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The Contradiction at the Heart of Bernie Sanders' Medicare for All Plan


Muda69

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https://reason.com/2019/04/24/the-contradiction-at-the-heart-of-bernie-sanders-medicare-for-all-plan/

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There is a huge contradiction at the heart of Bernie Sanders' Medicare for All plan.

On the one hand, Sanders not only wants to expand government-provided coverage to everyone in the country, he wants that coverage to be significantly more generous than Medicare, private insurance, or comparable government-run systems in other countries. On the other hand, he wants to drastically cut payments to hospitals, many of which lose money on Medicare right now, making up for the program's relatively low payments by charging much higher prices to private insurers.

What Sanders is proposing, in other words, is that the government finance a significant increase in government services while also radically reducing the amount it pays for those services. Even making generous assumptions, it's almost impossible to see how his plan could work.

Let's start with the promises Sanders makes about Medicare for All. No networks, premiums, deductibles, or copayments. Under his plan, essentially all non-cosmetic services would be free at the point of care for everyone.

Under Medicare for All, Americans will no longer have to worry about:

-Networks
-Premiums
-Deductibles
-Copays
-Surprise bills
-Losing coverage

We are going to end the greed of insurance companies and put patients first.

— Bernie Sanders (@BernieSanders) April 19, 2019

 

Sanders calls this Medicare for All, but what he's describing isn't Medicare as we now know it. As The New York Times noted earlier this year upon the release of a Sanders-inspired Medicare for All bill in the House, the new program would "drastically reshape Medicare itself," changing both what it pays for and how. In many ways, it would be a completely different program. Medicare for All, in other words, isn't really Medicare.

And that program would be far more expansive and expensive than nearly any other comparable system. It would cover more, and require less direct financial outlays (not including taxes), than either today's Medicare or typical private insurance plans in the U.S.

It would also be substantially more generous than the national health systems set up in other countries. Sanders likes to unfavorably contrast America's mixed public-private health care system with foreign systems where the government is more directly involved. When he announced the 2017 version of his Medicare for All plan, for example, he bemoaned the state of affairs in the United States "a time when every other major country on earth guarantees health care to every man, woman, and child." Discussions about health care policy on social media often include some variant of the question, "If every other country with a developed economy can do it, why can't the United States?"

 

The problem with this line of questioning is that what Sanders is proposing isn't what other countries do. Canada, for example, has a single-payer system, but it doesn't cover dental care, vision, drugs, or any number of other services. A majority of Canadians carry private insurance in order to cover those services. In Britain, which offers a fully socialized medical system where health care providers are government employees, many resident still buy private coverage. Sanders, on the other hand, would effectively wipe out private coverage in the space of just four years.

There are similar limitations on coverage in other countries, like the Netherlands. It's also true in Australia, where patients typically pay a percentage of the cost of specialty services. It's true that in these countries, government plays a more central role in health care financing. But their systems have also reckoned with costs and tradeoffs in a way that Sanders, after so many years, has not.

Indeed, the main trade-off that Sanders seems willing to discuss is the elimination of insurance companies, which he portrays as greedy middlemen driving up the cost of health care. Wiping out the industry in one fell swoop, as Sanders has proposed, would be a unprecedented and disruptive move that would have significant economic repercussions, including the probable loss of thousands of insurance industry jobs. But it still wouldn't do much to bring down the cost of health care, because so much money in the nation's health care system is tied up in provider payments, especially hospitals.

And therein lies the contradiction.

Most people probably think of hospitals as places where you go to get health care services. Politically and economically, however, they also fulfill another role: They are hubs for stable middle-class jobs, paying reasonably good wages to thousands of highly trained workers, most of whom are not doctors or specialists earning stratospheric salaries.

To acquire the revenue to pay for all these jobs, hospitals rely on a mix of private and public payments. Public payments make up a somewhat larger share of total hospital budgets, but private payers are typically charged much higher prices.

Hospitals like to argue that Medicare and Medicaid payments are too low to cover their costs, and that as a result, higher private payments effectively subsidize public health coverage. Critics (with some evidence) often respond that hospitals either overstate or don't really understand their own costs, and that this is just a ploy to extract more money from government health programs and private payers.

