Cover Story

Medicare Expansion Steps Into the Political Limelight

Democrats are running on Medicare for All—or extending the seniors’ program to the merely middle-aged—or resurrecting a ‘public option’. Republicans say Medicare expansion would mean government intrusion and inefficiency. But politics aside, how would these Medicare expansions work?

Timothy Kelley
Senior Contributing Editor

Sometimes it matters politically. Other times it doesn’t. But in this intensely partisan season, health care—and more specifically, Medicare—is once again very much in the game.

With Republicans struggling to defend a controversial president and signs pointing to a big opportunity in next month’s elections, Democrats are finding that health care reform is a blue-hot issue. And it’s hottest when they speak of building on a 53-year-old program that, all told, has a pretty good rep for delivering health care to the nation’s seniors. As Paige Winfield Cunningham wrote in the Washington Post’s “Health 202” blog in April, “If you want to sell Americans a bill expanding the government’s role in health care, be sure to include ‘Medicare’ in the title.”

Smart packaging, yes, but some experts think it’s smart substance, too. Writes Princeton economist Paul Starr in this August’s Journal of Health Politics, Policy, and Law: “From a political and economic standpoint, the fundamentals favor Medicare as a platform for both expanding coverage and containing costs.”

Matthew Fiedler

Medicare expansion comes in two basic flavors, says Matthew Fiedler of the Brookings Institution. One is a true single-payer approach. The other allows individuals to buy into a public plan that competes with private insurers.

Indeed, building on Medicare is one thing current coverage-expansion proposals have in common—with one Medicaid-based exception. Aside from that, they’re a dizzying array, but they come in two basic “flavors,” explains Matthew Fiedler, a fellow at the Brookings Institution’s Center for Health Policy. “One is a true single-payer approach, in which all services would be provided through one public insurer. Private insurance would no longer exist, and all the costs of financing that public coverage would be borne, typically, by the federal government. The other flavor would give individuals the option to buy into a public plan that would compete alongside private insurers. Many plans of this kind would provide additional subsidies to make purchasing coverage more affordable, and some would restore an individual mandate.”

Nine years ago, when the Affordable Care Act passed, even a public option—a light-touch choice for increased government participation—proved politically unpalatable. So why are Democratic candidates excited today? Polls are one reason. In a recent Kaiser Family Foundation survey, a “Medicare for All” proposal to expand coverage won the approval of 59% of Americans, including 58% of political independents, while an even heftier 75% gave the nod to a public option plan. Another reason is the “in-your-face” political era we live in, when there seems to be no payoff for playing nice with the GOP. Democrats remember the Obamacare struggle, when they took pains to craft a health care reform proposal built on market principles dear to Republican hearts and the Republican idea of an individual mandate. The tally of Republican votes it got them? Zero.

Meet M4A

As proposed by Sen. Bernie Sanders, Medicare for All would extend coverage beyond seniors to all Americans by establishing the U.S. government as the single payer. It would eliminate private insurance with its concoction of premiums, deductibles, coinsurance, and copays. Sanders also wants to include coverage for dental and vision care. As Starr points out, it’s a bit of a misnomer because Medicare is not really a single-payer program, but one in which a third of beneficiaries now buy private coverage through Medicare Advantage plans. The proposal might be more accurately named “Medicare’s public plan for all.”

Whatever it’s called, it’s riding higher than ever. When Sanders introduced his bill in the Senate in 2013 he found no cosponsors. The version introduced in September 2017—S. 1804, the Medicare for All Act of 2017—had 16. “There’s never been as much support for single-payer as there is now,” says Sally Pipes of the conservative Pacific Research Institute—and she’s no booster but a foe who believes that “M4A”—as some insiders call it—is a terrible idea.

H.R. 676, the main Medicare for All legislation in the House, now boasts 121 cosponsors—60% of the Democratic caucus. It’s not a true companion bill to the Sanders measure. According to Edmond S. Weisbart, MD, a St. Louis family physician who chairs the Missouri chapter of the pro–single-payer group Physicians for a National Health Program, the House bill is a bit more robust in benefit design in some areas—it includes long-term care, for example—while the Senate bill is more explicit about covering reproductive choices for women. Implementation schedules also differ. Under the House measure, the new system would go “live” after two years, while the Senate bill provides for a four-year transition as different age cohorts, starting with the 55–to-64-year-olds, would migrate into the new federal coverage.

Enactment of either measure would delight Weisbart—and horrify AHIP, the health insurance trade group. “Frankly, it would be dramatically different,” says Kristine Grow, AHIP’s senior vice president of communications, “and the average American would lose a lot in a transition to single-payer.” She says it would be better to build on a current health care system that successfully fosters “quality, choice and people’s control over their own health care decisions.”

Choice? Weisbart is glad to have the topic brought up. He says 20% to 31% of today’s health care dollar goes to inefficiencies and redundancies in administration, and he invokes the not-uncommon scenario of a patient arriving at his primary care physician’s office to see a sign declaring that his insurance plan is no longer accepted—because this year its contract is no longer a worthwhile deal for the practice. “That makes me sick,” says Weisbart, arguing that true choice of doctors and hospitals would be enhanced, not diminished, in a single-payer world.

