year. If you are admitted again more than 60 days later, you pay another $1,364 deductible. You are also liable for coinsurance starting at $341 a day if you are in the hospital for more than 60 days. There’s another deductible of $185 for physician and other services under Part B, and 20% coinsurance after you’ve satisfied the deductible.
That’s a sharp contrast with typical private coverage. If you were used to paying $20 for a visit to the doctor under your private insurance before you turned 65, Medicare’s high cost and arcane rules would come as a shock. Your out-of-pocket costs under Medicare are both expensive and unpredictable. There are arbitrary limits on what Medicare will cover and how long that coverage lasts, and those limitations vary by the type of medical service. It’s a very confusing program.
This is one of the reasons why Medicare Advantage (MA) has grown rapidly, especially over the last decade. About 35% of Medicare beneficiaries are in MA plans, which are all structured similarly to the kind of coverage you had when you were working. MA generally offers better benefits than traditional Medicare, and it’s in one easy-to-understand package. Traditional Medicare, by contrast, requires seniors to work their way through a maze of rules that frankly baffles experts, not just the average person.
Warren and Sanders only want parts of Medicare in “Medicare for All.” They would dispense with the success of private plans in containing program costs, and extend Medicare price controls to the entire health sector. They would add benefits and eliminate premiums and cost-sharing, opening the door to a massive increase in the use of services. Even most contenders for the Democratic Party’s 2020 presidential nomination know that won’t work.
The Kaiser Family Foundation polls demonstrate another important point about the public’s views. If asked how they feel about a “public option” or an “optional federal plan,” responses are much more favorable than for “Medicare for All.” The public likes the idea that there might be an alternative that might be better, but they don’t want to be forced into it because it might not be better. That says to me that the average person is leery about taking government promises at face value.
Anyone who has employer coverage knows what to expect. You may not be totally thrilled by it, but you know what it is. To be told that you will lose that coverage and be enrolled in a new, uncertain government plan is a disruption that many people would not welcome. Despite the enthusiasm from some on the Left, that’s not a positive political message.
DW: Sen. Elizabeth Warren’s plan is said to cost an additional $20.5 trillion over the first decade, and it would require major legislation to be passed, such as immigration reform. Sanders’ plan would cost roughly $32 trillion, and he says middle class taxes would go up. Can you talk about that?
ANTOS: The Warren and Sanders plans are basically the same. Everyone would be enrolled in the government plan, and benefits would be expanded well beyond Medicare’s benefits to include dental, hearing, vision, and long-term care services. As a result, the bottom line cost would be about the same – about $32 trillion over the next decade. That’s the additional amount the federal government would have to pay to finance “Medicare for All” over the next decade.
Warren’s $20.5 trillion is lower only because it assumes some questionable sources of savings that total about $12 trillion. Her plan assumes that the federal government would receive the full amount state and local governments now pay for Medicaid and insurance for employees. Some spending would be reduced due to lower administrative costs. Health care providers would be paid substantially lower rates than they now receive from private insurers.
Warren’s plan would pay physicians and most other providers Medicare rates, which are about 40% below commercial rates. Recognizing that hospitals are a more potent political force, her plan offers hospitals 10% more than Medicare rates. That would have a devastating effect on many small and rural hospitals, many of which likely would be forced to close without additional subsidies. This proposal would directly challenge two of the most powerful lobbying groups in Washington. That probably isn’t going to work out too well.
The remaining $20.5 trillion would be financed by a raft of new taxes. Nearly $9 trillion would be collected from employers to capture the amount they contribute to their employee’s health plans. The proposal also increases taxes on wealth, large corporations, financial transactions, and assumes increased tax revenue as a result of higher wages paid to workers who no longer have employer coverage. It is clear that the middle class will foot much of the bill for Warren’s proposal.
DW: If somehow the “Medicare for All” plans are paid for, is there a fear that talented surgeons, doctors, and even prospective surgeons and doctors who are planning to enter into medical school, might choose a different career path because those jobs won’t pay as much anymore?
ANTOS: That’s a legitimate concern, and we see this happening already. There is high demand for highly-trained physicians in roles that do not involve the direct delivery of care to patients. The hours are better, and the pay is good. That shift would certainly increase.