But when considering Medicare for All, the particulars of this debate are largely beside the point, because there is simply no question that eliminating private insurance and payment for all services would drastically reduce the amount of revenue for hospitals.

Yet that is exactly what Sanders wants to do. His plan calls for paying for health care services at Medicare rates, which means that, practically overnight, hospitals would end up with far, far less revenue. Exactly how much is unclear, but one estimate indicated that payments could drop by as much as 40 percent.

That would leave hospitals with a couple of difficult choices. They could eliminate services. They could try to force some employees to take pay cuts. They could fire large numbers of workers. Or they could simply shut down. As a recent New York Timesreport on how Medicare for All would affect hospitals noted, rural hospitals—many of which are already struggling to stay afloat—would be particularly at risk of closing.

Whatever ended up happening, there is simply no way most hospitals would or could continue operating as they do now under the payment regime that Sanders envisions. Lots of middle class jobs would disappear. Services would be eliminated or cut back. 

Yet Sanders not only imagines that hospitals would continue to operate as they do now, but that they would expand their services to even more people, since more people would have coverage. And since he also imagines a system with no deductibles or copays, those people would almost certainly end up dramatically increasing utilization of hospital services.

Studies of health insurance have consistently shown that expansions of health insurance result in increased demand for (and use of) health care services; more people with coverage means more people lining up to get care. (Relatedly, introducing even very small copays—on the order of just a few dollars—can reduce the number of visits to doctors and hospitals.) Greater utilization of health care services does not necessarily translate into measurably better physical health outcomes. But it does increase the strain on the health care delivery system—which is to say, it puts a huge amount of pressure on hospitals.

So what Sanders is proposing is a massive reduction in funding for health care services at the exact moment that the system experiences a massive increase in demand. It would be difficult to do either. Sanders wants to do both at the same time. 

It is a recipe for disaster—and a contradiction that Sanders has so far barely acknowledged, much less resolved.

Spot-on analysis and commentary by Mr. Suderman.  Mr. Sander's "Medicare for all" plan would be a disaster if implemented.

 

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1 hour ago, Impartial_Observer said:

I just saw a Medicare bill from the local hospital. Charges were over 23K, Medicare deducted over 20K and paid about $2500. Leaving the patient with $528.00 out of pocket. 

I'm not sure how this business model survives. 

 

The hospital's charges have little to no connection to their cost for the services, so those figures honestly don't tell us whether the hospital is still making a profit at that level of payment. The "window sticker" charges at hospitals are almost never paid by anyone: private insurance companies aren't paying anything close to those charges, and most poor uninsured people don't pay full boat because the hospitals just write off the charges.

Because of the way our health care system works, the hospital's charge list exist mainly just to (a) be the place to start the negotiations with insurers (public and private) over discounts and actual reimbursement rates, and (b) get over in those rare cases where a wealthy person is willing and able to pay out of pocket.  

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1 hour ago, Impartial_Observer said:

I just saw a Medicare bill from the local hospital. Charges were over 23K, Medicare deducted over 20K and paid about $2500. Leaving the patient with $528.00 out of pocket. 

I'm not sure how this business model survives. 

 

It doesn't surprise me.  I recall when I had heart surgery that the bill was some ungodly amount before insurance and by the time insurance had done their part and the hospital had done its deductions and everything else, it ended up being easily manageable.  It's been a long time, but I'll see if I can track down ballpark numbers to give an idea.

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Because of the type of work I do, I spend a lot of time in hospitals and physicians’ offices. I confess, i don’t understand how, on the one hand, health care providers complain loudly over the niggardly reimbursement system of Medicare -and the insurers who take their lead from it - while on the other hand, every hospital I see has got significant construction underway, is building freestanding outpatient centers in the community, is buying up physician practices, etc. They’re obviously making money somehow.

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16 hours ago, Wabash82 said:

The hospital's charges have little to no connection to their cost for the services, so those figures honestly don't tell us whether the hospital is still making a profit at that level of payment. The "window sticker" charges at hospitals are almost never paid by anyone: private insurance companies aren't paying anything close to those charges, and most poor uninsured people don't pay full boat because the hospitals just write off the charges.

