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MEDICARE-FOR-ALL: NOT OUR ONLY OPTION FOR UNIVERSAL COVERAGE

Dana P. Goldman and Kip Hagopian

The failure to meet ambitious but attainable goals—cover everyone, control costs— has created opportunity for radical reform. Dr. Gaffney advocates for universal health coverage via the burgeoning “Medicare-for-All” approach that has dominated the progressive health reform landscape for decades. As appealing as it may be from the outside, the strategy ignores several key health policy realities, namely the proper amount of insurance, the historic limitations of Medicare, the pitfalls of cutting costs by reducing administration, and the rising pressure of private markets in international health insurance.

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196 / Point/Counterpoint

MORE INSURANCE DOES NOT NECESSARILY MEAN MORE HEALTH

In the fight for universal coverage, it can be tempting to think of health insurance as an endlessly beneficial resource—the more, the better. That is, after all, the way Medicare is run. The reality is that the literature shows that insured groups have reduced mortality compared with uninsured (Woolhandler & Himmelstein, 2017a). What it does not conclude is that the amount of insurance matters. Many advocates of Medicare-for-All fall prey to this false conflation of more health insurance with better health.

The evidence, starting with the RAND Health Insurance Experiment, shows that giving insurance matters, but that much more generous insurance does not neces- sarily lead to better health. Creating a system that gives everyone sprawling, com- prehensive benefits limits our ability to insure everyone. That is why we propose to go back to basics: cover everyone, provide comprehensive but frugal insurance with a means-tested deductible, and carve out exceptions for services of high value. There would, of course, be the option to add on to this base with benefits from the private market, but the crucial issue of reduced mortality would be addressed by the catastrophic plan.

DO NOT BET ON MEDICARE

While Medicare has risen in popularity since its implementation in 1965, the pro- gram has a legacy of pricing and efficiency hiccups that remain unresolved.

Take Part B, which covers physician’s visits and outpatient care. The system to determine how much these visits and treatments should cost was updated in the early 1990s, when the agency realized their pricing was not accurately reflecting the risks or intensity of modern procedures. A group of health policy researchers de- veloped the resource-based relative-value scale to reimburse doctors appropriately. The result is a fee schedule captive to committees of physicians (Chan & Dickstein, 2015), and a maze of 140,000 different codes to keep track of these rates for each procedure (Janowski, 2017). Imagine what would happen if this process determined spending for all?

Additionally, public programs rarely innovate their benefit design, even as health care treatment is changing. It took more than four decades to add a drug benefit to Medicare, despite the obvious importance of drugs to good health. This was not for lack of trying, but divided government, federal budget deficits, and ideologi- cal conflict—among other factors—slowed down progress so much that Medicare beneficiaries did not see coverage until 2006.

This is not to say that Medicare has no value. As a public insurance option for the nation’s seniors, the program is vital for a significant portion of elderly and re- tired Americans. However, the unanticipated consequences of legislation can have dramatic effects. Our other public health insurance program, Medicaid, was de- signed to integrate care for the poor into the mainstream. Wilbur Cohen, Secretary of Health, Education, and Welfare for Lyndon B. Johnson’s administration, said of its creation, “The health policy community in 1965 was a small band of brothers and sisters concerned about the controversial elements in Medicare and unaware of the possibilities in Medicaid” (Cohen, 1985). Medicaid is now the largest insurer in the United States—even larger than Medicare—and rife with challenges. Given this history, Medicare and Medicaid should remain in their lanes.

ADMINISTRATIVE COSTS ARE NOT ALWAYS THE ENEMY

Medicare has also become the darling of health insurance reform for its low administrative costs, which Dr. Gaffney argues would balance out the extraordinary

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Point/Counterpoint / 197

expense of implementing a single-payer system. It is pretty widely accepted that Medicare spends less of its budget on administration than private plans do—estimates put Medicare at around 2 percent and private health plans at about 12 percent (Woolhandler & Himmelstein, 2017b). Administrative spending in the United States is also higher than in other countries, 31 percent compared to Canada’s 16.7 percent in 1999 (Woolhandler, Campbell, & Himmelstein, 2003). Dr. Gaffney also cites a claim that a U.S. single-payer plan could bring about “bureaucratic” savings as high as $500 billion, due to such cost-cutting measures as reducing provider billing paperwork by creating simplified, uniform billing procedures (Woolhandler & Himmelstein, 2017b).

