A recent Associated Press story describing a study of Sen. Bernie Sanders’ proposal for Medicare for all carried the alarming headline: “Medicare for all projected to cost $32.6 trillion over 10 years.” Pretty scary stuff.
But the study, as reported, was misleading. Let’s correct that.
It’s true that transformation from a complicated mixed public-private system of financing health care to one that treats medical care as a public good would move a great deal of money from private, for-profit budgets to public nonprofit budgets and would result in a significant increase in taxes. But there is a big savings to doing just that. We who buy medical goods and services — including patients, employers, those buying health insurance and taxpayers — will save.
Replacing insurance with taxes will eliminate the need for much of the administrative and other sources of waste in our health care system. In fact, the study found that Medicare for all would reduce overall health care spending in the U.S. by $2 trillion over 10 years, compared to our existing system.
This waste is incurred by patients, doctors, hospitals and insurance companies as they each try to navigate the health care maze in order to maximize their revenue, and employers, patients and employees as they struggle to pay for medical care. According to the Medicare Trustees Report for 2018, Medicare’s administrative costs accounted for just 1.14 percent of all spending. But private insurance companies struggle to keep administrative costs below 20 percent. Those administrative costs do not buy a single bandage or aspirin.
A 2012 National Academy of Medicine study of America’s $3 trillion health care system identified $750 billion of waste. “Excess administrative costs” account for $190 billion. Another $575 billion is wasted by “prices that are too high,” inefficiently delivered services, unnecessary services, missed prevention opportunities and fraud.
Many of these costs are directly attributable to the use of insurance to finance medical care. Insurance requires the slicing and dicing of the insured population into “risk pools” to facilitate the pricing of premiums in our fragmented health insurance system. Medical underwriting requires a great deal of intrusively detailed information about those covered and armies of actuaries. All of that would be unnecessary and would disappear in a fully tax-funded system, because all beneficiaries would be pooled into a single fund. Everybody would be covered for life.
Insurance underwriting is not the only way to finance medical care. Instead of segmenting risk into multiple pools, Medicare puts all beneficiaries into one risk pool and payment for health care is made out of a federally administered — and controllable — fund.
A more unified system would produce many other benefits. Everybody in, nobody out would greatly increase the popularity, and therefore political stability, of our health care system. That’s what our half century of experience with Medicare has demonstrated.
A single payer negotiating prices for medical services, devices and drugs would save billions. Insurance administrative costs would drop from more than 20 percent to between 1 to 2 percent. Unpopular restrictions of pre-existing conditions and other medical underwriting would be eliminated.
New tools would be created to control rising costs. No changing your health care as individual circumstances change. “Job lock,” when employees aren’t able to freely leave a job over fear of losing health insurance, would be eliminated, decreasing business costs and increasing opportunities for entrepreneurs.
In fact, with everyone in and nobody out and everyone contributing, we could create a central database that would make the detection and remediation of fraud, waste and abuse — rampant in our current system — much easier.
Out of the savings generated, we could provide real primary prevention of disease, and gradually expand coverage to dentistry, eye care, long–term care and other beneficial services that reduce the demand for more expensive medical care.
Supreme Court Justice Oliver Wendell Holmes once said, “Taxes are the price of civilization.” We fund many popular services through taxes, including police, fire fighters, the military, schools, libraries, courts, roads and environmental protection. All are essential to a civilized society.
In the rest of the developed world, health care costs less and delivers better results. As the study actually shows, health care for all is better for the community and the economy.
And after it’s in place, we will all be thankful and will all wonder why it took so long.
Phil Caper is an internist and founding board member of Maine AllCare.
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