Monthly Archives: April 2019

Is Medicare4All really about expanding Medicare?

Raymond T Kyle

April 15, 2019

Although the Democrats’ 2018 mid term election strategy was advertised as a defense of the Affordable Care Act from Republican threats to repeal it, once the results were in, Democrat Senator Bernie Sanders of Vermont, and other 2020 Democrat hopefuls began a concerted campaign to replace President Obama’s signature domestic policy triumph with a single-payer model niftily titled “Medicare for All.” And, although backers, and the proposal’s website, claim that Medicare for All is merely an expansion of traditional Medicare, the details hint at something very different. In fact, Senator Sanders has praised the Canadian health care system as a model for Medicare for All.

Medicare for All, The Proposal

First, Medicare for All, unlike traditional Medicare, has no cost-sharing, meaning patients would have no deductibles, no co-pays, and no premiums. The reasoning behind such a provision is the claim that even minimal out-of-pocket costs reduce utilization. Since most people are not trained medical professionals, costs often keep individuals from seeking care when it is both needed, and most likely to have a positive outcome.

Medicare for All would have a single benefit package, and a single payer, which means no private insurance, and no options like Medicare Advantage or Medigap policies. There would be no red tape requirements, like prior authorization, for approved treatments, and hospitals, nursing homes, and other health centers would receive a “global budget,” where all expenses are reimbursed as a lump sum rather than payments made separately to doctors, labs, and other healthcare professionals involved in a patient’s care.

Under Medicare for All. a hospital or medical group that wants to purchase new capital equipment, like an MRI machine or CT scanner, would have to seek formal approval from a centralized authority before making the purchase. There would be a priority placed on approval for expenditures that address the needs of specific demographic and socioeconomic groups, in an effort to ensure underserved areas and populations receive equal consideration.

There. would be increased emphasis on Primary Care physicians, and less emphasis on specialists. This would be accomplished by subsidizing medical education for those pursuing Primary Care, and funding additional residency programs in Primary Care. Emphasis would be placed on prevention over treatment, and Primary Care doctors would assume greater responsibility for early diagnosis and intervention.

A central authority would negotiate drug prices for the entire United States, the goal being to pay no more for medications here in the US than anywhere else in the world.

Doctors participating in Medicare for All would be required to accept the program’s reimbursement rate as payment in full, and would be prohibited from accepting payments from private parties, even if the payer is the patient themselves. Again, emphasis for reimbursement would be Primary Care physicians rather than specialists.

Medicare for All states that it will ensure all Americans have access to health care, whether they live in a large, metropolitan area, or a poor, sparsely populated rural area. It promises to eliminate inequities in care, and improve the nation’s health, all while cutting medical red tape and other administrative costs. The proposal concludes by claiming that it would, “facilitate the distribution of healthcare resources.” That concluding statement provides insight into what Medicare for All really is, and what it is not.

Before we look into the Canadian system that is the model for Medicare for All, we need to better understand traditional Medicare, what the Trustees of the program say about its future, and how the pressures affecting traditional Medicare will affect any alternatives.

Traditional Medicare

Traditional Medicare consists of two parts, the Hospital Insurance Trust Fund (HI), more commonly called Part A, and the Medical Insurance Trust Fund (SMI), known as Parts B & D. Part A covers in-patient hospital care, skilled nursing facilities, home health care, and hospice services. Part B covers durable medical equipment without bid, ambulatory surgical centers, ambulance services, and medical supplies.

Funding for the two parts also differs, with Part A (HI) funded by a payroll tax on covered earnings. Employers and their employees each pay 1.45% of a worker’s pay, while self-employed individuals pay 2.9% of net earnings. High income workers must contribute another 0.9% tax on earnings above an indexed threshold, which is about $200,000/yr for individuals, and $250,000 for married couples. For Parts B & D (SMI), transfers from the Treasury’s general fund. These transfers represent the largest source of income for Parts B & D, and in 2017 accounted for 70% of funds. Beneficiaries also pay monthly premiums.

So, an obvious difference between traditional Medicare and Medicare for All is in funding. Medicare for All has no premiums, no co-pays, and no deductibles, not even prior authorizations for covered services.That means that Senator Sanders et al would need an increase in taxes just to run in place with no other changes to traditional Medicare. Unfortunately, cost projections for even traditional Medicare have not been static. Total traditional Medicare expenditures in 2017 were $710 BN, a 65% increase over the past decade. Annual per capita increases over the next decade are estimated to be 4.6%, fueled by the continuing retirement of Baby Boomers. To add insult to injury, the latest report by the Medicare Trustees predicts the Medicare Part A trust fund will be out of money in 2026, three years earlier than expected. The Trustees plead with Congress to face the need for reform sooner rather than later, so there is sufficient time for individuals, organizations, and taxpayers to adjust their expectations and behavior. So far, those pleas have fallen on deaf ears.

