Health Insurance for All: What Does It Mean?

By Patrick Reed | 11/29/19 8:04 AM

For over 70 years, Americans have debated the question of whether to enact a universal, government-run health insurance. Presidents Franklin Delano Roosevelt and Harry Truman introduced the idea during the middle of the 20th century, and in the subsequent decades, even as Medicare and Medicaid took effect and major health reforms such as the recent Affordable Care Act were implemented, the concept of a comprehensive policy that covers all Americans continued to influence policy and gain supporters within progressive political circles.

Recently, the idea of creating a “Medicare for all” government insurance program has resurfaced during the 2019-20 Democratic primary campaign for president. On this episode of Kentucky Health, host Dr. Wayne Tuckson welcomes a professor of economics to discuss the policy specifics of universal health insurance, including its potential benefits to both individuals and the economy in general and how it would be funded.

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Dr. Gerald Friedman, PhD., is a professor of economics at the University of Massachusetts at Amherst. An expert in labor history, recently Friedman has conducted research and written articles on U.S. economic and health care policy, including single-payer health insurance. He is currently writing a book titled “The Case for Medicare for All.”

Friedman recalls that when he was attending graduate school in the 1980s, the prevailing wisdom among most economists was that health care was overutilized by Americans and that costs could be controlled through insurance policies that made patients financially responsible for a substantial part of their care, making them access the health care system less often.

But despite this view, costs have continued to climb for patients, even those with insurance coverage, and many important barometers of public health have worsened. Friedman says that currently the U.S. is spending 50 percent more per capita on health care than any other country.

With the exception of the Affordable Care Act, passed in 2010 and which mainly took effect in 2014, Friedman says that “most everything else we’ve done in this country for the last 40 years has made health care more expensive, even while reducing access. Making Americans even worse off.

“Back even in the mid-1990s, we had the average life expectancy of countries in the Organization of Economic Cooperation and Development, the club of the rich. Nowadays, in the most recent years, we are 2-3 years behind in life expectancy from those other (OECD) countries. We have life expectancy now comparable with third world countries.”

Causes Behind Rising Health Care Costs

According to Friedman, the spiraling costs of health care in the United States are due to several factors, all of which share a common origin: the for-profit model that currently exists.

He cites the sizable administrative costs within the system as an example. “Private health insurers have what they call the medical loss ratio,” Friedman says. This ratio measures the percentage of health care premiums that actually return to the patient in health care services, versus what is spent on administration, marketing, and other areas.

“The average medical loss ratio for health insurers in the United States is about 80 percent,” Friedman says. “That is, about 80 percent of the money that we pay in premiums comes back in health care spending. For the traditional federal Medicare program, it’s 98.4 percent.”

Friedman says that most doctors and clinics have at least one full-time employee that negotiates payments and other issues such as pre-authorization for procedures with insurers. That administrative overhead adds up to a big part of the overall health care costs ultimately paid by patients.

Another major contributor is prescription drug prices, Friedman says. He says that so-called “Big Pharma” – the group of prescription drug companies – is the most profitable industry in the U.S. over the past 40 years. He estimates that it spends roughly $200 million per year to lobby politicians in Washington D.C.

To illustrate the power of Big Pharma in the existing system, Friedman compares the purchasing power of the Veterans Administration, which can currently negotiate drug prices directly with manufacturers, with the federal legislation passed under President George W. Bush that overhauled Medicare’s drug benefits. The V.A. currently pays about half of what the rest of Americans pay for drugs, he notes. On the other hand, the final, enacted 2003 Medicare Part D drug bill did not include a provision empowering Medicare to negotiate drug prices in the same way, due to industry lobbying.

Recent news stories detailing how the high monthly costs of insulin burden patients with diabetes illustrate how unsustainable – in both a financial and moral sense – the current private insurance model is, Friedman says.

“Insulin was given to the world by Canadian doctors for $1,” he recalls. “They sold it to the University of Toronto on the promise that the university would not restrict access. And now they’re charging gigantic prices because just a few companies manufacture generic insulin in the United States. And yes, people die because of this. People die when they turn 26 and they lose health insurance from their parents and they can’t afford $400-500 per month for insulin.”

A common argument coming from defenders of the private health insurance system centers around the prediction that a government-run plan would lower the amount of money pharmaceutical companies spend to research and develop innovative, life-saving medicines. Friedman counters by noting that of the approximately $70 billion drug makers spend each year on R&D, $40 billion of that comes via federal tax breaks.

