Why “Medicare for All” won’t work

Criticisms of Bernie Sanders’ Medicare-for-All Proposal

Photo Courtesy of Molly Adams

By: Hayden Cunningham

In the 21st century, healthcare has been one of the primary issues in American politics. Medical technology has exponentially increased over the last few decades, changing the quality and amount of medical treatment available. While this has changed, the United States has questioned what role the federal government should play in a changing medical system.

Politicians over the last two decades have been calling for a radical change in the country’s healthcare system. While in office, President Obama passed the Affordable Care Act (ACA), a significant shift in the country’s healthcare system that enacted many regulatory changes. The most notable change was the individual mandate, a law requiring all citizens to have health insurance or be subject to a fine. This began a growing moment by progressives that the country’s healthcare system should be a communal effort; individuals should work together to provide benefits to society as a whole.

Since the implementation of the ACA, many Americans have expressed dissent with its features. Conservatives argue that the ACA is too restrictive and enacted too many government regulations. Progressives, however, argue that the act does not go far enough in expanding medical coverage. In recent elections, many democratic politicians are calling for a “universal healthcare” system similar to the medical care in several European countries. Political proposals vary in size and scope of this sort of system in the United States. Some suggest that the country maintains a private option for those who want to keep their current healthcare plans, while others call for a single-payer system completely funded by the government.

The current healthcare system in the United States is best-defined as a multi-payer system. A majority of individuals receive their health insurance through their employer, but many citizens are recipients of Medicare, Medicaid and the Veterans health Administration. Nearly 42% of individuals enrolled in Medicare still have a private option through a program called Medicare Advantage (Freed et al., 2021) Medicare for All is a single-payer system of healthcare. Under a single-payer system, every individual is provided full medical coverage regardless of their ability to pay. The government, not individuals directly, pay all medical costs.

Background

Senator Bernie Sanders is the most notable politician calling for a government funded single-payer system. His plan, nicknamed “Medicare for All,” would move every American to Medicare and would essentially outlaw private insurance companies. This plan would also abolish Medicare Advantage, changing the healthcare plan of the nearly 42% of Medicare recipients who have utilized this option. Senator Sander’s plan can be found on his official website. His proposal includes the following:

  • Create a Medicare for All, single-payer, national health insurance program to provide everyone in America with comprehensive health care coverage, free at the point of service.
  • No networks, no premiums, no deductibles, no copays, no surprise bills.
  • Medicare coverage will be expanded and improved to include dental, hearing, vision, and home- and community-based long-term care, in-patient and out-patient services, mental health and substance abuse treatment, reproductive and maternity care, prescription drugs, and more.
  • Stop the pharmaceutical industry from ripping off the American people by making sure that no one in America pays over $200 a year for the medicine they need by capping what Americans pay for prescription drugs under Medicare for All.

Senator Sanders’ main purpose of Medicare for All system is to redefine healthcare as a human right rather than a commodity. He argues that if a person is prescribed medicine to treat a certain illness or condition, that person should not have to pay for their treatment. Under the senator’s plan, no individual would be required to pay out of pocket cost for prescriptions, co-pays for doctor visits, or bills from hospital-based services (Sanders, 2021). This system would require all Americans to be subject to the healthcare plan provided by the government. The benefits in a patient’s plan would be determined by the Department of Health and Human Services, and private medicine would not be an option for consumers. Such a system in this country would radically change the status quo of medical treatment and could have many consequences.

Criticisms of the “Medicare for All” Plan

Critics of Medicare for All have expressed numerous concerns about the implementation of such a policy in the United States. Consequences can be predicted by evaluating Senator Sanders’ plan and analyzing single-payer systems in other western countries. Here are five major consequences that must be addressed:

  1. Artificially setting healthcare standards means that there are no built-in market signals

In a free-market, demand for a good or service sets the prices for that product. But Medicare for All would remove a free-market, thus removing those built-in market signals. The government will also be artificially setting the prices of products. This will cause strong resentment from medical companies. If these companies do not have a free-market to make profit from their R&D, they are losing incentives to create new medicine and new medical devices. With Medicare for All, there are no mechanisms for the market to achieve efficiency.