Because of the way our health care system works, the hospital's charge list exist mainly just to (a) be the place to start the negotiations with insurers (public and private) over discounts and actual reimbursement rates, and (b) get over in those rare cases where a wealthy person is willing and able to pay out of pocket.  

I have a pretty good understanding of medical billing works. This was for a surgical procedure (amputation) which took about 2 hours. Granted the surgeon's bill was not included in this. My main point being, he was in pre-op for about two hours, with staff, associated pre-op care, IV, blood work, central line, etc., used an OR for two hours and associated staff, equipment, supplies, meds, pathology, etc., then in post op for about an hour and a half, w/staff. And the hospital was paid about 3K. I don't think their costs were covered. Granted this hospital is non-profit, at least the hospital itself. There is another entity that owns all the real estate that is for profit. 

My family doctor hasn't taken new Medicare/Medicaid patients in years, there must be a reason. I had a local retired dentist tell me that Medicaid (note Medicaid, not Medicare, I'm not using the two interchangeably) would pay a taxi service more to bring a patient to his office, than they would pay him to do routine dental procedures, extractions, fillings, etc.

I believe there is a potentially a looming healthcare crisis in this country, everyone laughed at Trump when he stated he agreed with VOC, the VA is fine. If you want a glimpse of what a government run healthcare system looks like, I'd say that's a pretty good example, only a fraction of the scale.

    

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1 hour ago, Impartial_Observer said:

I have a pretty good understanding of medical billing works. This was for a surgical procedure (amputation) which took about 2 hours. Granted the surgeon's bill was not included in this. My main point being, he was in pre-op for about two hours, with staff, associated pre-op care, IV, blood work, central line, etc., used an OR for two hours and associated staff, equipment, supplies, meds, pathology, etc., then in post op for about an hour and a half, w/staff. And the hospital was paid about 3K. I don't think their costs were covered. Granted this hospital is non-profit, at least the hospital itself. There is another entity that owns all the real estate that is for profit. 

My family doctor hasn't taken new Medicare/Medicaid patients in years, there must be a reason. I had a local retired dentist tell me that Medicaid (note Medicaid, not Medicare, I'm not using the two interchangeably) would pay a taxi service more to bring a patient to his office, than they would pay him to do routine dental procedures, extractions, fillings, etc.

I believe there is a potentially a looming healthcare crisis in this country, everyone laughed at Trump when he stated he agreed with VOC, the VA is fine. If you want a glimpse of what a government run healthcare system looks like, I'd say that's a pretty good example, only a fraction of the scale.

    

I appreciate the differences between Medicaid and Medicare. I work in the health care industry.

No offense, but unless you can provide more specific facts/evidence beyond just your opinion as a consumer, I am unwilling to assume that $3,000 did not cover the hospital's actual costs for the services it provided.

There is no question that many private insurance companies reimburse for some/many services at rates higher than those under Medicare and Medicaid, and that some physicians who have a sufficient base of private insurance patients have the luxury to not accept Medicare or Medicaid patients. But that is not the same thing as saying that those physicians could not operate at a profit -- and still make a very good living -- from the reimbursement rates paid by Medicaid and Medicare. Those providers are simply in the position of being markets where they can "sell" their entire limited inventory (their time) at a higher price.   

I suspect the dentist's comment re Medicaid reimbursement for transportation is an exaggeration. I believe that the reimbursement for a filling under the Indiana Medicaid fee schedule is around $110. Nearly all transportation services for Medicaid members are now provided through contracted brokers, and while I am not privy to the State's contract with its broker, I sincerely doubt the State is paying the broker at a rate that would allow the broker to pay the taxi companies it subcontracts with a hundred plus bucks for a trip to the local dentist. Because transportation is still a relatively  new benefit under some of the Indiana Medicaid programs, brokers do still face network adequacy challenges in some rural areas of the State, which may force them in "one off" situations to pay a provider (e.g., taxi company) to send a driver to a far away location to cover a trip that the broker does not have local resources available to cover at that time. In those unusual cases, the broker may pay the provider (who is doing them a solid) at a higher rate -- while the broker takes a loss -- in order for the broker to meet contractual obligations to the State. 

