Health Care Under Medicare for All Would Be Universal, Affordable, and Secure

On the day Michael Cannon published his essay attacking Medicare for All, the Centers for Disease Control released new numbers showing that America had 374,000 cases of Covid-19. In the three weeks leading up to publication of the essay, 17 million Americans lost their jobs and filed for unemployment benefits. Because we link health coverage with employment, the coronavirus is starting to unravel our health insurance system. The high price of American health care has also become a threat to public health, pushing people away from medical care even as a deadly contagion courses through our communities.

The pandemic displays the adversity of human life with the tape sped up. Rarely are so many lives upended so quickly, but economic disruption and medical illness are not anomalous events. They’re inevitable. Covid-19 has exposed and inflamed the problems in our health care system, but its troubles are chronic.

Medicare for All proposes a different path forward. The debate over M4A hinges largely on the ethical and economic wisdom of treating health care as a social good rather than a market product. Into this debate, Cannon puts forth an economic view that I find fundamentally mistaken: that Medicare is hopelessly expensive, and private markets are more effective at controlling health care costs.

Markets have many attractions, but for most health care services the evidence is quite clear that market forces are simply failing to keep prices under control. This should not be terribly surprising. There are many well-known reasons that health care does not function like a normal market good, and health care markets fail in predictable ways. We pay dearly for these failures—usually with our bank accounts, but too often with our health.

Compared to private insurance, Medicare has a much better track record for keeping care affordable, making it a sensible foundation for expanding health coverage across the population. And despite Cannon’s arguments to the contrary, M4A would be far more similar to the universal health care systems around the world than our current system is, and it would give all Americans access to quality health care.

The High Price of Our Medical Marketplace

Let’s start with the economic facts. The United States spends twice as much per person on health care as our peer countries, as Cannon describes. But we don’t use more health care: we actually have fewer doctors and hospital beds than our peers abroad, and in turn Americans have fewer doctors’ visits and hospital stays. We spend so much because we are charged the highest prices in the world whenever we do get care—and also because we spend the most money in the world administering our complex and fragmented payment system. The world’s most expensive health care system does not buy us better health: we live shorter, sicker lives than our peers abroad.

Cannon offers a simple diagnosis: “U.S. health care spending is excessive because of Medicare.” But the facts are incontrovertible: prices in the private insurance market are much, much higher than prices in Medicare. For physician services, private-sector prices are 35 percent higher than Medicare prices on average, and higher still for specialty care. Hospital prices in private insurance are double the prices in Medicare. In outpatient medical centers owned by hospitals, prices in private insurance are triple the prices in Medicare. It’s no surprise that when Americans turn 65 and switch from private insurance to Medicare, their spending drops precipitously.

Cannon’s argument that Medicare pays too much for knee replacements unintentionally proves the point: the Congressional Budget Office studied that exact procedure (DRG-470) and found that private insurers pay twice as much as Medicare does for total knee replacements, more than $27,000 compared to $13,500.

There’s no mystery why Medicare pays lower prices than private insurance companies. Medicare has the power and leverage to decide unilaterally how much it will pay for different kinds of medical care. In contrast, every private insurance plan needs to negotiate its own rates against powerful hospitals and doctors’ groups. Hospitals and doctors leverage this system—and all the market failures that undergird it—to charge privately insured patients the highest prices on the planet.

The United States also spent over $800 billion on health care administration in 2017—nearly a quarter of national health expenditures. The private insurance market drives up these administrative costs. To see why, consider the fact that each year the Cleveland Clinic must negotiate the prices for 70,000 billing codes across 3,000 different private insurance plans—that’s 210 million prices. Hospitals then need to hire an army of billers and coders to translate everything that happens on its premises into one of these prices. Private insurance companies also spend more than 13% of premiums on overhead and profit, compared to just 2.3% in traditional Medicare. All told, the United States spends three times as much administering our insurance system compared to our peer countries.

Cannon seems to recognize that our private insurance system is far more expensive than Medicare but argues that the government “widens that spread [between Medicare and private prices] by doing lots of things to drive private-sector health care prices higher.” The most telling argument he provides for this claim is that the tax break for workplace health coverage “encourages excessive insurance and discourages price-consciousness”.

To be sure, our employer-based health insurance system is a national liability as tens of millions of Americans lose their jobs during the coronavirus recession. But workplace coverage isn’t “excessive.” It’s inadequate.

Here’s the reality of employer-based health coverage. Two in five visits to the emergency department come with a surprise bill that’s not covered by insurance. Same for hospital admissions. The average deductible before insurance kicks in is $1,655 for an individual, and certain family plans have an average deductible approaching $5,000. (Recall that four in ten Americans have less than $400 in readily accessible savings). The kicker? Researchers have discovered that high deductibles do not lead to “price shopping”—they just slash health care use across the board. (They also cause 9-month delays in women receiving chemotherapy for breast cancer.) Even with all these inadequacies, workplace insurance premiums have increased by more than 50% over the last decade, now exceeding $20,000 per family every year.

In short, the problem isn’t government encouraging “excessive” private insurance. The problem is that selling health care as a market product is extraordinarily costly: our expensive private insurance system has failed to prevent runaway price increases, and Americans are left paying more and getting less. M4A offers an opportunity to bring health care prices back to earth, giving Americans more for their money.

