2020: The Year of the Healthcare Proposal

What are the 2020 democratic healthcare proposals all about, how would they fare on a national level, and, of course, what’s the price tag?

Hamodia spoke with a number of experts to find out.

A. James Lee, PhD, Health Economist, AJL Health Economics

William James Sonnenstuhl, PhD, Professor in the Department of Organizational Behavior, Cornell University

Gregory Stevens, PhD, Professor of Clinical Family Medicine at University of Southern California

Robert E. Moffit, PhD, Senior Fellow at The Heritage Foundation

THE PROBLEM

It’s no secret that healthcare is the U.S. is hugely controversial and a source of anxiety for countless Americans. Most of that has to do with the excessively high price of insurance premiums, co-pays and deductibles, as well as healthcare expenses that simply aren’t covered by insurance.

“It was reported last week that American families spend something in the excess of $20,000 per year on healthcare,” says Dr. James Lee. “Unlike other countries, we have a substantial minority who do not have coverage and constantly have limited access to health care. The evidence indicates that their health status and survival are impacted by lack of access to modern healthcare on a timely and affordable basis.”

Overhauling healthcare wouldn’t be as easy as it sounds, being that it is the largest industry in the country and a significant part of the national economy, but a whole bunch of Democratic candidates are giving it their best shot.

THE PROPOSAL

Although there are various proposals being bandied about by the Democratic presidential contenders, they can all be reduced to two basic pitches, best characterized as “the Biden plan” and “the Bernie plan.”

The Biden Plan

“The public option proposal that former Vice President Biden backs was originally discussed as part of the Affordable Care Act, and it is something most Democrats would support,” says Dr. Stevens. “The idea is that for people who look to buy insurance on the health insurance exchange in their state, a non-profit government insurance plan would be included as an option. It would add significant competition to the private health insurance plans that are the only things currently offered on the exchanges, and would help give people more options.”

Dr. Stevens notes that this public option could significantly reduce costs of insurance for people shopping on the exchanges, although there would be no change in cost for those who get their insurance through their employer.

“The Biden proposal would create a federal government plan (a ‘public option’) to compete against private health plans, including employer-sponsored health plans,” says Dr. Moffit. “Medicare rates are well below commercial private health insurance rates. Artificially low rates will enable the government plan to offer artificially low premiums.”

He explains how this would be the ultimate undoing of private insurance. “Government pricing, the imposition of non-market rates, would be the central mechanism to create an un-level playing field in the insurance markets, tilting that rigged market decisively in favor of the government plan. This will create powerful incentives for employers to dump workers and their families out of their existing employer sponsored coverage into the government plan.”

“Biden’s expansion of affordable care with a public option and controls on drugs reflects what has been called the ‘Bismark Plan,”’ says Dr. Sonnenstuhl. “Most European countries — Finland, Germany, Nethlerlands, Norway, France, Italy, and Israel — are based on this model.”

Of course this proposal would be met with significant opposition. “Private insurers fear this option because they know that they cannot compete with Medicare, particularly if it is an improved Medicare and employers can offer it to their employees as an option,” he continues. “The difficulty of this option is that there is a formidable array of actors who oppose it — hospitals, doctors, insurance companies, and the pharmaceutical industry because it will cut their profits.”

The Sanders Plan

For Bernie Sanders, the solution to healthcare challenges has long been a single-payer, Medicare-for-all bill.

“The Sanders bill (S.1129) would abolish nearly all existing private and employer-sponsored health plans,” says Dr. Moffit, “as well as the major government healthcare programs, including Medicare, Medicare Advantage, Medicaid, the Federal Employees Health Benefits Program (FEHBP), the Children’s Health Insurance Program (CHIP), the ACA insurance plans, and Tri-Care, the program for military dependents.”

“Bernie’s Medicare-for-All is a full service program that covers all healthcare for everyone. It is basically like Canada,” says Dr. Sonnenstuhl. “It is a good plan but frightens everyone because it would require quick changes and would do away with private insurance, except for supplemental plans. It would require pharmaceuticals to negotiate with the U.S. government like they do in other countries… Employees with good health insurance fear that a government plan would not be as good as what they have. Current Medicare recipients also fear losing what they have. These are big roadblocks to going forward. Of course the way around this is to ensure a Medicare plan that is better.”

“The Medicare-for-All option moves things further forward, making a non-profit government insurance plan available to everyone,” says Dr. Stevens. “It would take the profit motive out of health insurance (but not necessarily health care), which is a worthwhile goal because the insurance companies don’t necessary add much (or any) value to the delivery of health ‘care.’”

