As it was in the 2018 mid-term elections, health care and health insurance promise to be touchstone issues in the 2020 presidential and congressional elections.  A majority of Americans consider it to be one of the most important social issues facing the country today.    No other factor contributes more to a country’s vitality and productivity or to individual quality of life than good health.  In the wealthiest country in the world, many believe adequate and appropriate health care should be a right of every legal resident.  Let’s take a look at some of the issues surrounding the provision of universal health care.

Role of Government

There has been considerable discussion over the proper role of government in providing or insuring health care services.  The preamble to the U.S. Constitution states that one role of Government is “to promote the general Welfare” of its citizens.  To that end, governments at every level have taken on the responsibility of providing those essential services that every citizen requires but cannot realistically provide for themselves.  Our national defense is a prime example at the federal level and police and fire services at the local level.  You do not hear cries of socialism when governments operate law enforcement agencies or fire departments because most of us realize that these are essential services that are necessary for the common good and ones that we all may need at some point.  No one wants to hear, when they dial 911 to report their house on fire, “And will you be paying with cash or credit card today”.

We recognize that it really is not appropriate to profit on people’s personal tragedy, so most of us willingly pay taxes to ensure that we have these services available to us.  So it should be with health issues which create more personal tragedy than any other cause. Only the wealthiest of Americans can afford to pay out-of-pocket for the horrendously high costs of medical care in this country, but every American will require access to medical care at some point in their lives and for most this occurs on a regular basis.  Compare this to the relatively few who ever will ever have to call the police for help or have the fire department respond to a fire.

Taking an active role in ensuring that every American has access to necessary and appropriate health care should be and is a primary responsibility of federal, state and local government; and is one that all levels of government are currently engaged in through Medicare, Medicaid, CHIP, VA Medical Services, and local indigent care funds.

Health Care Costs in the U.S.

According to the Centers for Medicare and Medicaid Services (CMS), total U.S. health care spending in 2017 was $3.5 trillion.  That breaks down to $10,739 for every man, woman and child in the country.  The average amount spent on health care per person in other wealthy, developed countries (all of which have some form of universal health care) was $5280– about half of what we spend in this country.  CMS projects health care spending in the U.S. will rise 5.5% annually through 2026 to a level of $5.7 trillion a year, or a cumulative total of $45 trillion over the ten-year period.  It will then make up 19.7% of the U.S. economy, compared to 17.9% in 2016.

The primary drivers of this increase will be the aging baby-boom generation that will increase enrollment in Medicare, the ever-increasing costs of medical goods and services, and a higher level of disposable income.  Prescription drugs are expected to have the fastest growth over the next ten years (averaging 6.3% per year), due to higher drug prices and greater use of specialty drugs for genetic disorders and cancer.

So why does the U.S. spend so much more on health care than other developed countries?

According to researchers at the Harvard Chan School, what sets the U.S. apart are inflated prices across the board, specifically in the areas of drug prices, physician costs, hospital services, diagnostic testing, and the administrative costs of medical services and private insurance.  Researchers found that people in the U.S. use health care services at about the same rate as other developed countries but pay substantially more for the privilege.  For instance, a primary care physician in the U.S. made an average of $218,173 in 2016 which was double the average pay for a generalist in 11 other wealthy countries.  Administrative costs accounted for 8% of total U.S. health care expenditures while in these other countries they ranged from 1-3%.  In the U.S., we spent $1443 per capita on drugs compared to an average of $749 per capita in the same 11 other countries.  Medical procedures and diagnostic services were also comparatively expensive.  The average cost of a coronary bypass surgery in the U.S. was $75,435 compared to $15,742 in the Netherlands and $36,509 in Switzerland.  A CT scan averaged $896 in the U.S. compared to $97 in Canada, $279 in the Netherlands, and $432 in Switzerland.  While the quality of care in the U.S. was found to be comparable to other developed countries, we had the least accessible health care system and lowest rate of health insurance coverage.  We also have much higher mortality rates and a lower life expectancy.

So how did the $3.5 trillion in health care costs break down categorically in 2017?

