Key Facts About Government-Controlled Health Insurance Systems

MEMORANDUM

TO: Interested Parties
FROM: Lauren Crawford Shaver, The Partnership for America’s Health Care Future
RE: Key Facts About Government-Controlled Health Insurance Systems
DATE: December 10, 2019

As the U.S. House Energy and Commerce Health Subcommittee prepares to conduct a hearing today regarding various new government-controlled health insurance systems, it’s important to consider the consequences these proposals would have on taxpayers, consumers, patients and families.  In fact, studies show that new government-controlled health insurance systems – like Medicare for All, Medicare buy-in and the public option – could mean higher taxes and premiums, longer wait times, and lower quality of care.  For those paying attention to today’s proceedings, here are some key facts to keep in mind.

Studies Show That Medicare For All Would Cause American Families To Pay More To Wait Longer For Worse Care.

Medicare for All “would cost more than $50 trillion over 10 years,” Yahoo! Finance reports.  And a recent study from the Urban Institute finds “that federal spending on health care would increase by roughly $34 trillion under a single-payer plan similar to Medicare for All,” CNN reports.  The Committee for a Responsible Federal Budget (CRFB) finds that “fully offsetting the cost would require higher taxes on the middle class,” and would “require the equivalent of tripling payroll taxes or more than doubling all other taxes.” 

• The bill’s author, Senator Bernie Sanders (I-VT), acknowledged that Americans making more than $29,000 per year would “pay more in taxes” for Medicare for All.

• “No matter how you cut the numbers, there is absolutely no way to pay for Medicare for all without tax increases – or spending cuts – on the middle class,” Marc Goldwein of CRFB told POLITICO.  “There’s no question it hits the middle class,” Kenneth Thorpe, Chairman of the Health Policy and Management Department, Emory University told The Washington Post.

• “Although [Medicare for All’s supporters] have frequently stressed that the middle class would see overall costs go down, a wide range of experts … say it is impossible to make those guarantees based on the plans that the candidates have outlined so far … ‘It’s impossible to have an ‘everybody wins’ scenario here,’ said Kenneth Thorpe, chairman of the health policy department at Emory University … ‘There’s no question it hits the middle class,’ he added.  John Holahan, a health policy expert at the nonpartisan Urban Institute agreed: ‘Even though high-income people are going to pay a lot more, this has to hit the middle class.’… ‘Most of the proposals to move to Medicare-for-all would involve substantial tax increases that would affect most people,’ said Katherine Baicker, an economist at the University of Chicago who specializes in health policy.  ‘These are going to be big tax increases.’ … ‘I think it seems likely under most proposals taxes would have to go up substantially unless you dramatically cut the health care you’re getting,’ she added,” The Washington Post reports. 

• And, “economists say that most taxpayers would pay more in taxes than they would save from having the federal government absorb the cost of health-care premiums,” The Post also reports.  Additionally, “71% of households with private insurance would wind up paying more than they would under the current system,” Kenneth Thorpe, chairman of the health policy and management department at Emory University, told The Wall Street Journal.

The non-partisan Congressional Budget Office (CBO) warns that a one-size-fits-all government-controlled health insurance system, would “put pressure on the available supply of care … if the number of providers was not sufficient to meet demand, patients might face increased wait times and reduced access to care.”  The CBO also finds:

• “Compared with the options available under the current system, the benefits provided by the public plan might not address the needs of some people.”

• “Setting payment rates equal to Medicare FFS rates under a single-payer system would reduce the average payment rates most providers receive-often substantially.  Such a reduction in provider payment rates would probably reduce the amount of care supplied and could also reduce the quality of care.”

• “If the average provider payment rate under a single-payer system was significantly lower than it currently is, fewer people might decide to enter the medical profession in the future. The number of hospitals and other health care facilities might also decline as a result of closures, and there might be less investment in new and existing facilities. That decline could lead to a shortage of providers, longer wait times, and changes in the quality of care, especially if patient demand increased substantially because many previously uninsured people received coverage and if previously insured people received more generous benefits.”

Economists also warn that Medicare for All could threaten patients’ access to care, POLITICO reports. 

• Kate Baicker, Dean Of The University Of Chicago Harris School Of Public Policy: “I’m not sure that we can lower overall health spending without restricting access to care in ways that people might not like, such as through denying coverage, or even shortages caused by cutting back on reimbursement rates … it’s unrealistic to hope that we can insure more people but spend less on health care overall without substantially cutting back on payments or restricting services, both of which would restrict access to care for the insured.”

• Hannah Neprash, Assistant Professor At University Of Minnesota School Of Public Health: “… [Medicare for All] M4A would need to dramatically reduce the price we pay for care, in order to rein in spending.  That’s not out of the question … But it could raise concerns about access to care.” 