The biggest victim of artificial signals in healthcare (besides consumers themselves) would be hospitals. Hospitals, while providing medical care and treatment, are ran like a typical business. They also use market signals to determine the needs of patients. Without these, there could be disproportionate funding in certain areas. Certain geographical areas could see too many hospitals, while others see too few. Hospitals may also be over and under-funded compared to the financial needs required to treat patients.

The American Hospital Association and the Federation of American Hospitals conducted a study evaluating a recent congressional proposal called Medicare-X. This policy would drop the “over 65” requirement for Medicare and would allow any individual to enroll. The study had key findings showing that hospital-based services would be disproportionally affected by substantial increases in Medicare (Koenig et al., 2019).

Medicare-X would increase the number of hospitals with negative margins. Over the first ten years after implementation, hospitals would lose $774 billion from lower reimbursement rates. Hospitals in non-metropolitan areas would have the largest impact. The study also concluded that the gains of increasing Medicare coverage would be modest relative to gains that could be achieved by strengthening existing characteristics of the Affordable Care Act (Koenig et al., 2019).

  1. Complete regulation of the healthcare system may jeopardize the United States’ lead in medical innovation

The United States consistently leads all OECD countries in medical research and development; the U.S. published more medical research papers and creates more drugs and medical treatment annually than other countries (Health Expenditure and Financing, 2019). The U.S. also has better lifesaving care than other developed countries(Marie-Turner, 2012).This is why it is not uncommon for an individual from a country with socialized medicine to travel to the United States for surgeries. The current healthcare market gives incentives to medical companies. For example, companies are incentivized to create new drugs because of the profit they can receive and patent protection which allows them to be the sole provider for specified period of time. But when the government increases regulations and artificially sets the prices rather than the market, medical companies will lose their incentives to innovate.

  1. While a singer-payer system may be affordable for individuals, it is not affordable for the country

Bernie Sanders’ Medicare for All plan would cost an estimated $32 trillion over the next decade (Blumberg et al, 2019). To pay for this plan, the senator has proposed various tax increases. First, he proposes a tax increase on all individuals with an income over $250,000 a year (Sanders, 2021). Second, he proposes a “wealth tax” on all net worth over $50 million. Recently, democratic politicians have also proposed an “unrealized gains” tax on assets. These sources of revenue would assist the government in paying for a single-payer system. However, many studies suggest that they will not go far enough.

Raising taxes on the top 1% of income earners has many economic consequences including job loss and decreased innovation. Regardless, experts have estimated that a tax increase on only the top 1% of American income-earners would still not be enough to fund Medicare for All (Blumberg et al, 2019). While middle class Americans will spend less on their medical bills, they will spend more on taxes. The country will also significantly increase the national debt, raising questions about a potential financial crisis in the future.

There are many hidden overhead costs in a single-payer system as well. A paper by economist Patricia Danzon suggests that the cost of risk bearing would be no higher under private insurance than public insurance. This is because private insurance diversifies risk through the market, while public insurance shifts the risks to taxpayers (Danzon, 1992). The overhead cost of a healthcare system would be lower in a competitive market because the government-funded system is a monopoly that has less incentives than private insurers do to account for all costs. This was proven in the Canadian single-payer system. The overhead costs in Canada, when adjusted to include hidden costs, was higher than the overhead costs of U.S. private insurers (Danzon, 1992).

  1. Other countries have not yielded the expected benefits from a single-payer system

Politicians will often point to other countries that have implemented single-payer systems as an example of a working healthcare system. These are often the Scandinavian countries (Denmark, Norway, Sweden) and Canada.

The Canadian single-payer system has experienced significant challenges in recent years that can be used as warnings to the United States. In 2017, the average wait time for a person to see their primary care doctor or treatment by a specialist was 22.1 weeks (Barua and Moir, 2019). That is significantly longer than the average wait time of 24.1 days for U.S. metro areas.