• 5% ($1.14 trillion) was spent on hospital care, an increase of 4.6% from the previous year;
• 20% ($694.3 billion) went to ambulatory physician and clinical services, an increase of 4.2% from the previous year;
• 10% ($333.4 billion) went to the cost of prescription drugs, a 0.4% increase over the previous year;
• 5% ($432 billion) was spent on retail medical products;
• 5% ($227 billion) was spent on health insurance;
• 9% ($156.8 billion) went to nursing care facilities.

The remainder was divided between other professional services, dental services, home health care, durable and non-durable medical equipment, government administration, public health activities, investment, research, and structures and equipment.  These figures indicate that the biggest drivers of health care expenditures are hospital costs, physician and clinical services, prescription drugs, and administration, which also are the greatest targets of cost containment through a single-payer health insurance system.

Health Insurance

There has been much debate over how to provide health insurance—public vs. private insurers, employer-based vs. individual pay.  If we look at how medical spending broke down in 2017 based on type of insurance:

• Medicare spending was $705.9 billion, or 20% of national health expenditures (NHE);
• Medicaid spending was $581.9 billion, or 17% of NHE;
• Children’s Health Insurance Program (CHIP) was $16.6 billion, or 5% of NHE;
• Veteran’s Affair Medical Care was approximately $54 billion, or 15% of NHE;
• Private health insurance was $1,183.9 billion, or 34% of NHE;
• Out-of-pocket spending was $365.5 billion, or 10% of NHE.

So government programs already account for 57% of our national health expenditures every year.

President Obama (while advocating for a public option) chose–for pragmatic reasons–to retain an employer-based system in developing Obamacare.  It was in place and would cause the least disruption to the health insurance system in the country, (he was also under a great deal of pressure from the private health insurance industry).  There may have been good justification 50-60 years ago for businesses to provide or subsidize health insurance as a means to recruit and retain employees.  At that time most employees expected to work their entire careers with one company.  Unions were alive and well and had considerable power in negotiating for worker’s benefits.  The costs for health care were relatively low and companies could provide such benefits and still maintain profitability.  None of those factors are true today. Most people will have several employers in the course of their working lives.  Unions are no longer an effective tool for ensuring appropriate compensation and benefits for most workers.  And companies can no longer afford the ever-increasing costs of health insurance and still be competitive in a global market–with employer costs of health insurance expected to double in the next ten years.

Currently, 49% of Americans have employer-provided health care insurance.  In 2019, the average per-employee cost for employers was over $12,000 per year, with costs projected to increase 3-5% a year.  Small businesses pay 8-18% more than large firms and so typically offer less generous plans or no insurance at all.  Employers who offer traditional preferred provider (PPO) plans typically pay about 70% of the premium with the employee paying the balance.  In recent years employers have been shifting more costs to employees in the form of higher deductibles and providing less generous plans.  Deductibles for employer-sponsored plans now average $1491 for single coverage plans and $2788 for family coverage.  It must be noted that the cost of health insurance along with all other employer-provided benefits are part of an employee’s overall compensation package and could be paid out in the form of direct salary.

It was never the responsibility of business to provide for their employees’ health and welfare beyond paying them a salary, although it is obviously in their self-interest to have healthy and productive employees.  It is self-evident that American companies can no longer afford to provide the level of benefits that they did in the past and still be competitive in the global market.  Nor should they be expected to.

It is also self-evident that American workers need the benefits that most employers used to provide, particularly health insurance and pension benefits.  So, in an environment where most workers can expect to work for several employers in the course of their career (often in multiple states), what is the most logical and expedient way of providing those needs and how do we accomplish it in the most cost-effective manner.

This brings us to the question of public vs. private insurance.  The most significant factor in the cost of health insurance is the size of the risk pool being insured.  The larger the risk pool and the greater the ratio of relatively healthy to relatively unhealthy individuals, the more the costs of health care can be spread and the less each individual’s cost will be.  This belies the long-standing Republican approach of increasing competition by allowing private insurance companies to sell insurance across state lines.  Notwithstanding the fact that states set their own rules for insurance companies doing business in their state, bringing more companies into a state will only diminish the client base of each individual company, which essentially reduces the risk pool and lessons the ability of each company to negotiate for lower costs from health care providers.  A single-payer health insurance system covering all residents of the country would create the largest possible risk pool and allow the insurer to negotiate for the lowest possible health care costs, much the way Medicare and Medicaid do now.

