“Medicare for All” may be one of the hottest topics on every political agenda in the next several months, but a May 2019 report from the Congressional Budget Office (CBO) indicates we are nowhere near an answer on how the concept of Medicare for All may actually play out.
The recent CBO report posed a series of questions that any proposed legislation would need to address. We’ve outlined the potential impact and additional uncertainties for various stakeholders as follows:
How would the government administer a single-payer health plan?
Whether administered on a federal level, state level, or both, a single-payer health plan would create significant administrative costs both up front and on an ongoing basis. Just looking at current Medicare administrative costs, the Centers for Medicare & Medicaid Services (CMS) reports 6% of expenditures are administrative in nature while many private insurers report administrative costs between 12% and 17%. This private administration includes profit margin to private insurers but it is unknown if a government-administered plan would generate enough efficiency to lower administrative cost estimates.
Who would be eligible for the plan?
Would all Americans be required to participate or would an opt-out be available? How would non-citizens be allowed to participate, if at all? Enrollment verification would ease up from current income qualifications for Medicaid but to accomplish that, all Americans would have to automatically be enrolled either at birth or at issuance of a Social Security Number.
What benefits would it cover?
It’s clear the ACA has paved the way for a framework of covered services, but with a single-payer system, a tremendous responsibility would lie within that system to determine which new services or technologies would be accepted. What would that process look like and what would the decision-making process look like? The report cited other countries with single-payer systems as examples. Would benefit types and coverage levels vary by state?
What cost sharing, if any, would the plan require?
The CBO report cites the relationship between lower cost share for services and increases in utilization as well as the relationship between increased cost share and financial strain for individuals, however no real reconciliation for the conflicting issues. Lowering cost share could increase utilization and costs but also could be limited by the supply of available providers, something provider groups concerns about as well. The American Medical Association (AMA) has supported an improvement to the ACA over a Medicare for All strategy in their advocacy work and also expressed concern over provider shortages even before considering a single-payer system. Provider shortages could not likely be combated by increasing reimbursements to providers themselves without risking increasing cost share from participants, but the ACA framework for maximum out-of-pocket limits’ actuarial value are likely to be a starting point for the design of a single-payer plan option.
What role, if any, would private insurance and other public programs have?
The CBO report surmises that private insurance may be limited to supplemental, substitutive or concierge-style benefit enhancements. Although private insurance options are common in other countries with single-payer systems, initial proposals for such a system in the U.S. have limited or prohibited such plans as interfering with the success of the Medicare for All ideal. It’s clear that other public programs that provide similar care (Medicaid, Tricare, veteran’s benefits, etc.) may be redundant and unneeded if a single-payer system is put in place.
Which providers would be allowed to participate, and who would own the hospitals and employ the providers?
The current Medicare and Medicaid systems allow some providers to balance bill for charges over the reimbursed amount in some instances. It’s unknown how to best manage the idea of a “participating provider” in a single-payer system and how those mandates on providers and facilities will be carried out if they are to be required to accept the reimbursement rates as full payment. The CBO offers different scenarios for hospital ownership and provider employment, but suggests the most likely scenario would be to keep the current ownership structure of 70% privately-owned. The Veterans Medical Administration owns facilities and employs all providers though and that may be the path the single-payer proposals pursue going forward.
How would the single-payer system set provider payment rates and purchase prescription drugs?
A variety of reimbursement methods are discussed in the report but each suffers from the desire to incentivize providers to deliver services while still managing costs. Different national systems currently in operation have attempted to balance these desires in different ways. It’s likely that a proposal for prescription drug purchasing would model other national programs and negotiate on a national level. This also has varying pros and cons.
How would the single-payer system contain health care costs?
Organizationally managed budgets and utilization management are two suggested methods in the report but it’s noted that “although such techniques could contain costs, increasing financial pressure for providers to lower their costs could adversely affect access to and quality of care by causing providers to supply less care to patients covered by the public plan. Less spending on medical services could also alter manufacturers’ incentive to develop new technologies or providers’ incentive to invest in capital, which could affect patients’ choices over the longer term.” If lowering costs and improving care were an easy problem to solve, I suspect a single-payer system wouldn’t be needed.
How would the system be financed?
Saving the best question for last, the CBO report discussed the significant increase in public spending needed to nationalize health care while private spending would be dramatically decreased at the same time. Implementing additional taxes, shifting cost share or introducing governmental borrowing are options to finance the system, none of which sound terribly appealing. There is no estimate of overall spending on medical care that indicates a nationwide decrease as many administrative challenges remain.
The CBO study did discuss at length a multipayer system that achieves universal coverage, an option that many other nationalized systems use. The current US system is a multipayer system but does not achieve universal coverage for all as the uninsured rate decreased initially with the onset of the ACA but has increased according to recent reports.
The Future of Medicare for All
In the overall problem of tackling high healthcare spend and the desire to maintain high quality, effective care for all Americans, the unanswered questions abound. No single proposal to solve the problem has been detailed enough or supported enough to be evaluated by the CBO in detail, but the coming election cycle will be telling. Aldrich Benefits expects the discussion of universal healthcare to be a hot topic on both sides of the aisle and we will continue to monitor its trajectory. With more than one million more jobs available than workers to take them, Aldrich Benefits does not foresee much incentive on the employer side to wait expectantly on a national solution. As employers seek to effectively recruit and retain employees and drive organizational growth, compensation and benefits will continue to play an active role in the employee experience.
Meet the Author
Aldrich Benefits LP
Mandi has over a decade of experience in the employee benefits world. Prior to joining Aldrich, Mandi served as an account manager at a brokerage firm in Portland, Oregon, specializing in health and life insurance for groups ranging from 100-4,000 employees. Her experience also includes providing benefit calculations for retirement plans at a large actuarial…
- Self-funding and complex contracting
- Consumer-driven healthcare plans
- Plan compliance
- Financial Analysis