The facts may be accurate, but the argument is backwards. Medicare’s problem is that it spends too little on administration. It pays for all services, regardless of cost, reviews nothing, and ends up with a financing scheme that is rife with provider and supplier fraud. Investigators have uncovered “widespread, organized, and lucrative schemes to bilk Medicare out of an estimated $60 billion dollars per year” (Potter, 2007).

Even taking into account efforts to better target Medicare’s audit system (CMS, 2017), which could make a dent in fraud enforcement, an insurer that covers first and reviews later (in essence, does no “upstream rationing”) is more likely to make some bad calls. In 2003, Medicare decided to pay for left ventricular assist devices for patients with end-stage heart failure. The devices can cost Medicare $200,000 or more, but studies found patient survival is very poor (Hernandez et al., 2008). The increased mortality and costs from a misstep such as this one far outweigh savvy administrative spending.

Finally, even if one thinks administrative costs are too high, they do not explain the growth in health care spending. The percentage the United States spends on administration has not changed in at least the last decade, while our overall health care costs have ballooned. It makes more sense to address cost-saving measures that will attack this larger problem rather than pick only on administrative spending.

INTERNATIONAL MARKETS FEELING THE STRAIN, TOO

The United States has earned some degree of infamy for not adopting a single-payer system in the wake of countries like the United Kingdom and Canada. But Britain is seeing its most significant spike in demand for private insurance since 2008, despite a rise in insurance premium tax (IPT) rates (Collinson, 2017). While some cite concerns about the National Health Service’s long wait times and restricted care, a majority of the surge comes from employer-provided plans, suggesting rising employment rates could be playing a role rather than dissatisfaction with the public plan.

Regardless of cause, could this private market influence be a positive one? Al- though the United States does spend more than any other nation per capita on health care, there are areas where our higher spending buys better care. In a study of global comparisons in cancer survival, an American diagnosed with prostate can- cer has a 91 percent chance of surviving at least five years, but the odds drop to 55 percent if you live in England (Coleman et al., 2008). Clearly the current system delivers value for diseases requiring extraordinary innovation.

Medicare-for-All is far from our only viable path to universal coverage. The United States can achieve equitable health insurance without sacrificing the inherently pri- vate relationship between physicians, insurers, and patients—something Americans value highly. We can provide universal access and need not do so at the expense of our values.

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198 / Point/Counterpoint

DANA GOLDMAN is the Director of the Leonard D. Schaeffer Center for Health Policy and Economics at the University of Southern California, 635 Downey Way, Dauterive Hall, Suite 210, Los Angeles, CA 90089 (e-mail: [email protected]).

KIP HAGOPIAN is the co-founder of Brentwood Associates and a Managing Partner at Apple Oaks Partners, LLC, 11150 Santa Monica Boulevard, Suite 1200, Los Angeles, CA 90025 (e-mail: [email protected]).

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Chan, D., & Dickstein, M. J. (2015). The role of price-setting by committee in Medicare: Evidence from the RUC. Working Paper.

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Coleman, M. P., Quaresma, M., Berrino, F., Lutz, J. M., De Angelis, R., Capocaccia, R., . . . Concord Working Group. (2008). Cancer survival in five continents: A worldwide population-based study. Lancet Oncology, 9, 730–756.

Collinson, P. (2017). Private health insurance sales surge amidst NHS crisis. London, UK: The Guardian.

Hernandez, A. F., Shea, A. M., Milano, C. A., Rogers, J. G., Hammill, B. G., O’Connor, C. M., . . . Curtis, L. H. (2008). Long-term outcomes and costs of ventricular assist devices among Medicare beneficiaries. Journal of the American Medical Association, 300(20), 2398–2406.

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UNIVERSAL UNDERINSURANCE IS NOT THE SAME AS UNIVERSAL HEALTH CARE

Adam Gaffney

I begin my response to Dana Goldman and Kip Hagopian’s admirably clear reform proposal on a point of agreement. Today, 28 million Americans remain uninsured according to the United States Census Bureau. The three of us clearly agree that this

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