Some argue that forcing health care providers to accept the current Medicare/Medicaid reimbursement rates would force many providers out of business and result in a shortage of providers and a lower quality of medical care.  There is certainly some validity to that argument.  I, for one, have always believed that workers should be compensated based partly on the social value of the work they do, and few would argue that the medical professions provide a high level of social value.  Medical practitioners should be well compensated based on their level of education, knowledge, and skill as well as the critical service they provide.  On the other hand, one can argue that the primary motivation for anyone entering a medical profession should be the desire to help your fellow man.  As noted previously, medical doctors in the U.S. make 2-3 times more than those in any other developed country, and our hospital costs are also 2-3 times more expensive.  A single-payer system would allow the insurer to negotiate reasonable reimbursement rates for providers that adequately and appropriately compensate them for their services, while standardizing costs on a cost-of-living basis throughout the country.  This would include the cost of pharmaceuticals.  This alone could reduce the cost of medical care by a minimum of 20-30%.

Another area of agreed upon savings would be profit margins and administrative costs.  In 2017, private health insurers made an estimated profit of $18.1 billion dollars.  Prior to Obamacare, administrative costs for private insurance companies were often as high as 30% which included the exorbitant salaries of their high-level administrators.  Under Obamacare, insurance companies must keep their administrative costs to 20% or less.  Even so, the administrative costs of Medicare run about $132 per person compared to over $700 a person for private plans.  In other countries with single-payer systems, administrative costs run 1-3%.  We must also consider that a “Medicare for All” type system would eliminate the need for Medicaid, the VA Health System, CHIP, and state and local indigent care funds, along with the administrative costs of running those programs.

Proponents of our current health insurance system argue that “socialized medicine” would result in longer wait times for care, due to higher utilization of services and fewer providers which would ultimately result in poorer quality health care.  In the first place, no one I know of is advocating for totally socialized medicine, only socialized health insurance.  We would still maintain our system of primarily private health care providers.  While it is true that with universal coverage we would undoubtedly see a higher level of utilization of health care services; with proper implementation those services could be delivered in a much more efficient and effective manner.

A single-payer system could prioritize and subsidize the use of preventive services and the expansion of our primary care system.  For instance, we know that obesity is one of the biggest factors in preventable chronic diseases and healthcare costs in the U.S., estimated to cost from $147-210 billion annually.  It is associated with job absenteeism costing employers approximately $4.3 billion a year, and with lower productivity while at work.  While a single-payer system would not, in itself, eliminate obesity and other lifestyle-related health issues, rewarding doctors and other practitioners for encouraging and assisting with lifestyle changes, plus including education and treatment programs in their covered services could substantially reduce these issues.  The same case can be made for treatment of mental health issues and substance abuse.

Another major cost factor is the trend toward consolidation in health care services.  An example is the two health care systems in my hometown of Boise, Idaho.  Sixty years ago, we had two stand-alone hospitals, both of which had been in place for half a century and provided full hospital care services.  As the area started to grow in population, both hospitals decided they needed to expand.  One proposed building a brand-new facility in West Boise; the other planned to expand in their current downtown location but was very concerned about losing market share to the other hospital.  It became a political football until the two hospitals decided that they would enter into a cooperative agreement which would allow both hospitals to expand, but would divvy up provided services between them.  One hospital would handle cancer treatment, the other maternity care, etc.  This worked well for a few years, but eventually each hospital started encroaching on the other’s designated areas and soon the cooperative agreement was dissolved, and full competition ensued.  Today these two hospitals have expanded into full health care systems by buying out smaller hospitals, specialty clinics and private practices.  They have expanded beyond the Boise area to the entire south central area of Idaho.  Whenever one expands into a new area, the other soon follows, which usually entails building new facilities equipped with all the expensive technological devices utilized in modern medicine.  The result is a great deal of excess capacity and redundant services, which in turn leads to increased costs for everyone using their services.  This same phenomenon is occurring all across the country.

