Does Medicare for All Mean Abolishing Insurance Companies?

Two experts debate.

Natalie Shure and Max B. Sawicky March 19, 2019

New Yorkers rally on the steps of Union Square on July 24, 2017, to demand a universal, single-payer, improved and expanded Medicare healthcare system. Should Democratic candidates join their call to end for-profit health insurance? (Photo by Erik McGregor/Pacific Press/Lightrocket via Getty Images)

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 régime 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 régime. 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.

Natal­ie Shure is the head of research for Adam Ruins Every­thing on TruTV. She writes about health, his­to­ry and pol­i­tics.Max B. Saw­icky is a writer and econ­o­mist in Vir­ginia. He pre­vi­ous­ly worked for 18 years at the Eco­nom­ic Pol­i­cy Insti­tute in Wash­ing­ton, D.C.
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