Kitchell: The Cost Of Health Care And Medicare For All

The Congressional Budget Office (CBO), a nonpartisan federal agency, in early May gave a report to Congress regarding some of the consequences of a potential "Medicare for All" proposal.

Currently, 160 million Americans are covered by employer-based private insurance, 44 million by Medicare, and 69 million are covered by Medicaid and Children's Health Insurance Program (CHIP). The number of Americans covered by the Obamacare Medicaid expansion is currently 12 million by the 31 states that agreed to the expansion.

Of the Americans who are not covered by employer-based insurance or Medicare/Medicaid, called individual coverage, there are nine million Americans who obtained coverage through the Obamacare exchange, and another 5 million individuals are insured through non-Obamacare plans, called "grandmothered" plans, association health plans, or short-term plans.

In the past 18 months, the number of Americans who are uninsured rose by about 2 million to 30 million, largely a consequence of the loss of the Obamacare mandate to purchase health insurance. Of those 30 million uninsured, 41 percent are actually eligible for either expanded Medicaid (15 percent) or subsidies to buy insurance through the Obamacare exchange (26 percent).

Another six million of the uninsured live in states where they could be on Medicaid if the states did allow Medicaid expansion, which is predominantly funded by federal funds. So only about 4 percent of Americans would be uninsured if everyone took the opportunity to be covered with Obamacare's help.

Many Democrats, including some of the 23 or so who are currently running for president, have been proposing a "Medicare for All" plan to achieve full coverage of all Americans. There are at least 10 different proposals or bills, and the four Medicare for All (MFA) plans that propose a "single-payer" system are the most disruptive -- far more disruptive than Obamacare was.

The CBO did not give a specific figure for the cost to switch to a single-payer system, as there are many differences and unanswered questions about how to get to a single payer system from where we are right now. The CBO did warn Congress that switching to a single payer MFA would be very complicated and disruptive.

The RAND corporation recently did a study of the cost of a Medicare for All plan, modeling this MFA with a single-payer system and elimination of all private insurance. The study showed this would lower the administrative costs of U.S. health care by $158 billion, and drug costs could go down by $39 billion in one year.

The problem is those numbers are small compared to the total spent on health care by the government, businesses and individuals.

The RAND article reported the total spending on health care per year in the U.S. in 2019 will be around $3.82 trillion, and it determined a change to a single-payer MFA plan would actually cause the total spending to go up to $3.89 trillion. The main reason the total cost would go up is because home health care, it estimated, would go up by $244 billion to $520 billion.

The Rand researchers estimated there would be little impact on hospital spending, currently at $1.14 trillion, and physician spending at $673 billion, but it is therefore unlikely MFA would lower total costs.

One of the advantages MFA proponents stress is no longer will Americans or their employers have the responsibility to pay for health care -- the government (through taxes) would. The study estimated the current cost for businesses, households and other non-government spending for health care would go way down -- with employers no longer responsible for paying the majority (usually 70 percent to 80 percent) of the costs of their employees' health care.

The deductibles and out-of-pocket costs for employees could also go away. The average cost for an employee's health insurance nationally is more than $18,000 per year for a family of four, and employees rarely pay more than 25 percent of that.

The total spent by non-government sources, according to the Rand corporation, in 2019 will be $2.095 trillion, and switching to an MFA single-payer system would cost much less, only $393 billion a year in the next year it estimated. The government's (federal and state) share of the new $3.89 trillion total spending with the MFA single payer would rise from $1.728 trillion to $3.498 trillion, a huge increase.

So switching from business to government funding would save a lot: $2,095 billion minus $393 billion, or $1.70 trillion for businesses and households. That sounds like a good deal for U.S. businesses and employees. Except that someone would have to pay the taxes for the new MFA, and that tax increase to pay the increased governmental cost of going from $1.728 trillion now to $3.498 trillion with the MFA would be a source of huge controversy over who and how much they should pay in tax increases.

The RAND article also speculated with increased demand and access, the total cost of health care under a new MFA-- without constraints -- would rise even higher, to $4.197 trillion.

Many hospitals and physicians have been concerned about MFA because Medicare is paying far less than the cost to deliver services, and few physicians in Iowa are happy with policies of Medicare that pay most other states' physicians far more than in Iowa, called geographic adjustments.

Without higher payments from private insurers, many Iowa physicians and hospitals would have major disruptions if the current underpayment by Medicare continues.

Universal coverage for all Americans is a goal of Obamacare, and improving Obamacare would be far easier than switching to a very complex and disruptive single-payer system.

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