Medicare for All, The Cost

According to Senator Sanders own estimates, the plan he advocated during the 2016 presidential primary campaign would cost $1.4 trillion/yr. The Urban Institute estimated the 10-year-cost of the Sanders plan as $32 trillion. Candidate Sanders admitted, “there will be pain,” if there is a transition to his plan. As columnist and healthcare analyst Sally Pipes wrote in “Forbes” in July of 2018, “America is struggling to pay for ‘Medicare for Some’-much less ‘Medicare for All.”

The Canadian System

Since cost weighs heavily on Medicare for All, Senator Sanders has praised the Canadian health system for delivering care at half the cost of care in the United States. So, could the Canadian model be an effective road map for the United States?

The Canadian health care system, like Medicare for All, also has no out-of-pocket costs for doctor and hospital visits. Unlike Medicare for All, however, Canadian Medicare does not cover prescription drugs, dentistry, vision care, rehabilitative services, and home health care, so two-thirds of Canadians have supplemental coverage or employer coverage for those needs. The national government provides tender payments to Canada’s provinces and territories, which each have their own insurance plans, and manage actual delivery of care to their constituents. The private sector delivers much of actual care.

Since the Canadian system doesn’t cover all needs, it’s not truly a universal system. In fact, Canada is the only nation in the developed world which claims to have universal coverage, but does not include coverage for prescription medications.Senator Sanders has apparently taken note of those oversights, and provides for them in Medicare for All. But that’s not the only criticism of Sanders’ favored template for the replacement of traditional Medicare. There are also claims of inequity of care for certain indigenous peoples, and anger regarding cost-saving measures that translate into low pay for doctors, and long wait times for patients requiring diagnostic tests and/or treatment. And, of course, taxes are high in order to fund the system, or, at least part of the system.

There are abysmal health statistics for native peoples like the Inuit, and the lack of coverage for prescription medications means that just as in the US, some patients will forego filling prescriptions for lack of money to pay for them. Estimates for the number of Canadian households where someone is not taking their medications due to an inability to pay run as high as 25%. This has led to charges of inequity of care based on demographics and financial status.

Inequity is also charged as regards wait times for non-emergency, specialty procedures like hip and joint replacement. In 2017, the median wait time from referral by a General Practitioner to treatment by an Orthopedist was 41 weeks, and for neurosurgery, 33 weeks. Waits for diagnostic tests are also common, and as the Medicare for All proposal states, long wait times for care can have an adverse effect on treatment outcomes. A common joke among Canadians is that “universal health care” can be translated to mean, “universal access to a wait list.”

Then there’s the hidden costs, both in taxes, and lost productivity, while awaiting treatment. There are steep taxes paid to both the national and provincial governments to support Canadian Medicare. A family of four pays 12,000/yr in taxes to cover its share of the cost. Still, even those high taxes don’t provide the level of universal care Canadians want, and with no cost-sharing at the point of service, there’s no incentive for Canadians to self-moderate their demand for services. All that waiting means less productivity by Canadian workers, resulting in an estimated loss of $1.7 Bn/yr in wages.

Canadian provinces don’t explicitly ration care, but do intervene in the salary potential of doctors, another area where the Sanders Medicare for All is somewhat better, at leadt on paper. In Canadian provinces, doctors don’t work for the government, but the province is the paymaster. Canadian Medicare’s reimbursement rate is so low, entering the medical field or investing in a new office/clinic is a losing proposition financially. A Canadian orthopedist makes only about half what his/her US counterpart does. In the 1990s, cuts in payments to doctors as provinces tried to save money forced many Canadian doctors to relocate to the US. Rather than take the hint, Canada simply imported more foreign doctors who were willing to work for whatever the provinces were willing to pay.

As Sally Pipes wrote in Forbes in January, 2008, re the Canadian model Senator Sanders has praised, “A system that forces patients to wait months, sometimes years, for treatment, should be nobody’s idea of quality health care.”

Conclusions

Senator Sanders and other Democrats tout Medicare for All as the panacea for what ails American health care. His plan draws heavily from the Canadian health care system, but also attempts to address its lack of coverage for prescription drugs, and bolster the position of physicians, at least in Primary Care. Still, profound shortcomings remain. Without any cost-sharing for patients, history reminds that utilization rates will skyrocket, as everyone can go to the doctor for anything, and incur no added cost. With no incentive to moderate behavior, an aging population, and a probable continuing doctor shortage in spite of efforts to correct it, it’s inevitable that the only recourse will be for rationing care by time, as occurs in the Canadian system. Combined with high tax rates, and a long history of obtaining care quickly, Americans are likely to rebel against Medicare for All, and its authors. Several states have considered implementing a similar system for their residents, but the staggering cost involved has driven even California from moving forward with adoption.

So, why the continued push for Medicare for All by Senator Sanders and others? Why the determination to push forward in the face of so many obstacles? The answer appears at the end of the Medicare for All proposal, as mentioned earlier in this article, that it would, “facilitate the distribution of healthcare resources.” In other words, it’s not about healthcare per se, it’s about empowering the government to decide what is equitable, and who gets what. And, as with most socialist plans like this, it’s more likely that everyone gets less than that everyone gets more.

Copyright 2019 Kyle Policy Partners