It is frequently stated that the current Republican Congress is ineffective in getting anything done. That is not entirely true. A big issue was decided this past summer. The failure of Congress to repeal and/or replace the Affordable Care Act means that the goal of universal healthcare for all Americans is here to stay.
The question now is the best way to implement universal healthcare. Senator Bernie Sanders (D, VT) has just introduced a single payer universal plan, “Medicare for All.” Here are some of the problems associated with such a plan:
At least three states, Vermont, Colorado and California have recently rejected state-wide single-payer plans because of the huge costs involved.
The Urban Institute estimates that Medicare for All would increase federal spending by $32 trillion for the first ten years (compared to a very high current total national debt of $20 trillion).
Medicare is an inefficient hidebound system with over 140,000 procedure codes where private sector cost-saving measures, like competitive bidding for routine services, are rarely used.
There are now 155 million Americans who receive and like their employer provided health insurance and who will resist moving to a Medicare for All plan especially at the cost of a huge tax increase.
On the other hand the cost of healthcare in the U.S., public and private, now eats up 18% of GDP, almost twice as much as for any other developed country, and major changes need to be made to give individuals more direct responsibility for the cost of their own healthcare.
One attractive alternative is to limit the tax deduction for employer provided care to the cost of catastrophic coverage, at a cost of about $3000 per person per year. It could be made progressive by tying deductibles to income.
Conclusion. Healthcare spending in the U.S. is way too high and something major needs to be done. Universal catastrophic care for all Americans not already covered by Medicare and Medicaid is an attractive alternative to single-payer Medicare for All.
The New York Times is running a series of articles, “Paying Till It Hurts,” giving many examples of the very high cost of healthcare in the U.S. today. The latest article “As Hospital Prices Soar, A Single Stitch Tops $500”, focuses on the high cost of emergency room treatment around the country.
We spend 18% of GDP on healthcare, twice as much as any other country in the world. It is specifically the cost of healthcare entitlements, Medicare and Medicaid, which is driving our huge deficits and rapidly growing national debt. But to limit the cost of these entitlement programs, we first have to address the more fundamental problem: how to control the overall cost of healthcare in general.
Our current healthcare system, a combination of private insurance and government programs, is very inefficient. The basic problem is that the tax treatment of employer provided health insurance takes away the incentive for individuals to control the cost of their own care. And Obamacare does not solve this problem, because it just extends the present system to more people, rather than revamping it.
There are essentially two different ways to transform our current healthcare system to make it far more efficient. One way is to turn it into a single payer system, like what most of the rest of the world has. This could be accomplished by simply expanding Medicare to everyone. Costs would then be controlled by government regulation which would, of course, include rationing. Given the unpopularity of Obamacare, with all of its mandates and uniform coverage requirements, it is unlikely that Americans would be happy with such a highly proscribed single payer system.
The alternative is to change over to a truly consumer based, market oriented system. This could be accomplished by limiting the present tax exemption for employer provided insurance. For example, the current system could be replaced by a (refundable) tax credit equal to the cost of catastrophic insurance (i.e. insurance with a very high deductible). All other healthcare costs, whether paid for directly by consumers or through insurance, would be with after tax dollars. Subsidies could be provided to lower income people through the Obamacare exchanges. Once such a system is set up and running smoothly, it could fairly easily be extended to encompass Medicare and Medicaid.
Insurance companies selling catastrophic coverage would negotiate with hospitals and other healthcare providers to get the lowest possible prices for their customers. In other words, both insurance companies and providers would compete in the open market to deliver healthcare products at the lowest possible cost.
Something along this line will have to be done and the sooner we get started the better!