Thursday, November 20, 2014

Medicare For All: The Steps Between Here and There

-- Posted by Neil H. Buchanan

In my new Verdict column, "Disdainful Economists, Hubristic Jurists, and Fanatical Republicans: A Recipe for Single-Payer Health Care?" I try to figure out what the "end game" is for the great debate over the U.S. health insurance system.  That is, if Republicans (in Congress and/or on the Supreme Court) succeed in damaging or killing the Affordable Care Act, what would happen next?  I suggest that one possible answer is ... wait for it ... single-payer health care in the United States!

(As an aside, I hope that people will read the column simply for the section in which I explain the recent mini-controversy over arrogant remarks by Jonathan Gruber, an Obama Administration economist, who repeatedly mocked the "stupid voters" who had to be fooled for their own good.  Short version: He's just saying what all economists -- liberal and conservative -- think.  "We're smart.  Everyone else is an idiot.")

The logic in my column is basically this: Republicans are having some success convincing people that anything resembling a well-regulated private health care system is bound to fail.  The public will hate the status quo ante, which we know because they hated the status quo ante enough that we ended up with the ACA.  In fact, the post-ACA status quo would probably be even worse (for reasons that I discuss in the column).  No one will trust the government to do anything right, but no one will be happy with an unregulated mess.  Time for something tried-and-true.  Which part of the health care system does nearly everyone like?  Medicare, of course.  It has low administrative costs, it is already "scaled up," and it has been in place since the end of the Baby Boom.  And, of course, some people think that it is not run by the government (which is weirdly a plus in this circumstance).

As I concede at the end of the column, I am not putting a high probability on this outcome.  The higher probability is that we will muddle along for decades, with too many people dying prematurely from lack of care, too much money being spent on executive salaries and marketing materials -- and cost-shifting strategies -- and everyone wondering why the health care sector continues to absorb twice as much of our (slow growing) economy than every other country on the planet.  At some point, however, the pressure could become too strong.  At least, I am willing to imagine that happening, as one plausible outcome.

How might the transition happen?  The most straightforward approach, of course, would be simply to announce that on a particular date, everyone will be covered by a single-payer plan.  That would require a huge amount of work regarding transition rules, but at least it would be "simple" in the sense that there would be as few moving parts as possible.  Those transition rules, however, would be huge, because we would need to figure out how to allow health insurers to shut down in an orderly way, how to handle transitions of ongoing care, and so on.

How best to smooth the transition?  One idea is to lower the eligibility age for Medicare in increments, until everyone is covered.  Sounds good, sort of, but let's think about this.  (Another aside: The suggestions by "fiscal centrists" to increase, rather than decrease, the Medicare eligibility age have been definitively shown to be budgetary losers, rather than winners.)  What concerns might arise from this transition?

Suppose that the plan is to reduce the eligibility age by two years every year.  So, in Year 1, the age is lowered to 63, to 61 in Year 2, and so on.  One problem is that there will be a bunch of gaming around the transition period.  If I am 60 in Year 1, then I know that I will be covered in Year 2.  If I am 57 in Year 1, then I will become eligible in Year 3.  In either case, do I continue to pay private health care premiums for a year or two, or do I hope for the best and expect to deal with the fallout once I am safely in Medicare's embrace?  It is easy to imagine people making foolhardy decisions, worsening their overall health and increasing overall costs to the public system.

Another question: Why do the kids come last?  At the point where we are covering 47-year-olds, why should their children still be covered by private insurance?  Would employers discontinue (or radically change the terms of) family health insurance coverage if the parent/employee is no longer covered?  Would the answer then be to come at it from both ends, with Year 1 seeing coverage not only for 63-and-up but for children 0-2?  We then meet in the middle a decade or so later?

It seems likely that there would be a tipping point at which it made no sense to maintain the slow transition.  Years in which, say, only people between 24 and 41 could be uncovered would obviously be untenable.  The likely logic would be: "What are we doing?  We have proved that Medicare can be expanded, so there is no reason to wait."  A transition would come to be seen as ridiculous.  However, this does not mean that the "right" amount of transition time is none at all.  I do not think it useful to imagine an economic model of "optimal transition," but it does seem plausible to foresee a relatively short period in which we prove that Medicare can add millions of people to its rolls.  (Doctors and hospitals, by the way, would have it easy.  They already deal with Medicare, and they would simply find that more of their patients are covered under that system.)

These are just a few preliminary thoughts about a possible transition path from a dysfunctional system to a system that works.  There would certainly be all kinds of claims for compensation from health insurance companies, including most likely an effort to press a "regulatory takings" challenge to the whole idea.

Most of the questions, however, are political in the sense that Professor Gruber's remarks clumsily capture.  How would we label the new Medicare taxes, which would in fact simply be replacing (at a lower overall cost) the private health insurance payments that many employees never see, but that are very much part of their "employment compensation"?  Would the fact that a big chunk of the economy would suddenly show up as "government spending," even though the overall system would be cheaper, matter?  I guarantee you that politicians of all stripes would be trying to figure out how to use words to "fool stupid voters" into supporting or opposing the transition.

The problem for anti-single-payer people, however, is that the momentum would be unstoppable, once the transition began.  That has been true of the ACA, and it will be even more so with Medicare For All.  That is why the fighting is so fierce now.  As I noted in my column, however, the people who hate "Obamacare" might be paving the way for something much bigger.  I would like single-payer to happen because people like it on its merits, but we might require this ugly transition period.  That would be a waste, but better than continuing on our current course indefinitely.


Unknown said...

