Making the Economy Work for the Many and Not the Few

#11: Medicare Isn’t the Problem; It’s the Solution

By Robert Reich
HuffPost Politics, June 22, 2015

Again and again the upcoming election you’ll hear conservatives claim that Medicare — the health insurance program for America’s seniors — is running out of money and must be pared back.

Baloney. Medicare isn’t the problem. In fact, Medicare is more efficient than private health insurance.The real problem is that the costs of health care are expected to rise steeply.

Medicare could be the solution — the logical next step after the Affordable Care Act toward a single-payer system.

Please see the accompanying video — #11 in our series on ideas to make the economy work for the many rather than for the few. And please share.

Some background: Medicare faces financial problems in future years because of two underlying trends that will affect all health care in coming years, regardless of what happens to Medicare:

The first is that healthcare costs are rising overall — not as fast as they were rising before the Affordable Care Act went into effect, but still rising too quickly.

The second is that the giant post­war baby boom is heading toward retirement and older age. Which means more elderly people will need more health care, adding to the rising costs.

So how should we deal with these two costly trends? By making Medicare available to all Americans, not just the elderly.

Remember, Medicare is more efficient than private health insurers ­­ whose administrative costs and advertising and marketing expenses are eating up billions of dollars each year.

If more Americans were allowed to join Medicare, it could become more efficient by using its growing bargaining power to get lower drug prices, lower hospital bills, and healthier people.

Allowing all Americans to join Medicare is the best way to control future healthcare costs while also meeting the needs of the baby boomer and other Americans.

Everyone should be able to sign up for Medicare on the healthcare exchanges set up under the Affordable Care Act. This would begin to move America away from its reliance on expensive private health insurance, and toward Medicare for all – a single­ payer system.

Medicare isn’t a problem. It’s part of the solution.

http://www.huffingtonpost.com/robert-reich/medicare-solution-for-making-…

Video: https://www.facebook.com/moveon/videos/vb.7292655492/10152825520900493/

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Public Plan Option in a Market of Private Plans

By David Himmelstein, M.D. and Steffie Woolhandler, M.D., M.P.H.
Physicians for a National Health Program, March 26, 2009

The “public plan option” won’t work to fix the health care system for two reasons.

1. It forgoes at least 84 percent of the administrative savings available through single payer. The public plan option would do nothing to streamline the administrative tasks (and costs) of hospitals, physicians offices, and nursing homes, which would still contend with multiple payers, and hence still need the complex cost tracking and billing apparatus that drives administrative costs. These unnecessary provider administrative costs account for the vast majority of bureaucratic waste. Hence, even if 95 percent of Americans who are currently privately insured were to join the public plan (and it had overhead costs at current Medicare levels), the savings on insurance overhead would amount to only 16 percent of the roughly $400 billion annually achievable through single payer — not enough to make reform affordable.

2. A quarter century of experience with public/private competition in the Medicare program demonstrates that the private plans will not allow a level playing field. Despite strict regulation, private insurers have successfully cherry picked healthier seniors, and have exploited regional health spending differences to their advantage. They have progressively undermined the public plan — which started as the single payer for seniors and has now become a funding mechanism for HMOs — and a place to dump the unprofitably ill. A public plan option does not lead toward single payer, but toward the segregation of patients, with profitable ones in private plans and unprofitable ones in the public plan.

http://www.pnhp.org/news/2009/march/himmelstein_and_wool.php

In his enthusiastic endorsement of single payer Medicare for all, Robert Reich also renews the call for the “public option” of allowing people to purchase Medicare through the exchanges established by the Affordable Care Act. During the health care reform process, the public option had wide support, but was first weakened considerably and then eventually rejected by Congress in a power play by Sen. Joseph Lieberman.

In spite of the modest benefits of the Affordable Care Act, nothing has changed that would alter the concerns about the public option expressed by David Himmelstein and Steffie Woolhandler and others of us at PNHP.

At the time the public option was being considered, I wrote the following: “The option to purchase a public plan within a market of private health insurance plans would merely provide one more player in our inefficient, dysfunctional, fragmented, multi-payer system of financing health care, that is if the public option even survives the political process. It would leave in place the deficiencies that have resulted in very high costs with the poorest health care value of all nations (i.e., overpriced mediocrity in health care).”

Even if Medicare were offered for purchase in the exchanges, the premiums would not be competitive with the low-actuarial-value silver and bronze plans with their very high deductibles, especially since the Medicare risk pool includes higher cost elderly and disabled individuals. If Medicare were revised to make it competitive, benefits would have to be reduced when what we need instead is an improved Medicare with expanded benefits.

One possibility would be to provide subsidies for those electing the Medicare option, but either the beneficiaries’ share would still be too great, certainly making the plan non-competitive, or the public subsidies would have to be greater than those for the private low-actuarial-value insurance plans – an approach that would be vigorously opposed by the all-powerful private insurers.

Besides, it is unlikely that Congress would support higher subsidies for a public option Medicare when their agenda has been the opposite – providing higher subsidies for the private Medicare Advantage plans, sending us in the direction of a privatized Medicare.

Although Robert Reich proposes a public option version of Medicare as a way to begin moving us toward a single payer Medicare for all, it is difficult to perceive how the transition would take place. Offering an option to purchase Medicare is a very small step that leaves everything else in place. As Medicare Advantage demonstrates, one-third of beneficiaries have moved in the opposite direction – from traditional Medicare to private insurance options. That would continue as long as Congress continues to advance policies that cater to the insurers more than they do to the public.

Reich seems to be recommending a two step path to reform – one step offering the Medicare option and a second step of converting to single payer Medicare for all. Quentin Young has compared that to taking two steps to cross a chasm. That first step can lead to a serious misadventure, but it should not be a surprise.