So here is the deal with U.S. healthcare. There are about 330 million Americans. Employers provide nearly half with access to healthcare, close to 40% are covered through government-funded programs, and remaining Americans either purchase individual coverage (much of which is subsidized under ACA) or are uninsured.
Medicare provides coverage for nearly 60 million Americans (and Medicaid over 70 million). It is estimated that Medicare and Medicaid combined paid hospitals about $77 billion less than the actual cost of care. Medicare pays about 40% less than private insurance does for hospitals and about 30% less to physicians. Today, these lower reimbursement rates are subsidized by employer plans.
So let’s say that Medicare on average is 35% less expensive. Politicians look at this and think it’s a great idea to simply shift everyone to Medicare, except hospitals and other providers can’t possibly afford to reduce costs for all their patients by 35%.
And unwinding our healthcare system would be nightmarish – employers provide roughly 165 million people with access to healthcare. Around 60% of this is through self-insured plans and a significantly lower amount is through insured small group plans. 11.4 million people purchased individual coverage through 50 state exchanges for 2019. Governments provide coverage mainly through Medicare and Medicaid (which is actually state-based with the federal government providing partial funding), but also through Children’s Health Insurance Program (CHIP), the U.S. Department of Veterans Affairs (VA) and various other government plans.
Medicare made up 15% of the federal budget in 2017 and Medicaid/CHIP/ACA subsidies accounted for 11%. A federal takeover of healthcare would make healthcare the overwhelming focus of our government and consume the vast majority of our taxes (which would need to go up quite a bit).
The complexity is overwhelming. I tried to explain this to the CFO of a European-based client and his head was spinning. I don’t think that Medicare for All is feasible – economically or politically. However, it will be tempting to move to a public option, which allows employers or individuals to buy into the federal programs. We should be very careful with this… I see where it would go – significantly higher federal spending on taxes to fund healthcare and potentially rapid erosion of our current system. We have woven a complex web. Unwinding it will take a lot of time and could be disastrous.