A government-operated single-payer system of insurance would help curtail unnecessary expansion through its control over reimbursement rates, making it no longer financially rewarding.  They could also encourage and reward cooperative agreements between providers that matched capacity with demand and minimized redundancy.  They could facilitate the development of a national electronic medical records system which would allow you to go to any doctor in the country and have your complete medical history available immediately.  That coupled with a single-payer electronic billing system could cut administrative overhead by two-thirds and create the most efficient, cost-effective system possible.  The money that businesses currently spend to provide and administer employer-based health insurance programs could be used to increase worker’s salaries and cut the cost of goods and services.

The Cost of ‘Medicare for All’

The objection most often heard is that such a system would be unaffordable.  The Committee for a Responsible Federal Budget estimates such a plan would increase federal spending by 60% and would require the equivalent of tripling payroll taxes or more than doubling all other federal taxes.

The New York Times, in their April 2019 article “Would ‘Medicare for All’ Save Billions or cost Billions?”, cites several studies that place the cost of health care in 2019 at between $2.76 trillion and $3.87 trillion under a Medicare for All system.  They used a model that would have no deductibles or co-pays, would not restrict beneficiaries to networks of care, and would offer a comprehensive suite of benefits including dental care, vision and hearing care, transportation for disabled and low-income patients, dietary and nutritional care, long-term care, other long-term services and support as well as the traditional costs of hospital care, physician services, laboratory and clinical services, and pharmaceuticals.  The differences in their projected costs primarily center on whether long-term care is included and what reimbursement rate is used for hospitals and doctors.  Most argue that with Medicare reimbursement currently being about 40% below that of private health insurers; maintaining that rate would be unsustainable for many hospitals and medical providers, which is undoubtedly true.  Charles Blahous with the Mercatus Center at George Mason University, using the current Medicare reimbursement rate, came up with an annual cost in 2019 of $3.46 trillion.  The Urban Institute, figuring a 7% increase over Medicare rates came up with a figure of $3.87 trillion in 2019.

We have already stated that total annual national health expenditure was $3.5 trillion in 2017 and is projected to increase over 5% annually which adds up to a cumulative total of $45 trillion over the next ten years under the current system, and it will continue to increase every year thereafter.  Under this projection in 2018 we would be spending $3.69 trillion for Medicare for All.  Let’s assume that CMS negotiates a hospital and doctor reimbursement rate that equals what we are currently paying with the combination of private insurers and Medicare/Medicaid, and use that $3.69 trillion figure for the cost of Medicare for All in 2018.  Out of a total U.S. population of 327.2 million, we have approximately 153.34 million who are employed.  Their average salary, per the Census Bureau, is $56,516.  This equates to a total income from this population of $8.67 trillion per year.   According to the Bureau of Economic Analysis, total personal income in the U.S. in 2018 was $17.6 trillion, which means that about $8.93 trillion in personal income comes from sources other than wages.   We are currently spending $10,739 per person (about 20%) on health care.  Assuming a total cost in 2018 for Medicare for All of $3.69 trillion, we would be spending 21% of total personal income.

So, the question becomes how we equitably divide these costs across our population.  I would suggest that everyone who earns a wage should continue to contribute to the system through payroll taxes, including employers.  The contribution should be based on a fixed percentage of income.  Currently Medicare is funded by a 2.9% payroll tax shared equally by employer and employee.  I would continue that system with the percentage being adjusted upward to cover the cost of the program.  If the percentage started out at 21% that means both employer and employee would pay 10.5%.  So a person making $20,000 would pay $2100 a year; a person making $500,000 would pay $52,500, and this would be matched by the employer.  The cost for a person making the average U.S. wage of $56,516 would be $5934 for both employee and employer, or less than the average currently being spent for employer-provided insurance.    I would cap the taxable salary level at $500,000, which I feel should also be the cap for Social Security.  I would raise the tax on investment income to 40% with 20% going to Medicare for All.  Those currently on Medicare could continue to pay their current amount through their Social Security accounts.