He points to the fact that most people on Medicare are content with their insurance, and that it is a program which operates efficiently (overhead is about 4%).

“But resistance to government involvement and people who prefer the private sector for all or more things in their lives represent a potential barrier,” he notes.

Isolating the word “socialized” as a fearmongering tactic, he reminds us that Medicare would not actually be socialized medicine. The delivery of care would remain completely in the hands of the private sector with privately-employed doctors and profit-seeking hospitals, while government would simply pool our resources to purchase those private services.

THE ANALYSIS

For Dr. Lee, providing an analysis of the particular 2020 Democratic plans is difficult because none of the candidates have offered plans with detailed proposals.

“Candidates are reluctant to put forward detailed plans, because that opens you up to more critique,” he says dryly. “And you have more substance to be challenged.” However, despite the lack of content, he believes the Democratic candidates are ultimately open to universal healthcare, although not particularly dedicated to it.

“We’re kind of in a never-never land where everyone is advocating universal healthcare…You hear a lot of rhetoric about Medicare for all, but aside for Bernie Sanders, I’m not persuaded the other candidates are actually committed to it. I frankly think Bernie Sanders is naïve; his proposal as it stands would be dramatically costly.

“Sanders has, of course, introduced legislation of Medicare for all, but his bill does not really speak to much beyond the benefits. It provides little or no insight as to the cost, and says nothing about implementation and transition,” he points out.

Another concern regarding universal healthcare is the traumatizing impact on the healthcare industry, which, as mentioned earlier, makes up a significant portion of the national economy. “Wherever we go, whatever the approach, it would take a long time to get to universal healthcare from today,” he says. “If we were to move everyone onto Medicare, that would be a ten-year project.”

He points to two major hurdles the nation would confront with such radical transformation. One, the legislation, and two, the implementation.

“One lesson learned from the ACA, you need bipartisan support if it’s going to be long-term change,” he says. “And it might take a few years to negotiate the consensus, and then another three to five years to implement. We have a lot of complicated structures to work through first.”

As for which proposal is more desirable, Dr. Lee finds that conversation redundant. “We have a lot of heated rhetoric debating between Medicare for All (Sanders) and an expanded ACA (Biden). I frankly think the comparison and the debate is not helpful. In the near term, it wouldn’t make any difference anyway. Even if we committed to Medicare for all, it would take years of building on the ACA to eventually get to that, to federalizing the healthcare system.

“This is not a matter of simply turning a switch…I just don’t see that we need to decide now what the ultimate system will look like. We need to put one foot in front of the other, and move towards expansion of the ACA, and getting to the point of other developed countries.”

For Dr. Sonnenstuhl, the real problem in the national healthcare discussion is the lack of emphasis on the destructive role of profit in this industry. “I used to teach a course in healthcare which compared healthcare systems around the world,” he says. “The U.S. remains the only industrial country that does not provide universal healthcare to all of its citizens. In this context, we have millions of uninsured Americans and healthcare costs twice as much as the next-most-expensive system, Switzerland. Why is that? The short answer is that other countries have constrained the profit in healthcare — insurance, hospitals, doctors and drugs. When I used to teach the course, students asked, ‘But how do they compete? If not for profits, what?’ The answer is simply that in other systems, providers compete over the quality of care. This point is lost in our discussions.

“The U.S. is unique in offering healthcare as a profit-making business,” he continues. “The private sector can exist only if it makes a profit. They make profits by constraining the services for which they pay and by increasing premiums, deductions, and co-pays. This is the reason employer insurance is rising so quickly. The fewer people covered, the higher the premiums to make a profit. Other countries made the decision to do away with profit-making entities because it is the only way to provide universal healthcare to everyone.”

And as for the leave-healthcare-to-the-free-market pitch, Dr. Sonnenstahl knocks that by noting how most healthcare is paid for by the federal government, via the VA, Medicare, SCHIP, and Medicaid, as well as through tax breaks to corporations that provide insurance. In short, the government is already deeply involved in our care.

As for the specific proposals themselves, he believes both plans get us to the same end-goal. “Biden’s plan means slow buy-in, where employers may buy into public option, and private plans wither away. Bernie’s plan means a quick turnaround. But both can eventually provide quality healthcare to all. However, at the end of the day, in order to provide universal coverage, health care will be tightly regulated and profits will be wrung out of the system. This is what every other country has had to do.”

