DEBATES AMONG CANDIDATES for the Democratic presidential nomination feature discussions of how to address the significant shortcomings of the US healthcare system. All the candidates appear to support versions of expanded coverage and many of them have endorsed the idiom that has arisen from Bernie Sanders’ two presidential campaigns: “Medicare for All.” From a political perspective, Sanders has driven the debate by attacking the genuineness of other candidate’s positions. He claims to use the phrase literally but his actual proposal significantly redefines Medicare even for current recipients.
Creating political energy to expand healthcare is valuable; confusing people about what it means is not.
Medicare is a system implemented a half century ago to support care for older members of our society. While it has accomplished a lot, neither its purpose nor its design fit the vastly different policy goal of creating an efficient system that provides universal healthcare access. Medicare covers approximately 18 percent of Americans, virtually all of whom are over 65. Examining how it works raises multiple questions about how Medicare for All compares with Medicare for real if it is expanded to cover 330 million citizens.
Medicare is overseen by the Centers for Medicare & Medicaid Services (CMS), which for much of its existence was known by a different name, the Health Care Financing Administration. The earlier name was an accurate description because financing is what the agency in fact does. CMS has a relatively small staff because virtually all the management of Medicare is outsourced.
The administration of conventional Medicare is divided into 12 regions across the country. The northeast, including New England and New York, is called Jurisdiction K. As elsewhere in the country, the region is run by what is known as a Medicare Administrative Contractor (MAC), a private healthcare insurer. The MACs around the country process claims, make payments, determine coverage, and do almost everything else essential to running the program.
Conventional Medicare patients in Massachusetts who go to their hospitals, doctors, or other providers are effectively covered by an insurance company called National Government Services, which is also the MAC in a second region of the country covering Illinois, Wisconsin, and Minnesota. Last year, National Governmental Services managed Medicare for 25 million people and processed more than 225 million claims in its two regions.
Few Medicare recipients in Massachusetts or elsewhere have heard of National Government Services even though it provides the insurance that covers them. There is even less awareness that the company is a subsidiary of Anthem, which is the second largest for-profit health insurance company in the country. Anthem is a publicly traded corporation that had more than $96 billion in revenue over the past year.
Of the 64 million people now on Medicare, two thirds are in the conventional program regionally administered by such companies under contracts with CMS. The other third of recipients have signed up for Medicare Advantage, which allows them to enroll in standard HMO and PPO plans available in their market. Those insurers receive capitated payments from the government. In Massachusetts most of the Medicare Advantage enrollees choose non-profit plans such as Blue Cross Blue Shield, Fallon, and Tufts Health Plan. On the national level, however, huge for-profit companies such as Aetna, Anthem, Humana, and UnitedHealth dominate that market. The number of Medicare Advantage enrollees has doubled in the past 10 years and the trend is expected to continue, with half of all Medicare recipients likely to enroll in such plans a decade from now.
Ironically, if the Bernie Sanders vision of Medicare for All were enacted, the current versions of Medicare would not be available to anyone. His draft legislation makes it unlawful for “a private health insurer to sell insurance coverage that duplicates the benefits provided under this act.” This provision abolishes the growing Medicare Advantage option which now covers 22 million people.
The proposed statutory language is unclear about eliminating the insurers who now administer the conventional program as regional Medicare Administrative Contractors. But Sanders’ public assertions seem unambiguous. He has repeatedly said that it is not possible to achieve universal healthcare “unless you get rid of the insurance companies.” The proposed law is silent on the day to day administration of the new service beyond establishing that enrollees “are entitled to have payment made by the Secretary” of the US Department of Health and Human Services. If that means a new federal program serving 330 million people, it would require a bureaucracy with hundreds of thousands of employees. That agency would control almost one-fifth of our GDP.
In any event, Medicare would change dramatically for current recipients and everyone else. As is not now the case, the proposed law would initiate a prohibition against “cost-sharing, including deductibles, coinsurance, copayments, or similar charges” for virtually all services provided. At the same time, the benefits would expand to include dental, vision, and hearing services which are not currently covered. In addition, the bill empowers patients to make decisions in a way that precludes common managed care practices. While these changes may seem appealing, some of them are unrealistic and inefficient. In short, the current version of Medicare is not what anyone would get under the Sanders proposal.
The paradox of Medicare for All is that it has promoted a needed discussion about improving access but it does not provide a useful framework about how to do it. Congress right now cannot even pass routine budgets. Skepticism is prudent when contemplating whether Congress can design and enact a universal healthcare service that is both massive and efficient.
An important lesson is the last significant change to Medicare that occurred in 2003 with the enactment of Part D, intended to help recipients pay for pharmaceuticals. The extraordinary power of corporate lobbyists in Washington successfully included the “non-interference” clause, which precluded the Health and Human Services Secretary from negotiating or otherwise attempting to control the price of drugs paid for under Part D. This contributed to the significant increase in pharmaceutical pricing. Corporate lobbyists are even stronger now and the contemplated legislation would engage every element of the healthcare industry and their influence peddlers. It’s not unreasonable to fear that a Medicare for All statute passed by Congress and administered by a huge new bureaucracy would result in the quagmire we associate with Washington.
It is best to initiate change towards efficient universal coverage in a different way. Healthcare is a local service. If the goals are to provide access and control costs, there is no need for an identical approach everywhere. The best way to test innovation is to encourage states to design new systems that fit with local needs and resources. Comparing the risks and benefits of various approaches over the next few years is the right path to design an enduring national system. The significant healthcare reform enacted in Massachusetts in 2006 was not perfect but it reduced the uninsured to 2 percent and provided a step towards the Affordable Care Act passed nationally in 2010. That’s how we should approach this.
The appropriate federal role now is not to impose an ill-conceived standard solution but to provide states with financial resources to design sensible local attempts to meet the goals of access and cost control. Experimentation, variety, and creativity will teach us useful lessons. The attempt to implement a bad metaphor will not.
Edward M. Murphy worked in state government from 1979-1995, serving as the commissioner of the Department of Youth Services, commissioner of the Department of Mental Health, and executive director of the Health and Educational Facilities Authority.