“The first $40 billion, they’re spending our money,” Friedman says. “The next $30 billion is mostly spent on marketing and reformulating (drugs) to retain their patents.” According to Friedman, the overwhelming majority of new drugs developed in the United States have originated from public investment in R&D, done by organizations such as the National Science Foundation and National Institutes for Health. “Something on the order of 98 percent of them were developed with public funding,” he says.

The Benefits of an “Improved Medicare for All” Plan

Currently, two bills have been filed in Congress that would establish a government-run health insurance plan covering all Americans: Senate Bill 1129, sponsored by Sen. Bernie Sanders (I-Vermont), who is a current Democratic Party presidential candidate; and House Resolution 1384, sponsored by Rep. Pramila Jayapal (D-Washington 7). Both are called the Medicare for All Act of 2019.

These bills are based on the existing Medicare program available for people over age 65 that was enacted in 1965, but both expand its coverage to include every American and also increase services and eliminate patients’ direct payments, according to Friedman. He calls the bills’ plan “improved Medicare for all.”

“The idea of universal health care is that everybody has access without regard to income,” Freidman says. “There are no financial barriers to access, no copays, no deductibles.”

Under improved Medicare for all, patients would receive an insurance card with a chip in it, Friedman explains. They would be able to choose their doctor or provider, and use that card at the clinic or hospital. Then, after the visit, the provider would enter in diagnostic and/or treatment codes, give the card back to the patient, and submit their invoice to the federal government for payment. “And that’s the end of the billing and insurance process,” he says.

Critics of a universal health insurance plan offer many arguments against it, and one of them is the decades-old prediction that it will result in over-utilization of health care services. Friedman counters by pointing out that determining personal health care needs is always a judgement call, and that he believes such decisions should be left up to each individual and his/her physician.

“I am ready to trust doctors,” he says. “I mean, there will be some abuse, but one of the advantages of improved Medicare for all is that we’ll have all the data for everybody. I’ll be a lot easier to find any doctor who is misbehaving. And also we’ll have data chronologically, what we call longitudinal data among economists, so we can follow treatments and see what is actually working.

“All of this is thinking about people as human beings,” Friedman continues, “human beings who have intrinsic value as citizens, but if we just want to be narrow, they have value as workers, productive workers who can contribute to our economy and our general well being.”

The function of private insurance companies as middlemen between providers and payers would be rendered obsolete in a Medicare-for-all system, Friedman says. “I don’t want to trust my health care to people who are going to make a profit by denying access to that care,” he reasons.

How will such a vast, expansive federal program be paid for? Friedman says that first of all, cost savings will come by lowering prices paid to elite medical providers such as major hospitals and also to pharmaceutical companies. In addition, the roughly 20 percent of current medical expenses going to administrative costs in private insurance would be significantly reduced. Friedman grants that this action would result in job losses within the insurance industry.

Friedman says that currently, the Center for Medicare and Medicaid Services projects to spend about $47 trillion over 10 years within the existing private insurance system.

“Improved Medicare-for-all, with the savings I’m talking about and then with improved utilization when people get to go to the doctor more, and with increasing Medicaid rates to the rate paid by Medicare, I project will cost about $37 trillion,” he estimates. “So we’ll be saving about $9 trillion.”

According to Friedman’s research, current revenues allocated to existing Medicare and Medicaid projected out to 10 years total about $28 trillion. To make up the estimated $9 trillion difference, Friedman concedes that public taxes will have to be raised. In Friedman’s view, the public is already paying what amounts to a “private tax” to insurance companies; the Medicare for All plan would result in a net benefit as increased public taxes would be more than offset by the elimination of insurance premiums, deductibles, and co-pays.

Friedman explains that public taxes would be proportionally applied to income levels – high earners would pay more – but also says that “You’re not going to be able to get all the money from millionaires. You’re going to have to go down into the middle class.”

Ultimately, Friedman believes that a Medicare for all, government-run, single payer system represents an investment in the American people that will, in both the short term and the long run, result in myriad benefits to individuals’ health and to the broader society.

“One advantage of improved Medicare for all – yes, there’s a productivity gain that comes over time – but immediately, by lowering the cost of health care and taking that burden off of business, we will be able to expand the economy,” he says.