Healthcare is shaping up to be one of the most important election issues as we saw in the second round of Democratic debates. In 2017, we spent $3.5 trillion on healthcare which represented about 17.9% of the economy and on the current track, this is expected to grow to 19.4% in 2027. And depending on your health status and how you access care, you either love what you have and want to keep it or hate it and want it changed; passion runs both ways.
All of the Democratic candidates advocate more government involvement in healthcare and that runs the gamut from Joe Biden’s “Obamacare 2.0” to Bernie Sanders’s phase-in of “Medicare for All” over four years. Sanders believes this can be done with no copayments or cost-sharing of any kind by the patient.
Obamacare 2.0 involves the introduction of a public option in which individuals can elect to buy into the public plan. And Kamala Harris’s plan is a public private option which keeps private insurers in the system similar to the Medicare Advantage plans which are now available alongside Medicare and would have a 10-year phase-in period.
But to be clear, all of these options would involve significant tax increases. All call for the repeal of any Trump tax reductions and more. Sanders suggests a 4% tax increase for anyone earning over $29,000.
But let’s take a step back – is this a better system or are we just proposing to change to a system which has its own set of evils? Here are a few to look at:
- No doubt the biggest complaint will be tax increases. Estimates show that a government takeover would be expensive, and my guess is that the estimates are low-balled to make the proposal look better.
- We are more likely headed to Medicaid for All, rather than Medicare for All. Medicare is a rules-based reimbursement system whereas Medicaid is a tightly managed care system with restricted access and sometimes less than optimal provider options. Medicaid would be much more affordable, but Americans are used to getting care where they want it and from whom they want it. I would urge all of us to be careful what we wish for. It would be difficult to “keep what you have” for an extended period time.
- It is clear that government-sponsored programs are reimbursing care at a lower rate than private payers. This is possible because of cost-shifting to private plans. Under a single-payer arrangement, the cost of Medicare and Medicaid will no doubt increase significantly.
- Politicians often criticize profits in healthcare, but it is important to realize that this profit potential gives rise to innovation. As private company profits are squeezed, I wonder what this will do to innovation. No doubt it would be stifled at least a little.
- State budgets rely on health insurance premium taxes; single-payer would eliminate this cash flow and the states will need to raise taxes somewhere to pay to run their services.
We need a balanced approach to healthcare reform, and I believe that the government’s role should be limited to oversight balancing the private sector providers. Complex problems can’t generally be solved with simple solutions – and this is a whopper.