“I do not agree that either the Biden proposal or the Sanders proposal would be a sound prescription for the reform of the healthcare sector of the American economy,” says Dr. Moffit. “Both would result in a loss or abolition of personal preferences for private or employer health coverage, the exact opposite of former President Obama’s original promise to create robust competition in the nation’s health insurance markets. Both would result in a major increase in healthcare spending and taxes, including, in the case of Senator Sanders, a broad based imposition of higher taxes on the middle class. These proposals would reduce (in the case of Biden) or eliminate (in the case of Sen. Sanders) the remaining competition in the health insurance markets.”

In reference to the Sanders plan, Dr. Moffit sees it as an infringement on personal freedom and choice, being that the bill would impose restrictions on doctors and patients who wish to contract with each other outside of the newly established national health insurance system. “If any doctor were to contract with a patient outside of the system, the doctor would have to refrain from getting government reimbursement in treating all other patients for a period of one year,” he says. “It would secure the goal of discouraging outside alternatives … Payment to doctors, hospitals, and other medical professionals would be based on Medicare rates, which, applied nationally, would reduce provider reimbursement by an estimated 40%. Such a provision would likely aggravate the projected physician shortage and further jeopardize patients’ future access to quality care.”

THE FINANCING

And now, for the scary part.

The Joe Biden pitch would run something like $750 billion over the next 10 years while, wait for it, the Bernie Sanders pitch would take us up to about $30 trillion.

This of course gives us collective sticker shock, and invites all sorts of questions, primarily, who’s picking up the tab?

If it’s Medicare-for-all, the answer is, all of us, in the form of a tax increase on the middle class. This may not be quite so scary, being that the average family spends a whole, whole lot on healthcare. According to the Centers for Medicare and Medicaid Services, the nation is spending $3.5 trillion annually anyway, so for the Sanders plan, it’s just about restructuring that money and changing the way it’s spent.

With the ACA 2.0, it would be partially funded by reversing the 2017 tax cuts under the Trump administration, as well as an increase in the top tax rate to 40%, and a doubling of the capital gains tax on those citizens with an annual income of $1 million.

“While Senator Sanders’ bill contains no financing provisions, the Senator has offered a range of possible financing options,” Dr. Moffit says, such as a new 7.5% employer-based payroll tax; a 4% income-based premium tax paid by all households, and a variety of specialized taxes on wealthy Americans, (higher capital gains taxes, an increase in the estate tax (ranging from 45 to 55%) and miscellaneous taxes on corporations).

“Senator Sanders insists that while Americans would pay higher taxes, they would no longer pay private health insurance premiums and cost sharing, and that Americans would spend less overall,” he continues. “Most independent analysts, as The Washington Post has reported, generally do not support such a conclusion. For example, analysts at the Urban Institute, the Mercatus Center, Emory University and the Rand Corporation all conclude that, based on the financial obligations entailed in the Sanders proposal, aggregate healthcare spending would be higher. According to the Mercatus estimate, Americans would pay more. In the Emory analysis, conducted by Professor Kenneth Thorpe, 71% of Americans would pay more for healthcare than they do today.”

“Clearly, we need to be mindful of the costs, and be mindful of the financing,” says Dr. Lee. “In principle, we have enough resources in the healthcare system to get to universal, but the rub is, 30% of the healthcare today is unnecessary, or provided inefficiently. The villain here is not the insurance industry. Rather, the providers are doing too much, are being paid too much to do it, and the hospitals have a powerful lobby.

“Unless we change the way healthcare is delivered, certainly there would be a raise in taxes. With Bernie Sanders’ plan, there would be a significant increase. I can’t say if it would cost 10 or 20 or 30 trillion, but it would be substantial.”

Before stressing over the bill, Dr. Lee reinforces the idea that the first step is deciding whether, as a nation, we want universal healthcare at all. The rest is going to involve slow movement, consensus-building, and baby steps.

But yes, for those who are still googly-eyeing the $30 trillion, price does matter.

“Look, transferring to universal healthcare can’t be a free-for-all with anyone getting anything without cost share, like Bernie Sanders proposes,” Lee warns. “Rationing is part of any healthcare system. Most employees have a $1,000 deductible for their healthcare, the idea being that if there is a financial cost, patients will be more cautious about only accessing healthcare when needed. There’s ample evidence that when healthcare is freely available at no cost to the patient, then the patient demands more.”

