Nov, 02 2018

CMS BLOG: Medicare for All? Just another name for a government-run, single payer system

Seema Verma,
Administrator, Centers for Medicare & Medicaid Services 

November 2, 2018

Medicare for All? Just another name for a government-run, single payer system.

If your instincts tell you something is too good to be true, then maybe it is. When listening to those advocating ‘Medicare for All’ it’s good to be skeptical about their promises.  As head of the agency that serves over 58 million Medicare beneficiaries, I deal first-hand with the challenges of government run healthcare.

Medicare has a plethora of misaligned financial incentives that work to increase costs for taxpayers and beneficiaries, and create challenges related to fraud and abuse. Less than two-tenths of one percent of Medicare’s one billion annual claims are reviewed for program integrity issues. Those advocating ‘Medicare for All’ due to lower administrative costs need to understand those costs are lower principally (or: in part) because of an under-funded, inadequate system of review to detect fraud and abuse. The law doesn’t allow CMS to do the types of reviews that have become routine in the private sector, leading to a high frequency of improper payments, and more fraud and abuse. Medicare also pays differently for the same service in different settings, reducing competition and increasing market consolidation, which leads to higher prices for the entire system. Just look at the decreasing numbers of doctors.

Medicare’s system of paying for drugs today is another prime example of what doesn’t work.  As President Donald Trump explained in his recent address, Medicare is a price taker for drugs administered in physicians’ offices under the Part B program.  This results in other countries getting a much better deal than America; we essentially have been subsidizing other countries for years. 

What’s worse, Medicare actually fuels higher drug prices, by paying doctors and hospitals an add-on fee for drugs that is set at a percentage of the cost of the drug.  With this setup, it’s no wonder that prescription drugs represent Medicare’s fastest-growing area of spending, with spending on Part B drugs increasing at an annual rate of 9.8 percent from 2011-2016, from $17.6 billion to $28.0 billion.  Instead of expanding a flawed program, the Trump Administration is committed to fixing the problems in the current system, such as through the historic International Pricing Index model intended to lower drug costs in Medicare.

However, drug costs aren’t the only challenge. The Medicare trustees have voiced concern about the solvency of the entire program. ‘Medicare for All’ would further put the program’s funding into jeopardy. 

To understand the world we would live in under government-run ‘Medicare for All’, it’s important to understand the market dynamics in place today. Doctors receive less from their Medicare reimbursement than they do from private insurance for the same services. In essence, 170 million Americans in private insurance subsidize the care provided to 60 million Americans in Medicare.

Under ‘Medicare for All’ you either take private insurance away from those 170 million Americans, or greatly restrict access to it, meaning there is no relief valve for physicians facing up to 40 percent payment cuts.

You can see where this is heading: doctors will be forced to provide care for substantially lower fees for everyone, driving many out of the practice of medicine. All Americans will soon have fewer physicians who will see them. Wait lists will become a regular feature of American care. And unlike for Canadians and Europeans, who can come to America to avoid a wait list for an important procedure, there will be no America to serve as our saving grace when wait lists for procedures become part of the American system of health care. Just look at other socialized health care systems around the world - under ‘Medicare for All’ patients could wait up to six months or longer for a hip replacement, or worse, up to 48 hours for an emergency room operation. 

Without higher premiums from commercial insurance subsidizing today’s Medicare population, Medicare could be severely undermined for the seniors who use it today.

Consider also the cost to taxpayers. One recent study estimates ‘Medicare for All’ would cost $32.6 Trillion.[1] That means, if implemented by 2022, healthcare spending would grow from 28 percent of the federal budget to 58 percent of the budget. Imagine funding the rest of government, from defense to education, at a level 30 percent less than today, or imagine a $2.5 Trillion tax hike, because the cost of health care to the government would more than double.

Ask yourself why proponents of ‘Medicare for All’ are advocating such a radical reform of health care just five years after the full implementation of the Affordable Care Act (ACA), often referred to as Obamacare. It is certainly not because the ACA has worked.  After the ACA took effect, premiums skyrocketed and choice dwindled.  Average premiums on the Federal exchange more than doubled between 2013 and 2017 and, today, half of counties across America have just one insurer offering coverage on the exchanges. While the Trump Administration has worked to strengthen the markets and helped reduce premiums by two percent, premiums still remain far too high.  Sadly, instead of recognizing the problems with the ACA – namely the implementation of government-run, highly regulated insurance plans – ‘Medicare for All’ proponents want to double down on what has failed.

We need to focus on a conversation about the drivers of health care costs in America, where health care spending is on course to eclipse one-fifth of national GDP by 2026.  The answer to the skyrocketing cost curve is not greater government intervention leading to the evisceration of the private insurance marketplace, but just the opposite: increase choices, unleash private competition, innovation, and lighten regulations on plans, doctors and providers.

It’s time to move to a patient-centered, value-based system. Let’s give consumers the information and tools they need to make decisions about their care. Let’s create a more robust, private market with competition for consumers, and a variety of benefit plans. Let’s stop government intrusions into care, where Washington bureaucrats set the price of plans and limit the options states can offer.

‘Medicare for All’ is Obamacare on steroids. It could destroy Medicare for those who need it today, our elderly population, by doubling down on the worst aspects of Obamacare. It’s time to change course, with fewer edicts from Washington, more benefits for patients, and increased competition to reduce premiums.  

 

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[1] https://www.mercatus.org/publications/federal-fiscal-policy/costs-national-single-payer-healthcare-system