To my knowledge, the various "Medicare for All" plan being floated are all modeled on (as the name suggests) Medicare single-payer system, not the VA's single-payer-and-(mostly) single-provider model.  While I have not followed the troubles of  the VA system super closely, my understanding is that the complaints are associated with issues that arise primarily because veterans relying on VA health benefits must go to VA-run facilities for treatment, and those facilities are often outdated and under-staffed.  

 

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33 minutes ago, Wabash82 said:

I appreciate the differences between Medicaid and Medicare. I work in the health care industry.

 

 How would a progressive socialist "Medicare-for-all" system personally affect your current position in the health care industry?

 

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2 hours ago, Muda69 said:

 How would a progressive socialist "Medicare-for-all" system personally affect your current position in the health care industry?

 

I have it on good authority from a high ranking official in the Sander's campaign that I would be appointed as Chief Apparatchik for the new Frankfort Soviet, responsible for the re-education of recalcitrant medical providers and any (surviving) known Libertarians in the glories of the single-payor medical nirvana. 

So I think I'd come out okay....

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40 minutes ago, Wabash82 said:

I have it on good authority from a high ranking official in the Sander's campaign that I would be appointed as Chief Apparatchik for the new Frankfort Soviet, responsible for the re-education of recalcitrant medical providers and any (surviving) known Libertarians in the glories of the single-payor medical nirvana. 

So I think I'd come out okay....

*yawn*

b6219298e12bf5a26a9846df8d5caa6bb2b358e9

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18 hours ago, TrojanDad said:

Muda, you lobbed that one belt high to a someone left on the political scale.

In reality, he has no answer because he doesn't truly know.  Can only speculate.

Uncertainty is inherent in today's technology-driven world, and folks who have trouble dealing with change are going to get left behind. 

I completely changed my career at age 56, so I have a fair amount of confidence that I'd adapt again successfully, if necessary, to whatever changes lie ahead in the health care world. But as we see curtently with Medicare and Medicaid, there are still lots and lots of opportunities in a single-payor system for private companies.        

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12 hours ago, Wabash82 said:

But as we see curtently with Medicare and Medicaid, there are still lots and lots of opportunities in a single-payor system for private companies.        

But can those private companies still make a profit if Mr. Sanders version of single-payer comes to fruition?

 

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10 hours ago, Muda69 said:

But can those private companies still make a profit if Mr. Sanders version of single-payer comes to fruition?

 

Well, since they are operating in single-payor markets now (Medicare and Medicaid), I'd assume they are making a profit in those markets, or believe they can make a profit in them. What specifically about Mr. Sanders' plan do you see as changing that?

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57 minutes ago, Wabash82 said:

Well, since they are operating in single-payor markets now (Medicare and Medicaid), I'd assume they are making a profit in those markets, or believe they can make a profit in them. What specifically about Mr. Sanders' plan do you see as changing that?

So currently the only source of income for these health care companies is Medicare and Medicaid?

And Mr. Sanders seems to be pretty clear that he wants to effectively wipe out an entire facet of the insurance industry.  FTA:

Quote

the main trade-off that Sanders seems willing to discuss is the elimination of insurance companies, which he portrays as greedy middlemen driving up the cost of health care. Wiping out the industry in one fell swoop, as Sanders has proposed, would be a unprecedented and disruptive move that would have significant economic repercussions, including the probable loss of thousands of insurance industry jobs.

 

 

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2 hours ago, Muda69 said:

So currently the only source of income for these health care companies is Medicare and Medicaid?

And Mr. Sanders seems to be pretty clear that he wants to effectively wipe out an entire facet of the insurance industry.  FTA:

 

 

For some of them, yes, they are only in those market segments and they presumably make money in them, or they wouldn't be. (Because many health care entities are organized as non-profits for historical reasons, it may be technically inaccurate to discuss whether they make "profits", but the point is that they have earned sufficient revenues in those markets to cover all their costs.)

Many of the large managed care companies who are active in both the private market and the public/single-payor market segments, like Anthem (big in Medicaid) and UHC (Medicare Advantage), are presumably making money in the public segments, since they have been actively pursuing business in them, and have been quite willing to exit "public" market segments where they are not making money (e.g., ACA exchanges, like Indiana's).