Delivering health care is not an easy job. It’s very time-consuming. There’s administrative hassle, which would not decrease under “Medicare for All.” At the end of the day, you’ve got to keep your business going, and now they’re going to cut your rates. For many providers, that would not make sense.
Young people would be less likely to go to medical school under such circumstances. Just as important, the health sector would be less attractive to investors who finance research that can lead to the next innovation in health care. This is a concern raised about pharmaceutical research, but it spans all of heath care. New diagnostic methods and new treatment approaches can improve the efficiency and effectiveness of our health system. Those advances will be less forthcoming under “Medicare for All.”
DW: If there’s a type of doctor, say a therapist, that doesn’t accept insurance currently because they don’t make enough money from it, and they just accept check or cash payments, how would they be affected under a “Medicare for All” system? Would they be able to keep their practice going, or would they have to accept insurance?
ANTOS: That’s a difficult question to answer. Sanders is clearer about this than Warren. He flat out says that private health insurance would be banned by law. The only services that could be offered by private providers would be ones not covered by “Medicare for All.” That would restrict private health care to a narrow range of services, such as elective cosmetic surgery, which is generally not covered by insurance now. The market for such limited services is very small.
The bread and butter of health care would be delivered under the government plan, without a private sector alternative. It might be possible for some providers to establish concierge practices that accept only cash customers, but few people would be able to afford this. It seems likely that proponents of “Medicare for All” would try to outlaw such work-arounds, arguing that everyone should access health services on the same terms with no exceptions.
DW: What the proponents of “Medicare for All” systems continuously say is, “Yes, you may pay more in taxes, but the overall cost will go down.” What do you say to that?
ANTOS: Some people will gain financially, some will lose. Where you come out depends on many factors, including your income, the generosity of your previous coverage, and your health status. Warren says she will tax the rich without increasing taxes on the middle class. That doesn’t mean the middle class won’t pay more in taxes. They certainly will. There just isn’t enough money from taxes on high-income people and wealth to finance the kind of expansions they’re talking about.
For the middle class, it is a close call. If you are likely to use expensive medical services and your previous coverage required significant out-of-pocket payments, you are more likely to save money looking narrowly at health costs. However, even in that case, you could end up with higher total costs when taxes are taken into account. The amount you currently contribute to your employer premium would become taxable income, and the employer tax is actually a tax on part of your total compensation – so you pay that as well.
A major goal of both proposals is income redistribution through the health system. Low-income people who are not eligible for Medicaid would have their medical bills paid. High-income people would see their taxes increase. But everyone would face longer waiting lines to access medical services. We can look to Canada to see that.
We’re also going to lose access to services that simply won’t be there because we will not have put the investment in, and nobody on the private side will take the risk.
DW: I was talking to a friend of mine from Canada who said that her mother had a ligament injury in her knee, and she had to wait six months to get an MRI. Despite the injury being terribly painful, it wasn’t life threatening, so they pushed her down the waiting list. On the other side of that, I have friends from Italy, from Canada, from the U.K. who have told me that they love their medical systems.
ANTOS: People’s attitudes about their health system depend on their expectations and, for many, whether they had a good experience the last time they needed care. Americans have high expectations. The British may be less demanding, partly because Britain is a less wealthy country and people may be more willing to wait for services. Opinions in other countries have no bearing on how a government health system would be viewed here.
The example of a torn ligament is revealing. If you are in pain and are told to wait for treatment, you won’t be happy regardless of your nationality.
Sally Pipes, the president and CEO of the Pacific Research Institute in California, is Canadian. She has pointed out that a dog would have more rapid access to an MRI than a human Canadian. The reason is that veterinary care is not part of the Canadian health system, and the private market responds to consumer demand. Moreover, since veterinary care is not subsidized by the government and insurance is not involved, prices are lower – reflecting what pet owners are willing to pay. Fido does not wait in line even though his owner does.
In part two of this interview, which will be released on Sunday, Antos talks about a more “free market” approach to health care, understanding “universal” coverage, the way in which conservatives and Republican lawmakers should approach health care legislation, the ultimate damage that a “Medicare for All” system could do, and more.