Life with Medicare for all | Jeffrey Scharf, Everybody’s Business

Santa Cruz Sentinel (CA)

Jul. 11--What would "Medicare for all" mean?

In the strictest version, all private insurance would be abolished. Even those who like their current employer-provided or self-purchased insurance would be forced into the Medicare system. According to OECD.org, this would make the U.S. an outlier having no private insurance.

It is also inconsistent with the current Medicare system. The Kaiser Family Foundation estimates that 81 percent of the 60 million Americans enrolled in Medicare have private primary or supplemental insurance. To the extent that "greedy" insurers are profiteering under current arrangements, these policies also need to be outlawed.

On the financial side, the usual discussion surrounding "Medicare for All" focuses on the tax increases needed to fund the new government-provided benefits. In part, this is a red herring. Because the government pays less for health care than private insurers, any new taxes would be less than today's insurance premiums. Somebody would save money. But who?

The first point to note is that Medicare is not free. Medicare Part A is only free to those who paid Medicare payroll taxes or had a spouse who did for at least 40 quarters. This leaves out those with limited work experience as well as any government employees outside the Medicare system. Medicare Part A premiums range from $240 to $437 per month depending on work history. Workers just starting out might pay $5,000 per year for every family member.

Meanwhile, the standard premium for Medicare Part B is $135.50 per month per person. So a family of four might pay $6,500 per year plus the cost of any supplemental insurance vs. nothing if they currently get their insurance through an employer.

Where would individuals and families get the money to pay these premiums?

Supposedly, the money that employers save on health insurance premiums would be passed along to employees in the form of higher wages.

But wait. Aren't "Medicare for All" proponents the same politicians who rail against the 2017 tax cut as a windfall hoarded by greedy corporations? Wouldn't a huge decrease in health insurance expenses amount to the same thing? Are the state and local governments that are drowning in unfunded pensions really going to pass health insurance savings on to employees?

These issues are big. But not as big as the elephant in the room described in the recent Democratic presidential debate.

As former Rep. John Delaney pointed out, Medicare pays less than cost for many services. Delaney claims that every hospital in the country would be bankrupt under "Medicare for All" at current reimbursement rates.

If Medicare payments to providers go up, taxes and/or Medicare premiums will have to go up proportionately. This will shrink the savings from switching from private payment to government payment.

As Delaney says, "'Medicare for All' makes a great campaign slogan." Whether it makes great public policy is an entirely different question.

Jeffrey Scharf is the Founder of Act Two Investors LLC, a registered investment adviser. Contact him at [email protected]. To view previous Everybody's Business columns, visit santacruzsentinel.com/topic/Jeffrey Scharf.

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