Long wait times can be detrimental for the needs of a patient. They also increase the time to diagnose an illness or condition. For example, a blood test that would be routine in the United States could take a considerable amount of time in Canada. During that time, the patient is left undiagnosed. This could exacerbate whatever medical issue they may be having.

Extensive wait times are a result of several factors correlating with a single-payer system. First, not requiring any co-pays or costs could create a moral hazard problem. Individuals may be willing to engage in riskier behavior because their medical expenses will not require any out-of-pocket cost. Individuals may also be more likely to visit a doctor’s office for a minor issue that they normally would have shrugged off or treated with home remedies. The result of this is more crowded waiting rooms in doctor offices, urgent cares, and hospitals.

The most urgent cause of extensive wait times in Canada is their current doctor shortage. Because the salary of a doctor is tired to what the government is willing to pay for a specific procedure, many doctors are choosing to quit or retire early weeks (Barua and Moir, 2019). Less individuals are attending medical school as well. These shortages decrease the quality of care available and further extend waiting times for patients.

It is worth noting that it is impractical to compare healthcare systems of other countries to the United States. Scandinavian countries, for example, are significantly smaller in population, have a much smaller annual GDP, and are more homogenous both physically and culturally. Other countries also have the ability to “piggyback” off American innovation. The United States spends significantly more money a year in research and development of new drugs and medical devices (Health expenditure and financing, 2019. These products are consumed by other countries who have lower administrative costs.

  1. Government-sponsored medical care violates individual liberty

Currently, a vast majority of Americans receive their healthcare through their employer and 80% of them state they are satisfied with their quality of care (Gallup, 2019). In a government-sponsored healthcare system, individuals will lose their ability to choose their healthcare plan and their provider.

The United States is a strongly individualistic country. While other countries have societies with individuals willing to sacrifice individual choice for the greater good of the community, the U.S. has a culture of individualism. When President Obama signed the ACA into a law and stated, “if you like your doctor, you can keep your doctor,” Americans were outraged when this turned out to be untrue. Many were forced to change their healthcare plans and were not able to receive the benefits they initially had. Under Medicare for All, no individual will be able to keep their private healthcare plan. While proponents of Medicare for All have the main intention to decrease the number of those uninsured, it is never a fair to help one group of people at the expense of another. Rarely does a federal, one-size-fits-all policy leave a majority of citizens satisfied.

Potential Solutions and Recommendations

All healthcare systems have three goals: high quality, affordability, and universality. However, every system implemented can only achieve two of these three. For example, a healthcare system can be universal and affordable, but it will not have the highest quality medical care. This is the tradeoff seen in Medicare for All.

Proponents of Medicare for All like Sanders have prioritize universality. Sanders believes that declaring healthcare a right means that every individual will have full access to treatment. This is not the optimal way to ensure the best coverage. While the coverage would be universal, the quality of care will severely suffer. Instead, the United States should have the goal of ensuring our medical care is the highest quality first, then finding ways to reduce cost and maximize access to everyone.   

Maximizing affordability and universality can be done by treating healthcare like any other good or service. The United States should pursue a free-market approach to lower costs and make medical care more widely available. Competition between insurance providers and medical companies will bring down costs much like any typical product a consumer can purchase at a store. There will be those individuals who slip through the cracks and will not have coverage, but there are still ways for them to be assisted. Charities, religious organizations, and as a last resort local government can help assist the uninsured or those with medical bills they cannot afford. The free-market approach has problems, but those problems would be worse under a system that treats healthcare as a human right rather than a commodity.

The current Medicare program is already showing a lack of incentives for doctors. In 2018, more than one in five physicians said that they had to limit the number of Medicare patients they saw or refused to see them at all (2018 Survey of America’s Physicians, 2018). For primary care physicians, 32% said the same. Medicare for All could certainly lead to a huge shortage of doctors in the United States.

The proposal of Medicare for All is such a radical change of the country’s current system that it questions whether the change is necessary in the first place. A vast majority of this country is insured, and law requires emergency care for all who need it. Generally speaking, most Americans are receiving the care they need. Medicare for All may be an example of when the solution to a problem becomes worse than the problem itself.