If that’s the case, how do you mitigate that under universal healthcare?

For Dr. Lee, the answer lies in the socialized U.K. healthcare system, which he believes manages those concerns.

Although Dr. Lee acknowledges healthcare can’t be a “free-for-all,” with everyone accessing care whenever, he is still wary of free-market solutions to this issue. “I’m not a great fan of market incentives when it comes to healthcare. I think we’ve just seen too many problems when it comes to market distortions in relation to healthcare. And I’m an economist saying that!”

Are there any proposals on the Republican end that would tackle healthcare concerns differently?

“No,” he answers bluntly. “There’s nothing going on at the Republican side. That’s a hot potato they haven’t been willing to touch. They have nothing to contribute.”

Dr. Sonnenstuhl has some choicer words for the GOP and its healthcare approach. “Republicans are wedded to profit and ensuring that the healthcare industry thrives as a profit entity. That is why their only plan now is rolling back guarantees under the ACA,” he says.

Reiterating his earlier thoughts on profit in the healthcare industry, he believes both Biden’s and Sanders’ plans can work, but not if we keep avoiding the ugly truths about profit incentive under our current model.

Dr. Stevens argues that the cost of care would actually decrease over time under a Medicare-for-All option. “It would be paid for by taxes on individuals and businesses that would replace and ultimately be less than what we pay out-of-pocket and what our employers pay toward our insurance combined,” he explains. “The government, of course, would combine these taxes and use them to buy health services.”

As for the Biden plan, the public option (to buy into Medicare) would bring down the direct costs to individuals who shop on the exchanges (although it would not bring down the costs for people who get their insurance elsewhere). “It would represent only a mild cost to the government, because we would have to use tax funds to support the administrative end of the insurance plan initially,” he says, “though it would be expected to be self-sufficient going forward.”

THE ALTERNATIVE

Universal healthcare, Medicare-for-All, or perhaps even socialized healthcare, may be the dominant pitch for correcting flaws in the U.S. system, but are there any market-based solutions that can ensure affordable, high-quality insurance for all Americans?

For Dr. Moffit, the answer is yes. But not by going backwards.

“It is neither possible nor desirable to resurrect the pre-ACA world,” he says. “The path forward should focus on new policies that would lower healthcare costs and expand healthcare choices. Both objectives would be secured by reigniting intense market competition, particularly in the severely damaged and shrunken individual and small group health insurance markets.

“Under the Health Care Choices Proposal, developed by Heritage Foundation analysts and others, this could be accomplished by pursuing three interrelated proposals.

First, Congress would maintain the existing level of projected ACA funding for health insurance coverage (approximately $1.6 trillion over ten years), and transform that huge funding commitment into equitable, formula-based block grants to the states. The states would be required to use this federal funding to provide financial assistance to low-income persons to secure health insurance coverage in their state markets, and offset the costs of persons with pre-existing medical conditions, through risk pools, reinsurance pools or direct subsidies, whatever risk mitigation mechanism state officials believe to be most appropriate in their markets.

Second, Congress would maintain existing protection of persons from an exclusion of coverage for pre-existing medical conditions, but then would restore to the people of the states the broad authority to reset and regulate the general rules that govern both their individual and small-group health insurance markets. Markets differ radically from state to state, shaped by a variety of factors, ranging from diverse patterns of medical practice and demographic characteristics to the depth of penetration of employment-based or Medicaid coverage.

Finally, Congress would guarantee every person under age 65 the right to choose their own health insurance coverage, if they wished to do so. If, for example, a person were enrolled in Medicaid or the Children’s Health Insurance Program, then that person would be free to redirect that per capita Medicaid funding to the private health plan of their choice, or employment-based coverage, if such coverage is also available to them.

“Based on an econometric analysis from the Center for Health and the Economy, such a proposal largely stabilizes the markets, while reducing premiums by 15 to 32%,” he concludes. “It would be a down-payment on health reform, a major first step in repairing and revitalizing the dysfunctional health insurance markets.”

Healthcare conclusions are nowhere on the distant horizon; this will be a protracted, national conversation.

While the majority of Americans want the government to ensure that all citizens have insurance (57%, Gallup 2018), those numbers drop when Americans are offered a government-run program (40% support), with the majority favoring private insurance (54%). With those numbers, it will be a tough call getting broad consensus on exactly what that government provision should look like.

As Dr. Lee said, Medicare-for-All is attainable, but first, we need to decide if we want it.