Health Care Around the World

Cannon also criticizes the notion that M4A is similar to other countries’ health systems, arguing that “not a single advanced nation has ever implemented what Medicare for All supporters propose.”

Universal health care systems can be designed in numerous ways, and it’s true that M4A does not copy any other country’s system wholesale. But the key features of M4A all have international precedent.

Let’s run through the examples that Cannon gives for how current M4A proposals differ from other countries’ health systems. Canada’s single-payer program does not cover prescription drugs. M4A would—and so do Denmark, England, Australia, France, Norway, and Sweden. Iceland requires a small co-pay to see a primary care doctor. M4A would not—just like Canada, England, and Denmark. England allows private insurance to cover the same benefits as the public plan. M4A would limit private insurance to services the public plan does not cover—similar to Canada and Medicare today. Canada’s system is largely administered by the provinces. M4A would include a large federal role—and so do France and Taiwan.

Of course, the policy questions raised by M4A ultimately should be debated on their merits, not based on how closely they match the details of any particular international system. Should there be co-pays and deductibles, and if so for what kinds of care? Should private insurance be permitted to cover the same services as the public plan? Should states have a larger role? Each country has answered these questions differently, and the M4A bills in the House and Senate provide their own set of answers. Even as we debate these important policy questions, it’s clear that any version of M4A would be much closer to the international norm than our current system.

The Right to Health Care

Finally, Cannon says it’s a “fairy tale” to think M4A would make health care a right.

Let’s start by examining what it means to make health care a right. A person with a right to health care is entitled to receive health care based on medical need, rather than ability to pay, social class, education level, place of residence, work history, or other factors. A society that protects the right to health care must define a comprehensive set of health care services that its members are entitled to.

Cannon makes several arguments against the idea that M4A would make health care a right. First he asserts that the “only right” guaranteed by either Medicare today or M4A is “a right to dangerously low-quality medicine.” But this charge is unconvincing. Americans on Medicare rate the quality of their care higher than older adults on private insurance. Seniors on Medicare also have similar or better access to care compared with people on private insurance based on measures like waiting times and ability to find a specialist. Compared to countries with universal health care systems, Americans die more often from conditions that adequate medical care can ameliorate. In short, quality health care is wholly compatible with making health care a right.

A different argument put forth by Cannon is that M4A wouldn’t make health care a right at all. On the contrary, “Medicare for All would trample health care rights.” He explains by giving his own definition of the right to health care: “If a right to health care means anything, it means consumers must be free to pool their resources to obtain better health care.” If Cannon views this as a sufficient condition for securing the right to health care, the implication is the following: A person has a right to health care if they are entitled to receive only the medical care they can afford on the private market, including through the purchase of private health insurance.

This market-based view of rights is clearly problematic. It implies that merely putting health care up for sale constitutes making it a right. It implies that an uninsured woman who cannot afford cancer treatment has a right to health care, but a woman on Medicare with guaranteed access to cancer treatment does not have a right to health care. Clearly, this gets things exactly backwards.

Put simply: The right to health care entitles a person to receive medical care based on medical need, not based on income. Health care is not a right in today’s America. It could become one under M4A.

The Future of Health Reform

American society is in the midst of a generation-defining upheaval. The pandemic is exposing the terrible human and economic costs of an overpriced health insurance system that crumbles at the very moment it’s needed most. The coronavirus is a product of nature, but it’s a human choice to let medical illness destroy the finances of entire families, or to quicken the spread of a contagion by letting high prices keep people away from care.

The time will come when we need to rebuild our economy and our health care system. When looking toward this future, Medicare for All offers a serious vision for how to make health care universal, affordable, and secure.

Also from this issue

Lead Essay

  • Michael F. Cannon finds many faults with Medicare for All, starting with the fact that it would reduce patient choice in ways that even citizens of Canada, the United Kingdom, and the Scandinavian countries do not experience. He rejects the idea that M4A would save money, and he describes the existing Medicare program’s history of failing to correct itself when it delivers inefficient and substandard care.

Response Essays

  • The health care status quo in the United States is nothing to be proud of, writes Sherry Glied. The U.S. response to COVID-19 in particular highlights the weaknesses of a system that is too expensive and that prioritizes the rich to an unacceptable degree. We face shortages of basic equipment that other countries do not, and this isn’t a failing limited to the pandemic. While she does not see Medicare for All as an especially good alternative, she concludes that it would nonetheless be much better than the status quo.

  • Writing with Jonathan Ketcham, Jay Bhattacharya explains how health care providers under Medicare face a series of perverse incentives—rewards, in essence, for inefficient and costly medical care. A system like this one can’t be expected to correct itself if and when the law makes it the only system around. Other countries’ socialized health care systems have also failed to deliver life expectancy or lower costs.

  • Micah Johnson disputes several of Michael Cannon’s empirical findings and argues that Medicare for All would indeed give all Americans a health care plan that was safe and affordable. Selling health insurance on the open market has failed to control prices; other countries, which use a variety of single-payer, government-administered systems, generally enjoy lower spending per capita and a higher standard of health than we do. He concludes that within a wide range of possible variants, any form of medicare for all would be closer to this appealing international norm.