There is also justification for beneficiaries to have some skin in the game if they can afford it; but we do not want a system that puts barriers in the way of low-income people getting preventive care or seeking treatment when it is needed.  I think a co-pay system is the most equitable way of insuring people can get care when they need it, while militating against abuse of the system.  I would suggest that those below 138% of the poverty line get 100% coverage with no co-pays or deductibles; those from 138% to 400% of the poverty line should pay a modest co-pay of perhaps $10.00 for doctor’s visits and medications, but receive 100% hospital coverage; those above 400% of the poverty line should pay a co-pay of perhaps $25.00 for doctor visits and medications, as well as a moderate deductible with an annual out-of-pocket cap of say $5000.  The private health insurance system could continue to provide supplemental policies to help cover these costs for those who can afford it.

While eliminating or reducing the role of private health insurance companies will displace their workers (about 500,000 in 2015), most of these individuals have skill sets that can be readily utilized in any business or government service and they should be soon absorbed into new jobs.  To minimize this displacement and disruption to the economy, it would make sense to implement a Medicare for All system incrementally.  As Bernie Sanders has suggested, it could be phased in over a 4-5 year period.  The bottom line is that we do not owe private insurance companies anything.  There are many other areas where these companies can and do provide a valuable service in protecting people against an unexpected loss, which is what insurance is all about.  Health problems, which most of us can expect at some point or other, does not have to be one of those areas.

So what would life under ‘Medicare for All’ look like:

• For starters, every fertilized human egg would receive the prenatal care it needs in order to grow to a healthy baby; and health issues could be addressed at the earliest possible time;
• Every infant would get the postnatal care, vaccinations, preventive care and nutritional assistance they need to grow into a healthy child and adult;
• Every mother would get the pre- and post-natal care they need to ensure a smooth, safe delivery and appropriate aftercare;
• All parents would get the information and guidance they need to maximize the physical and mental development of their children;
• Every person would get the preventive care and guidance they need to avoid lifestyle-related illness, and the early detection and treatment of both acute and chronic conditions;
• Health insurance would be completely portable so no one would be stuck in a job they do not like in order to maintain their health insurance;
• No one would have to make a choice between paying the rent or buying food and paying for their necessary medications or treatment;
• No one would have to declare bankruptcy because of medical expenses;
• Everyone suffering an illness or injury would be able to get the full range of treatment necessary to achieve maximal recovery;
• Everyone would have access to mental health and substance abuse treatment which could substantially reduce the level of gun violence and opioid addiction problems we have in this country;
• Everyone would have access to dental, vision and hearing care which could greatly increase their quality of life and level of functioning;
• Elderly people would have access to home health care, residential long-term care, and other forms of support they need to maximize the quality of their lives;
• Everyone would have complete choice over the doctors and facilities they utilize, and medical decisions would truly be made between a doctor, a patient, and their family—not an insurance company;
• Over time, the emphasis on preventive and primary care will actually reduce the overall costs of medical care in the country and significantly increase the productivity and vitality of its residents; which will have a direct impact on personal and business income, crime, substance abuse, mental health disorders, and overall personal development and life satisfaction.
• Bottom line, the country as a whole will be much better off and it will be well worth both the cost and initial disruption.

Conclusion

We cannot afford to wait any longer for comprehensive health care reform.  This is not a time for half measures.  We need to do it right and do it now.  It is time for Congress to show the American people that they actually can act in a reasoned, rational and bipartisan fashion to develop a functional, comprehensive and efficient health care system that meets the needs of the American people as a whole.  We can use the systems currently in place in Canada and Europe as models and find ways to avoid the problems those systems have.  And if we do it right, we can reduce the overall cost of the system as a whole and significantly increase the quality of life of the population and the productivity of business.  I am more than willing to pay my fair share to support a comprehensive system that ensures adequate and appropriate medical care for every American, but I will not support any politician who puts the profits of private companies or highly paid medical providers above the needs of the common citizen.