Yes, We’re Coming for Your Private Insurance Plan
By Natalie Shure
Since the 2016 Bernie Sanders campaign popularized the idea, “Medicare for All” has blossomed into a nationwide rallying cry, racking up congressional supporters and challenging the D.C. consensus around what is politically possible. But for many Democrats, support comes with fine print.
The popular slogan initially described a single-payer system, in which the government would act as the sole insurer. Sen. Sanders (I-Vt.) has proposed such a bill, co-sponsored by several other Democratic presidential contenders, including Sens. Cory Booker (N.J.), Kamala Harris (Calif.), Kirsten Gillibrand (N.Y.) and Elizabeth Warren (Mass.). On February 26, Rep. Pramila Jayapal (D-Wash.) introduced a single-payer bill in the House, co-sponsored by presidential candidate Rep. Tulsi Gabbard (D-Hawai’i) and multiple potential candidates.
But Booker now says he would keep private insurers around, and Warren has hedged, expressing openness to alternatives that would expand coverage through a combination of public and private insurers.
There are political reasons to do so. Not only does the deep-pocketed healthcare industry oppose single payer, but one recent poll found that respondents’ support for Medicare for All plunges to 37 percent when they’re told it could eliminate private coverage. The central question: Can private health insurers be part of the solution?
A clear-eyed analysis of our ailing health system yields a simple answer. The for-profit health insurance industry as we know it must be categorically eliminated.
Countries like Germany built their health systems atop a social insurance model in which the primary purpose is to pay for care. The U.S. system, however, grew out of models of for-profit property insurance — which means that health insurance was only ever intended as a safeguard against the risk of catastrophe.
This model assumes payouts for damage are rare, a fundamentally ill-fitting way to finance, say, the needs of chronically ill patients, extensive cancer treatments or comprehensive maternity care.
If a driver totaled their car four times a year, they would be practically uninsurable — they’d be locked out of coverage completely, or charged astronomical premiums to safeguard insurer profits. This tactic is essentially what health insurers have attempted to impose on sick people. For decades, they barred people with preexisting conditions from purchasing policies, or charged higher premiums to people likelier to use more care. Insurers still charge older patients higher premiums and often find technicalities to deny claims for payouts. A 2018 federal analysis concluded that privately managed Medicare Advantage plans engaged in widespread improper claims denial to boost profits.
Obamacare and other legislation banned the health insurance industry’s most egregious practices. But they can’t change the fact that the most basic purpose of a healthcare financing system — to pay for whatever care people need — is fundamentally at odds with the interests of for-profit insurance.
The reliance on private insurance creates structural obstacles to reform. For instance, a piecemeal web of competing insurance plans makes it difficult for any given insurer to command any leverage in negotiating prices with healthcare providers and drug companies. This obstacle is a large part of why U.S. healthcare costs are so high. By contrast, a single government payer would be able to exert far greater control over healthcare costs.
Furthermore, private insurers’ vested interest in minimizing “medical loss” — that is, payouts for care — leads to eye-popping administrative bloat on the part of both insurers and providers as each side struggles to pinpoint who pays what. All too often, navigating the snarl falls to individual patients, who are forced to call, sit on hold, beg, appeal, sue or go bankrupt to get care.
After decades of entrenchment, the U.S. insurance industry has only exacerbated problems in healthcare financing while adding no value whatsoever for patients. We deserve an efficient, equitable system. A unified public pool is the best way to deliver one.
If You Build a Public Option, They Will Come
By Max B. Sawicky
There is a new current of nay-saying on “Medicare for All” (M4A). At the risk of associating with some unsavory characters, I’m afraid I have to join the chorus.
The prevailing progressive view, presented by Natalie, is taking on the unfortunate nature of a litmus test. In this version of the policy, private health insurance would be legislated out of existence, replaced with a new regime of universal, single-payer insurance.
The idea that we must eliminate private companies to have real M4A flies in the face of experience, not to mention political sense. Actually existing universal systems in Europe still rely heavily on the participation of private insurance companies. In these mixed systems, the huge size of public programs allows governments to negotiate prices with healthcare providers and maintain downward pressure on costs.
More importantly, forcing everyone to change their health insurance risks a potent political backlash. Demanding that Democratic candidates commit to eliminating private insurance could sustain our current, repulsive ruling junta in the 2020 elections.
For anybody who hasn’t done a deep dive into the M4A legislation floating around Congress — in other words, most people — this new vision of Medicare is an unknown. It involves a wholesale revamp of really-existing Medicare, which is very far from adequate.
The desire, perhaps the governing assumption, is that almost all your medical expenses would be paid by somebody else, essentially financed with taxes collected from the population as a whole. Can this be accomplished?
On the “affordability” bugaboo, there should be no doubt. Universal single payer can be much cheaper than our current system. Those who say “we” can’t afford it are referring to themselves, upper-income taxpayers who can most definitely afford more taxes but would rather forgo the opportunity.
The 500-pound gorilla in the room is the politics of conversion. The switch to M4A would mean lower insurance premiums, perhaps no premiums at all, but higher taxes for some. Any big change such as this creates what social policy wonks call “winners” and “losers.”
Winners are those who, after the change, enjoy some preferred combination of better insurance benefits and lower total payments in taxes, premiums and out-of-pocket expenses. Losers are those who do not. Despite the shortcomings of private insurance, many who are well insured would not look favorably upon being compelled to enter a new, yet-to-be-defined insurance regime. They could legitimately fear being stuck in a plan with lesser benefits, and a tax code that would increase their own tax liability, perhaps even more than they would save in premiums.
