Yes, we can have affordable ‘Medicare for All’ with consumer choice. Here’s how.

Thomas R. Hefty – Published 12:03 p.m. CT Sept. 13, 2018

The election-year debate on health care has begun. Bernie Sanders and liberal Democrats argue for old-fashioned “Medicare for All.” They want a single-payer system.”

Conservatives call the idea “implausible” and the “same old bad idea,” and meantime, Republicans chip away at Obamacare’s weaknesses.

But although partisan rancor prevents serious discussion of alternatives, American health care challenges have not gone away.

Health care is too expensive. Health care costs continue to rise faster than general inflation. Administrative costs are too high. Almost 20 million people still lack health coverage. Families are confused by the overlapping programs and health care options.

The Bernie Sanders Medicare for All plan is a good step, but it’s also imperfect and insufficient. It does reduce administrative cost. It builds on a successful Medicare model, one which enjoys high public confidence. It is a national health care solution, not the current patchwork of state programs. It has a robust administrative program — avoiding the failures of the early days of Obamacare. And it has popular support: In recent surveys, 59% of national respondents favored Medicare for All.

But those surveys did not mention the costs or how to cover them.

Sanders’ costly plan

The Sanders plan of taxpayer-paid single-payer health care will not work for three reasons. It is built on a model of Medicare from a quarter-century ago; Medicare today is different. Medicare in 2018 no longer a single-payer plan — despite the attraction of that political slogan.

Old-fashioned “Medicare for All” ignores the American tradition of health care choices — choice of plan, choice of physician. Obama famously promised, “If you like your health plan; if you like your doctor, you can keep them.” But that wasn’t true with Obamacare. The Sanders plan ignores the lesson of Obamacare — consumer choice matters.  Although voters may like Medicare for All, they may not like single-payer.

Both liberal and conservative analyses of the Sanders plan reach the conclusion that taxpayer-funded Medicare for All is simply too expensive. A 2018 conservative Mercatus Institute analysis finds that taxpayer-paid Medicare for All would cost $32 trillion over a decade.  An earlier analysis from the liberal Urban Institute found a similar cost.

Neither estimate is affordable, given the unpalatable choices for taxpayers — a 35% income tax increase or a 31% boost in payroll taxes from current levels. The Washington Post editorial questioned the Sanders’ math in a recent editorial, “The Cosmically Huge ‘if’ of Medicare for All.”

But there is a tested solution — Medicare Advantage for All.  Let consumers buy into Medicare and Medicare Advantage — or if they choose, keep their private coverage.

Medicare, with choices

The name “Medicare Advantage” may be unfamiliar to some.  If you ask a recent retiree, they might say, “I have my Medicare with Humana,  United Health,  Blue Cross or a local HMO.”  Even the American Association of Retired Persons offers a Medicare Advantage plan. These are directed and regulated by the federal government but operated by private insurers. It is a national program with competition and consumer choice.

Medicare sounds simple, but it is an alphabet soup of coverages. Part A for hospital coverage is taxpayer funded. Part B is for physicians and is partly funded by taxpayers and partly by premiums; Part B is voluntary. Part C is Medicare Advantage —which must include both Part A and B basic benefits. Part D is voluntary pharmacy coverage — again funded by a mix of taxes and premiums.

For the parts with premiums charged to participants, there is a sliding scale based on income reported to the federal government. There are deductibles and co-payments. To cover the costs, 20% of participants in traditional Medicare also choose to buy a Medi-gap or Medicare Supplement insurance policy.

The federal government has a “star rating” system for all Medicare Advantage plans, giving consumers information to make better choices. Cost containment is built into the competitive plans. Using plan savings, consumers can gain additional benefits, such as vision benefits, dental coverage and wellness plans. Consumers can choose between competing plans — or take traditional Medicare.  Or they can switch back if they are unsatisfied.

The practical solution of “Medicare Advantage for All” is to permit younger individuals to buy into the Medicare and Medicare Advantage programs. Employers today can buy into Medicare Advantage plans for retirees; there is an existing sliding scale of premiums based on income.  Why not give younger individuals the same choice?

The George W. Bush administration created the Medicare Advantage model in the Medicare Modernization Act of 2003. Medicare recipients are essentially offered a voucher to buy Medicare Advantage coverage — private insurance coverage with benefits equal to or greater than traditional Medicare.

In a recent survey, 75% of respondents favored a public option — giving consumers the right to buy into Medicare and Medicare Advantage. Medicare Advantage enrollment has tripled in a little over a decade with nearly 18 million participants.

Consumers have spoken — the market has spoken. But politicians are not listening.

High marks for Advantage plans

A July 2018 McKinsey research report on Medicare Advantage gave the consumer information system high marks. The report, “Assessing the Medicare Advantage Star Rating System,” found that consumers were using the plan ratings to make better health care choices. It assessed performance over a decade, finding that performance had improved, quality standards had risen, and consumers were making good choices.

The report also found that Medicare Advantage saves money — using competition to create better cost containment — while still satisfying customers. In recent years, Medicare Advantage cost 90% of the traditional fee-for-service Medicare system, according to McKinsey. Insurers use those savings to offer additional benefits to consumers.

Under the Medicare Advantage model of Medicare for All, if consumers wish to continue their individual plan, they can keep it. If employers wish to continue their employer-sponsored plan, they can keep it. Physicians and hospitals can choose to participate —or not.

Medicare Advantage plans have quietly become the most successful healthcare financing innovation since Medicare itself. Without notice by the pundits, one-third of recipients have chosen a Medicare Advantage Plan over traditional Medicare. In Wisconsin, 40% of Medicare recipients — more than 400,000 individuals — have chosen Medicare Advantage plans.

Proponents of Medicare for All — of a single-payer plan — have overlooked the success of Medicare Advantage. The Sanders single-payer plan would force more than 400,000 Medicare Advantage participants in Wisconsin to change health plans again. In six states, more than 40% of Medicare recipients are enrolled in Medicare Advantage programs.

In only three states is Medicare Advantage enrollment less than 10%. One of those is Vermont, Bernie Sander’s home state, which may explain his failure to consider the consumer choice enjoyed in other states.

Similar to the choices offered to consumers, physicians can decide whether to participate in Medicare Advantage plans. Both consumers and medical professionals have a choice. They can opt-out, going back to traditional Medicare or going back to the private health insurance market or employer-sponsored plans.

The Medicare Advantage program is market tested. It is administratively robust and federally protected. Consumer confidence in the program is high. It saves money through competition.

Why is this choice so difficult?  Because of differing political philosophies and histories.

Medicare was a Democratic idea, passed under President Lyndon B. Johnson in 1965. Medicare Advantage was a Republican idea, passed under President George W. Bush in 2003 in a cliffhanger congressional vote. Both were political compromises. The entire Part A and Part B structure of the original Medicare program — Part A government funded and Part B voluntary and participant funded — took ideas from both political parties. Part C of Medicare brought the Republican idea of consumer choice.  Part D of Medicare brought prescription drug coverage — an idea first championed by Democrats. Parts C and D were passed together in 2003.

In the current political environment, perhaps Medicare Advantage for All should be called the Bush-Sanders Plan. It is a comprehensive national program — something Sanders and liberal Democrats want — combined with a buy-in program that includes consumer and physician choice and the competitive market efficiency promoted by Bush and Republicans.

Health care is about making people’s lives better — not about scoring political points.

Thomas R. Hefty is the retired chief executive of Blue Cross Blue Shield United of Wisconsin.