Medical costs in the United States are expensive because our healthcare market is heavily regulated. To fix this, the current healthcare system needs to reduce the restrictions that prevent it from being a free-market. The lack of price transparency for medical treatment is an example of how the U.S. does not have a free-market in healthcare; prices will not be given to a consumer until after the service is performed. In no other market is this possible. Rolling back healthcare regulations and allowing greater competition is the best possible solution to lower prices. Ultimately, it can serve as the best mechanism for helping those who are unable to afford their medical care.

Conclusion

The U.S. cannot remove the incentives in place that have resulted in competent doctors and world-leading medical innovation. Creating a free-market in medical care has risks: there may be medical shortages at times and there will be those who do not have access to care. But treating healthcare as a right would more consequences than the free-market approach.

Treating healthcare as a commodity forces the country’s medical system to be reliant on a market process to create goods. This is what incentivizes medical companies, doctors, hospitals, to maximize profits and innovate. And as a result, consumers will benefit. Throughout history, competition in markets have created valuable goods and services that become affordable and available to the vast majority of consumers. Medicare for All would cause crowding out in the market that would reduce supply and cause medical shortages across the country.

Declaring something a right does not increase the supply of that good or service. Government-sponsored medical care would remove market incentives, bring irresponsible cost, create supply shortages, and would violate individual autonomy. Instead of declaring healthcare a right, the U.S. needs to focus on building a system that incentivizes competition and the creation of more goods and services. The free-market has been this country’s solution to maximizing quality, affordability, and access to a product. Healthcare should be no different.

References

Barua, B & Moir, M. (2019) Waiting Your Turn: Wait Times for Health Care in Canada, 2019    Report. Fraser Institute https://www.fraserinstitute.org/studies/waiting-your-turn-  waittimes-for-health-care-in-canada-2019

Blumberg et al. (2019) From Incremental to Comprehensive Reform: How Various Reform          Options Compare on Coverage and Costs https://www.urban.org/research/publication/incremental-comprehensive-health-reform-how-various-reform-options-compare-coverage-and-costs    

Danzon, P. (1992) Hidden Overhead Costs: Is Canada’s System Really less Expensive?             https://faculty.wharton.upenn.edu/wp-content/uploads/2014/10/hidden-overhead-costs_1.pdf

Freed et al. (2021) Medicare Advantage in 2021: Enrollment update and Key Trends Kaiser         Family Foundation https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2021-enrollment-update-and-key-trends/

Health expenditure and financing (2019) Organization for Economic Co-Operation and   Development https://stats.oecd.org/index.aspx?DataSetCode=SHA

Koenig et al. (2019) The Impact of Medicare-X Choice on Coverage, Healthcare Use, and            Hospitals American Hospital Association & Federation of American Hospitals             https://www.aha.org/system/files/2019-03/the-impact-of-medicare-X-choice-final-report-2019.pdf

Marie Turner, G. (2012) Though the U.S. is Healthcare’s World Leader, its Innovative Culture is  Threatened. Forbes https://www.forbes.com/sites/gracemarieturner/2012/05/23/though-the-u-s-is-healthcares-world-leader-its-innovative-culture-is-threatened/?sh=56010a4777eb

McCarthy, J. (2018) Most Americans Still Rate Their Healthcare Quite Positively. Gallup https://news.gallup.com/poll/245195/americans-rate-healthcare-quite-positively.aspx

Most Americans want universal healthcare but don’t want to abolish private insurance (2019) The Hill https://thehill.com/hilltv/what-americas-thinking/428958-poll-voters-want-the-government-to-provide-healthcare-for

Sanders, B. (2021) Health Care as a Human Right, Medicare For All. Bernie https://berniesanders.com/issues/medicare-for-all/

2018 Survey of America’s Physicians (2018) The Physicians Foundation             https://physiciansfoundation.org/wp-content/uploads/2018/09/physicians-survey-results-final-2018.pdf

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