“When the government is the sole provider of anything,” counters Pipes, “there’s always inefficiency, and cost is always greater than projected.” She believes single-payer would result in long waiting lists for medical procedures and decries the Sanders program’s high cost, citing a study released in late July by the Mercatus Center at George Mason University that put M4A’s price tag over the next decade at $32.6 trillion. Yes, Mercatus is partly funded by the conservative Koch brothers, but chief author Charles Blahous is a reputable economist, she says, and his estimate is very much in line with that of a similar Urban Institute study of Sanders’ 2016 campaign proposal.

The other side has a “yes, but” too. “I want to thank the Koch brothers,” Sanders wrote in an email to supporters. While that $32.6 trillion figure makes for scary headlines, he points out that it’s actually $2 trillion less than projected health care spending under the present system. And experts back up Sanders on that one. As Kaiser Family Foundation analyst Larry Levitt told the Washington Post, the Mercatus study is “a surprisingly positive view of Medicare for All from a very conservative research institute.” Weisbart adds that there are now 27 published studies showing that single-payer would be a net money saver.

“A single-payer system would be simpler to administer than a system that involves multiple insurers—I don’t think there’s any question about that,” says Fiedler at Brookings. “But the flip side is that having multiple types of payers may provide greater opportunities for innovation.” Weisbart retorts that the innovations people care about most—new drugs and devices and advances in the quality of care—would be unharmed by a switch to single-payer. And health insurance innovations geared toward wellness and prevention, he says, would actually be encouraged. Insurers implementing such programs today face a penalty, he says, because they’re spending to improve the health of consumers, at least 20% of whom will be their competitors’ customers two or three years from now. A single-payer system, he says, would remove that disincentive and make prevention pay.

While theoretically private insurers would vanish in a single-payer world, in reality there might still be a role for them, says Fiedler. Noting that a substantial portion of Medicare’s claims processing is done today by private firms, he believes existing insurers might survive by applying their expertise in this area to become vendors for these outsourced services. “Or,” says Weisbart, “if companies couldn’t do it at an appropriate price, it might be something the government decided to in-source”—that is, even the paperwork might be done in federal offices.

Concludes Fiedler: “If you could snap your fingers and implement a single-payer plan, it would achieve essentially universal coverage, which would improve financial protection against high medical bills and improve access to care. Those are two very important goals.”

Anything that’s seen as threatening employer-­sponsored health insurance will be politically difficult to pull off, says Harold Pollack of the University of Chicago. Especially once financing becomes part of the discussion.

But the finger-snap is the rub. As Grow at AHIP points out, millions of Americans are now relatively satisfied with their health insurance. “If you start to do things that threaten people’s employer-based coverage,” says Harold Pollack, a professor of public policy at the University of Chicago, “I think the politics will quickly become very difficult—especially once the financing piece becomes part of the discussion.” Pollack likens all the excited M4A talk to a discussion of whether a Mars-bound rocket ship should have a round doorway or a square one for better egress to the Martian countryside—neglecting the problem of getting to Mars in the first place.

It’s widely agreed that implementing the Sanders proposal—or anything like it—would require the largest tax increase in America’s peacetime history.

Though funding details aren’t fully clear, it’s widely agreed that implementing the Sanders proposal—or anything like it—would require the largest tax increase in America’s peacetime history. “Of course it would,” says Weisbart. “It’s a tax-funded program; that’s the whole point. But it’s not taxes on top of what people are paying today. It’s taxes instead of what they pay in premiums, copays, and deductibles.” And he says even doctors—those traditional boosters of private enterprise—are coming around to the view that such a transfer might be a good thing. Weisbart cites Merritt Hawkins surveys showing that while just 42% of physicians favored Medicare for All in 2008, 56% do now.

Still, as George W. Bush administration veteran Blahous writes, “the primary effect here is the expansion of the federal government.” Indeed, is America—where millions still share Pipes’ suspicion of government-­run programs—ready to turn one-sixth of its economy over to the feds? Given the ACA’s history, the M4A proposals may resemble someone whose spouse flipped out when she tried to smuggle a kitten home—so she brought a 150-pound St. Bernard into the house instead.

The ‘public option’ options

Medicare Extra. “We have to shore up the ACA marketplaces and help the disabled and people who have costly health problems,” says Pollack. “But what I’m looking for are ways we can make real progress that’s more than tinkering with the ACA.” That’s why Pollack smiles on Medicare Extra, the plan proposed by the Center for American Progress, a liberal think tank.

Medicare Extra, which hasn’t been turned into a piece of legislation, would offer access to all providers that accept Medicare, but would leave private insurers in place, controlling costs by requiring that payments to providers by private insurers not exceed those of the public plan. Coverage would include ACA’s essential health benefits plus dental, vision, and hearing services. Care would be free for the poor, while premiums would rise with affluence to a peak of 10% of income. Employers could participate by continuing to offer private insurance, by sponsoring employees’ enrollment, or by letting employees sign up and—if they have 100 employees or more—reimbursing the government for their coverage. Says Fiedler of Medicare Extra: “It would increase subsidies and include something sort of like an individual mandate.”