• Brian Blase, Visiting Fellow At The Heritage Foundation: “A single-payer program would likely lead to more wasteful health care expenditures, since it would further reduce market signals about what is valuable and what is not.”

Experts are also growing increasingly worried about the “violent upheaval” a Medicare for All system would cause with hospital closures: “Some hospitals, especially struggling rural centers, would close virtually overnight, according to policy experts.  Others, they say, would try to offset the steep cuts by laying off hundreds of thousands of workers and abandoning lower-paying services like mental health,” The New York Times reports. 

And a study from the University of Massachusetts Political Economy Research Institute (PERI), shows that “1.8 million health care jobs nationwide would no longer be needed if Medicare for All became law, upending health insurance companies and thousands of middle class workers whose jobs largely deal with them, including insurance brokers, medical billing workers and other administrative employees,” POLITICO reports.  

Studies Show That So-Called “Moderate” Alternatives To Medicare For All – Like The Public Option, Medicare Buy-In & Medicare For America – Would Ultimately Lead To The Same Consequences.

As The New York Times reported last week, the public option “could be plenty disruptive” and “tilt in the same direction” as Medicare for All.  This is backed up by the findings of a new study, conducted by FTI Consulting for the Partnership for America’s Health Care Future, which reveals the public option could eliminate consumer choice for millions of Americans and “eventually cause the elimination of all private plans in the individual market.”  The study finds:

• After the first 10 years of the public option, more than seven million current enrollees would no longer have private coverage through the marketplaces – with two million of those enrollees being forced off their private plans as insurers exit the marketplaces altogether.

• The study also warns that the public option could eventually cause the elimination of all private plans in the individual marketplaces, eliminating choice for millions of Americans, even those with the resources or subsidies available to cover their preferred plan.

• In fact, the report finds that by 2050, 70 percent of state marketplaces (34 U.S. states) would no longer offer a single private insurance option.

• Rural families would be especially hard hit by the public option, the study warns, and could find few if any options available to them.

As The New York Times also reported in their story last week, the public option “could shake up the private market and also wind up erasing some current insurance arrangements … There’s also the possibility that linking public-option coverage to Medicare could cause some doctors to stop accepting Medicare patients, [Sherry Glied, the dean of the N.Y.U. Wagner Graduate School of Public Service, and a former health official in the Obama administration] said.  That would be another form of politically risky disruption.”Further, The Times explains, the public option “could have effects on employer insurance …[T]he existence of a public option might also induce some employers to abandon private coverage altogether … If it took a lot of market share from private insurers, some might decide to stop selling certain lines of coverage.  Private insurance could disappear from some places, or exist largely to fill certain niches, like high-deductible plans.”

Meanwhile, a study conducted by KNG Health Consulting, LLC for the Partnership reveals that “Medicare for America,” another proposed new government-controlled health insurance system, could force one-third of American workers off of their current employer-provided health care coverage, also known as employer-sponsored insurance (ESI).  And The Wall Street Journal reports that new government-controlled health insurance systems like the public option, Medicare buy-in and ‘Medicare for all who want it,’ represent “stepping stones to single payer.” 

An additional study, conducted by Navigant for the Partnership, finds that the public option could put more than 1,000 rural U.S. hospitals in 46 states “at high risk of closure.”  These hospitals serve more than 60 million Americans, and as Kaiser Health News and NPR report, hospital closures can have “profound social, emotional and medical consequences,” while RevCycleIntelligence also reports, “[p]atient access to care suffers when a rural hospital closes its doors for good, and consequently, patient outcomes can deteriorate.”

• A study by KNG Consulting, which was supported by the American Hospital Association (AHA) and the Federation for American Hospitals (FAH), found that “[f]or hospitals, the introduction of a public plan that reimburses providers using Medicare rates would compound financial stresses they are already facing, potentially impacting access to care and provider quality.”

• An earlier study by Navigant found that government-controlled health insurance systems such as “buy-in” or “public option” could force hospitals to limit the care they provide, produce significant “layoffs” and “potentially force the closure of essential hospitals.”

An analysis released by the American Action Forum (AAF), finds that a new government-controlled health insurance system known as Medicare Buy-in would cost an additional $184 billion that American families can’t afford. Even worse, the new system would decrease provider access by nine percent and would lead to a four percent decrease in medical productivity.

Economists agree, that the public option would burden American families with unaffordable costs.  “The public option would cause premiums for private insurance to skyrocket,” economist Dr. Scott Atlas of Stanford University writes in The Wall Street Journal.  “A single-payer option is not a moderate, compromise proposal.  Its inevitable consequence is the death of affordable private insurance … Massive taxation would be needed to expand Medicare, whether optionally or not,” Atlas continues.