Medicare for All ("M4A") is what I would have preferred to start: no RFRA issues, no Individual mandate issues, no King v. Burwell; Want to apply the Hyde Amendment to M4A? Simple: have a rule which says, "M4A does not cover abortion." Want M4A to have zero-copay treatments for hemaglemaflemaflagia, dasendufendorfenitis, or whatever disease it is You have? Simple: have a rule which says, "M4A is going to pay for these treatments," and US v. Lee applies. Healthcare for All; no legal hang ups; sheer poetry, My Boy!

Paul Scott said...

I am glad you wrote this. I have been working through these same issues recently and was about to email you and Mike this morning coming to essentially the same conclusion. If you are willing to accept mass suffering for a bit longer, probably the best thing long-term that could happen to our health care system would be SCOTUS killing the ADA.

pvine said...

M4A is great. Only problem: Everyone will be dead as a result of global warming before it ever comes to pass in America. If you want it, move to a civilized country that has it.

Joe said...

So, I'll be on Medicare by age qualification already if not dead before M4A comes about?

Joe said...

As some have noted, per a comment, RFRA shouldn't be an issue now. It's take the insurance or get a tax. U.S. v. Lee should apply now. But, the Hobby Lobby ruling argues 'no.' Also, the Hyde Amendment has hang-ups. It was only upheld 5-4.

I do agree M4A would be simpler in various ways.

David Ricardo said...

The analysis by Mr. Buchanan here and in his Verdict column is very good, but it starts with the premise that the insurance model/fee for service system is appropriate for health care in the United States. It is not.

Insurance works when (a) the probability of an event is very low and (b) the damages from the event are very high. The health insurance model evolved from hospital insurance, when the insurance model was appropriate. When the hospital insurance was introduced visits to the hospital were infrequent and costly. But for the last several decades it is the insurance model combined with fee for service and not the lack of a single payer system is the major problem with the U. S. health care system.

Under a fee for service model the incentives of the medical sector are to increase costs, increase treatment and overall, increase the amount of resources devoted to health care. For every cost of health care is that there is an equal amount of income into the health care system. (Does your physician make money from keeping you healthy or from treating your ailments?) And so the incentives of the U. S. system are to provide maximum cost.

The insurance part of the system is supposed to serve as a check on inefficiency and rising costs, but it is unable and unqualified to do so. And government in the form of Medicare has the same problems. Apparently there are now over 30,000 health care codes that providers must use to obtain reimbursement from Medicare. And yes, reforms to the system under ACA are starting to provide some incentives for better care and lower costs, but those reforms still butt up against basic economics.

A single payer system may be part of the solution, but the major part of the solution must come from elimination of fee for service. The health care profession must move to a model where providers are given a fixed amount to provide medical care and where their profits arise not out of higher costs to the patient/government/insurers but out of better, more cost effective and more preventative medicine.

And yes, the industry is moving slowly in this direction, with hospitals acquiring medical practices and placing physicians on salary rather than on profit, and with insurance companies acquiring health care facilities. This will happen because it must happen.

And to return to Mr. Buchanan’s point about arrogance in the economics profession, not only is there no basis for arrogance among economists involved in health care economics, but their failure to educate the public and policy makers on the most basic issue here, that incentives (not regulations) must be built into the system that drive it towards lower costs, not higher costs, denigrates the entire profession, this author included.

Shag from Brookline said...

At age 84 on Medicare, I sometimes get the feeling that my healthcare providers look upon me as sort of an annuity. Periodically there are "snapshot" tests. But there seems to be a lack of coordination between such providers. I notice how "antsy" providers get after 10 minutes of an appointment as an encroachment on the economies of their schedules. "Do you have any questions for me?" is a rhetorical device to end the appointment. The medical professions have to make more changes than eliminating fee for services.

David Ricardo said...

Agreed, there have to be other changes. But everyone will be amazed at how much better things get when the health care industry is rewarded economically for preventive care, for increased efficiency, for moving medical records technology from the 19th century to the 21st one and other improvements that will take place once fee for service is eliminated.

And another reform that would vastly improve the system would be for government rather than the private sector to underwrite the cost of pharmaceutical research. Since government through its various health insurance schemes pays for much of this cost indirectly anyway through high prescription prices, it makes economic sense for government to pay for the research and trials needed to bring prescription drugs to the market and then allow the pharmaceutical companies to manufacture and distribute the drugs. Under this system the cost of prescriptions would closely mirror their manufacturing and distributions costs and not reflect the development costs. Yes, this is basic economics, the sort of basic economics missing from the modern economics community.

Joe said...

I appreciate the intelligent discussion here on sane solutions. The government investment aspect reminds me of this:

"A Property Right to Medical Care"

Fact is we have so much government involvement now, the only thing left to decide is if it will be more intelligent and equitable than it is now. ACA is a foot in the door here, which might be why some hate it so.

Shag from Brookline said...

Like Social Security was a foot in the door. (Black farm workers were originally ineligible.)

Like Medicare was a foot in the door. Keep in mind how many seniors on Medicare actually vote, especially with the "growth" of the senior population. (Recall the Tea Party complaint of Obamacare: "I don't want government-run health care. I don't want socialized medicine. And don't touch my Medicare.")

Like Medicaid as a foot in the door.

Life, liberty and the pursuit of happiness seem to call for medical care - and not just for the wealthy. Alas, FDR died before he could try to implement his "Second Bill of Rights" that included a right to medical care.

Joe said...

Universal Declaration of Human Rights:

Article 25.

* (1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.

* (2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.

Valen said...

The people who refuse to pay for insurance, even though they can afford it, have realized that applying to direct loans lenders US and paying cash for health care services while maintaining a catastrophic care policy is much cheaper than paying an insurance company hundreds of dollars a month for years. Money shouldn't be the deciding factor in health care services. However, insurance is the root of the problem, NOT the answer to our prayers.