Pollack finds Medicare Extra more practicable than Medicare for All, but not because the latter program is the bogeyman some critics claim. In the 2016 Bernie versus Hillary primary battle, he says, almost all policy wonks were on Clinton’s side. “That was very unhealthy,” he says, “because it made it hard for progressives to offer proposals that were well-grounded in their policy analytics but also spoke to the values of progressive Democrats—and it also made some moderates think progressives’ ideas were more stupid than they actually were.” Policy wonks and progressive Democrats need to start holding each other accountable, says Pollack—and the Medicare Extra proposal is a good place to start.

Medicare-X. Unlike the 16 senators who have climbed aboard the Bernie bandwagon, Hillary’s 2016 running mate, Virginia Democratic Sen. Tim Kaine and his colleague, Colorado Democratic Sen. Michael F. Bennet, are treading more lightly—and it’s no coincidence that both come from swing states with large rural areas.

Unveiled in October 2017, Medicare-X would allow the under-65 crowd to buy into the federal program and use Medicare providers paid at Medicare rates. Low-income workers would get tax credits to help them pay premiums, and the plan would add such services as pediatrics and maternity care that obviously aren’t big priorities for seniors. In its first years, this option would only be available in counties that have zero insurers or just one insurer offering coverage on the ACA exchange. By 2023 Medicare-X would be open to the entire country, and starting in 2024 small businesses could also enroll.

The Choose Medicare Act. Introduced in April by Sen. Jeff Merkley, an Oregon Democrat, and Chris Murphy, his Democratic colleague from Connecticut, with 11 cosponsors, this bill is intended to build on the ACA. It would allow—but not require—Americans 64 and under to buy into a Medicare “Part E” plan on ACA marketplaces, with ACA subsidies available to help pay premiums. It would also permit employers to purchase coverage for their employees. The measure would set an out-of-pocket maximum of $6,700 for the year 2020, with subsequent yearly increases keyed to the medical care component of the Consumer Price Index.

The Medicare at 55 Act. Introduced last year by Michigan Democrat Sen. Debbie Stabenow with seven cosponsors (including Merkley), this measure would allow Americans aged 55 to 64 to purchase Medicare coverage. Someone who buys in would be entitled to traditional standard Medicare benefits and could elect Medicare Advantage, prescription drug plans, or both. (A similar measure introduced in the House, the Medicare Buy-In and Health Care Stabilization Act, would start the buy-in option at age 50. It’s been stuck in a Congressional meat grinder for more than a year.)

The Healthy America Program. This initiative, announced this spring by the Urban Institute, would build on the ACA, keeping its rules intact—and leaving private insurers alone too. Described in one account as “a consolidated version of today’s three-part Medicare option,” it would combine the populations on Medicaid, the Children’s Health Insurance Plan, and the ACA’s individual market into a single market and risk pool, offering premium subsidies and letting people choose between this government option and a private plan. According to Georgetown University’s Center on Health Insurance Reforms, Urban Institute experts believe their plan could be almost completely paid for by increasing the Medicare hospital insurance payroll tax by just 1%.

Medicaid for All. This bill would use the federal-state program for the poor rather than seniors’ Medicare as a building block toward universal coverage. Introduced in 2017 by Sen. Brian Schatz, a Democrat from Hawaii, and boasting 18 cosponsors (including Sanders and other boldface names), it would open the doors of Medicaid to the non-poor by allowing states to offer a buy-in opportunity to all Americans. It’s similar to a bill passed by Nevada’s legislature in spring 2017 to open the state’s Medicaid program to all, which was vetoed by Republican Gov. Brian Sandoval.

Many issues remain unclear beyond the sheer political feasibility of these proposals, and one of them is how drug prices would work. Would Medicare be able to use its buying clout to negotiate discounts, as it’s now legally prohibited from doing? “The amount of leverage a public payer has will depend on its ability to decline to cover a drug if it doesn’t like the price it’s getting,” says Fiedler. “That’s a thorny question, and it’s not clear to me how most of the proposals out there would handle it.”

After the Trump administration’s assaults on the ACA, progressives may wonder if reform can be achieved “on the rebound” from a previous rebuffed, failed, or semieffective effort (the ACA, in this case). Starr’s journal article argues that that’s the only way reform proposals have ever been enacted—right back to Medicare’s creation in 1965. And he should know. Author of the seminal Social Transformation of American Medicine (1982, with a 2017 update), he’s been charting the history of health care reform since before Obamacare or even the ill-fated Hillarycare, the Clinton-era health reform plan for which he was a key adviser. Democrats can only be cheered by his Olympian perspective.

But what’s this? Starr has something for us too, and it’s even got a catchy name. Midlife Medicare would be a buy-in option beginning, like the House “Medicare buy-in” bill, at age 50 (that’s when AARP membership kicks in, Starr notes). But at least at the start it would be limited to those not eligible for either group coverage or Medicaid, lest adverse selection drive premiums sky-high.

Seems like everybody’s got a plan.

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