• The public option “could also lead to a 10 percent increase in premiums for the remaining pool of insured people.” (Reed Abelson, “How A Medicare Buy-In Or Public Option Could Threaten Obamacare,” The New York Times, 7/29/19)

• “[A] government buy-in that attracted older Americans could indeed raise premiums for those who remained in the A.C.A. markets, especially if those consumers had high medical costs.” (Reed Abelson, “How A Medicare Buy-In Or Public Option Could Threaten Obamacare,” The New York Times, 7/29/19)

• “[A] government plan that attracted people with expensive conditions could prove costly.” (Reed Abelson, “How A Medicare Buy-In Or Public Option Could Threaten Obamacare,” The New York Times, 7/29/19)

• And a report found that an effort to implement the public option in Colorado, “could imperil thousands of jobs in the health-care industry or take hundreds of millions of dollars out of the state’s economy.”(Ed Sealover, “Colorado Public-Option Insurance Plan Could Cost Health-Care Jobs, Study Argues,” Denver Business Journal, 9/10/19)

Meanwhile, Polling Shows That Americans Don’t Want A New Government-Controlled Health Insurance System And Would Rather Lawmakers Build On What’s Working.

The second edition of Voter Vitals – a tracking poll conducted nationwide and in 2020 battleground states by Locust Street Group for the Partnership for America’s Health Care Future – finds that “as voters learn more about new government-run health care proposals, support for them is declining with a majority of voters preferring to build on and improve what we have today rather than start over with Medicare for All or the public option.” 

• The findings of Voter Vitals track closely with other recent national polling.A recent poll released by the Kaiser Family Foundation (KFF) finds “support for a public option is slipping,” POLITICO reports.  The poll also finds that Medicare for All “support wanes when voters hear trade-offs,” Becker’s Hospital Review adds.  Kaiser CEO Drew Altman wrote in Axios that support for Medicare for All is “headed in the wrong direction” – meaning down – while “polling shows that support drops much further, and opposition rises, when people hear some of the most common arguments against Medicare for All.” 

• A national poll from Quinnipiac University, finds that “Medicare for All has grown increasingly unpopular among all American voters,” with a majority saying it’s a “bad idea.” Medicare for Allis “a real problem for … candidates.  Not just because of the cost, but because few swing voters want to dump private health insurance,” Axios adds. 

• And a recent poll from the Kaiser Family Foundation and the Cook Political Report finds that nearly two-thirds (62 percent) of swing voters in the states of Michigan, Minnesota, Pennsylvania and Wisconsin rate Medicare for All as a “bad idea.”

• POLITICO has noted that polls show “growing opposition to ‘Medicare for All’” while a national poll by the Kaiser Family Foundation “probes Democrats’ views about the general approaches to expanding health coverage and lowering costs” and finds that “[m]ost Democrats and Democratic-leaning independents (55%) say they prefer a candidate who would build on the Affordable Care Act to achieve those goals.  Fewer (40%) prefer a candidate who would replace the ACA with a Medicare-for-all plan.”

• A separate poll released by Kaiser in July found support for Medicare for All on the decline, as “a larger share of Democrats and Democratic-leaning independents would prefer lawmakers build on the existing ACA” and “the share of Democrats who now say they ‘strongly favor’ a national Medicare-for-all plan is down” 12 percentage points in the three months since Kaiser last asked the question.

Yet another national poll conducted earlier this year by Kaiser revealed that support for Medicare for All “drops as low as -44 percentage points” when people find out it would “lead to delays in some people getting some medical tests and treatments,” and “is also negative if people hear it would threaten the current Medicare program (-28 percentage points), require most Americans to pay more in taxes (-23 percentage points), or eliminate private health insurance companies (-21 percentage points).”

Meanwhile, “Americans continue to prefer a healthcare system based on private insurance (54%) over a government-run healthcare system (42%),” according to Gallup’s annual Health and Healthcare poll, which finds that a government-controlled health insurance system “remains the minority view in the U.S.  This could create a challenge in a general election campaign for a Democratic presidential nominee advocating a ‘Medicare for All’ or other healthcare plan that would greatly expand the government’s role in the healthcare system.”

A recent report from the University of Virginia’s Sabato’s Crystal Ball finds that “the performance of 2018 Democratic House candidates shows that those who supported Medicare for All performed worse than those who did not,” and warns that “presidential candidates would do well to take heed of these results.”  And The Washington Post explains in a recent story headlined “Why 2020 Democrats are backing off Medicare-for-all, in four charts” that “[p]olls show why they’re doing this.  On the surface, the idea sounds as if it would appeal to voters.”  But when voters are made aware of the many negative consequences of such a system, including the elimination of private insurance and need for higher taxes, support drops.

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