Total costs could decrease, and research suggests the average benefit would be positive across all but the very top income brackets, but the likelihood remains that a great many individual oxen will be gored.
Many of those who come out behind might find themselves in opposition. We can think such persons as selfish as we like, but that won’t make them disappear or shut them up. The “vast majority” would be better off under M4A, but the vast minority can be quite a pain in the ass.
For this reason, I’d argue that excellent-Medicare-for-anybody-who-wants-it is a political no-brainer, and full-tilt M4A is political suicide. The former would be not unlike the “public option” suggested during the Obamacare debates, but with better coverage at lower cost and the express aim of making private insurance obsolete.
There are times to reject political constraints. On some issues, compromise is sabotage. M4A is not one of those cases, because it is possible to get to universal coverage by more politically feasible, alternative means. A buy-in available and affordable for all is one such alternative. It leaves nobody behind.
Without doubt, existing buy-in proposals have deficiencies. Sen. Sherrod Brown’s (D-Ohio) limited notion of expansion only to people over 50 is particularly disappointing. That doesn’t mean a robust plan is impossible.
Critics of the buy-in are justified in noting that existing Medicare leaves a lot to be desired, so a buy-in should itself be tied to an expansion of coverage under Medicare. It should eliminate the need for private “Medigap” plans that supplement Medicare benefits. Again, the point is to design a program that renders competing arrangements inferior, not to exclude them by fiat.
I would not suggest a candidate for office concoct a detailed plan — all that does is provide targets for nitpicking. A candidate need only say that anybody will have the choice to enroll in an expanded Medicare program. Increased costs will be defrayed by some combination of higher taxes and, unlike Obamacare, affordable individual premiums. People can still buy private insurance plans, as they do now.
In current debates, the political dangers of what could be called the absolutist position of M4A tend to be glossed over. There is a reluctance to acknowledge, much less explain, the failure of state-level M4A ballot initiatives in Colorado and California. Advocates also gloss over the presence of the conservative Blue Dogs and the moderate New Democrat Coalition, with 100-plus members, within the House Democratic majority. What sort of incremental moves they would support remains to be seen.
Presently many candidates for the presidential nomination give at least rhetorical support to M4A. In the very possible event that Sen. Bernie Sanders (I-Vt.), who defends the more ambitious version of M4A, does not get the nomination, the winning candidate will embark on the usual move to the center. At that point, those committed to maximum M4A will convey their disapproval, to no avail, except for the weakening of the Democratic ticket in the national elections. By contrast, a credible, realistic transition to a fully built-out Medicare plan can unite Democrats and progressives against the barbaric alternative that looms before us.
A Hybrid Won’t Cut It
By Natalie Shure
Max is correct that there are major political obstacles to winning Medicare for All (M4A). The most significant pushback, however, will come from the healthcare industry itself — not from imagined hordes of Cigna superfans. Yes, polls show Americans are skeptical about eliminating private insurers, but most will find much to embrace about no longer arguing over unpaid claims, searching for providers who accept their policies and poring over dozens of plans during open enrollment.
In a country with nearly 30 million uninsured people and many more with plans they can’t afford to use, it’s tough to make the case that the interests of “losers” in the transition to M4A should supersede the needs of those losing already. Such a sizable swath of the country surely already constitutes a “pain in the ass.”
The Obamacare backlash was not about people’s allegiance to their insurance companies; patients were angry to lose their doctors when shifted onto different provider networks. An “improved and expanded Medicare for All,” however, will offer a broader slate of benefits and options than more cost-conscious private plans, allowing a larger portion of patients to keep their providers. Even for those who truly enjoy their employer-sponsored policies, volatility and change already define the system: They can easily lose insurance in the event of job loss or divorce, or at the whim of their boss. A coherent, unified and stable public pool would avoid this.
Max is also correct that universal healthcare systems abroad maintain a role for private insurance, but not always for the better. In Canada, for instance, some provinces do not make prescription drugs available through the government insurer. This is not a model to follow, but a shortcoming activists are fighting to change.
Germany and France have private insurers, but many are structured as nonprofits, or else intended to complement (rather than replace) government coverage. Switzerland’s system could be compared to Obamacare, but there, firms are barred from making a profit off of basic policies; even then, Switzerland’s healthcare costs are far higher than those of its peers, suggesting we can and should do better.
In the U.S. context, Max’s “optional buy-in” plan could fail to streamline our piecemeal system and do little to increase leverage in pricing negotations. Without automatic enrollment — which M4A could make law — uninsurance rates would remain high: A 2013 Congressional Budget Office analysis found a public option would have practically no effect on uninsurance rates. Inertia would also leave many underinsured in the private insurance market, facing staggering medical bills for rejected claims. The semblance of “choice” may seem politically expedient, but such a structure forfeits the key advantages of a single-payer system.
Ultimately, Max’s argument in defense of private insurers boils down to the fact that we already have them. That simply isn’t good enough. For-profit insurance companies add no value and have been at the root of structural problems plaguing our healthcare system for nearly a century. The crisis is beyond the point of being salvageable through technocratic tweaks. Financing American healthcare through for-profit insurers is immoral and unsustainable, and must be unequivocally rejected. The lessons of history — including those of Obamacare, for all its flaws — suggest that, were a robust public system built, so, too, would a constituency to passionately defend it.