The "I'm gonna wipe out the insurance companies" is Sanders campaign rhetoric, akin to "I'm gonna build a Wall across the southern border and Mexico will pay for it!" Or "I'm gonna cut taxes without increasing the deficit!"  They are slogans meant to express commitment to a general policy position -- immigration, illegal and legal, needs to be substantially cut back; the economic benefits of tax cuts outweighs the economic detriment of growing the national debt; high administrative costs have to be addressed to get U.S. health care costs in line with the those of the other advanced nations). Only the very naive would take them as actual, concrete beliefs or courses of action for the politicians who espouse them....

 

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2 hours ago, Muda69 said:

So currently the only source of income for these health care companies is Medicare and Medicaid?

And Mr. Sanders seems to be pretty clear that he wants to effectively wipe out an entire facet of the insurance industry.  FTA:

 

 

I’m more than ok with seeing places like Carmel lose jobs.

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4 minutes ago, Wabash82 said:

For some of them, yes, they are only in those market segments and they presumably make money in them, or they wouldn't be. (Because many health care entities are organized as non-profits for historical reasons, it may be technically inaccurate to discuss whether they make "profits", but the point is that they have earned sufficient revenues in those markets to cover all their costs.)

 

So could they still earn sufficient revenues to stay in business should those revenues fall by as much at 40%?:

FTA:

Quote

But when considering Medicare for All, the particulars of this debate are largely beside the point, because there is simply no question that eliminating private insurance and payment for all services would drastically reduce the amount of revenue for hospitals.

Yet that is exactly what Sanders wants to do. His plan calls for paying for health care services at Medicare rates, which means that, practically overnight, hospitals would end up with far, far less revenue. Exactly how much is unclear, but one estimate indicated that payments could drop by as much as 40 percent.

 

2 minutes ago, DanteEstonia said:

I’m more than ok with seeing places like Carmel lose jobs.

But not Las Vegas?

 

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16 minutes ago, Muda69 said:

So could they still earn sufficient revenues to stay in business should those revenues fall by as much at 40%?:

FTA:

 

You are not following.

Sanders is talking about applying Medicare rates to what is currently the private market segment, which would allegedly result in a reduction of rates in the private market segment by up to 40%.

The companies I was referring to in the part of my post you quoted  are companies that already are solely in the Medicare or Medicaid market segments. So they wouldn't see a 40% cut under Sanders' supposed plan. 

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23 minutes ago, Wabash82 said:

You are not following.

Sanders is talking about applying Medicare rates to what is currently the private market segment, which would allegedly result in a reduction of rates in the private market segment by up to 40%.

The companies I was referring to in the part of my post you quoted  are companies that already are solely in the Medicare or Medicaid market segments. So they wouldn't see a 40% cut under Sanders' supposed plan. 

Thank you for the succinct explanation.  So Mr. Sanders's plan is to effectively destroy the private market segment of health care.  How many hospitals, surgery centers, etc. would be forced to close?  Are there currently hospitals that only serve Medicare or Medicaid recipients?

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7 hours ago, Muda69 said:

Thank you for the succinct explanation.  So Mr. Sanders's plan is to effectively destroy the private market segment of health care.  How many hospitals, surgery centers, etc. would be forced to close?  Are there currently hospitals that only serve Medicare or Medicaid recipients?

Don't know for certain if there are such hospitals, but I suspect that many inner-city urban and some rural hospitals are pretty close to that, simply due to the nature of the  populations they serve. 

But I am also having a little difficulty  understanding why you are so concerned about the prospect that some hospitals that can't compete at lower margins will close, with the tradeoff being consumers' overall cost for health care will be lower? Isn't that the exact outcome you've told us would result if health care was a free market system? 

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57 minutes ago, Wabash82 said:

Don't know for certain if there are such hospitals, but I suspect that many inner-city urban and some rural hospitals are pretty close to that, simply due to the nature of the  populations they serve. 

But I am also having a little difficulty  understanding why you are so concerned about the prospect that some hospitals that can't compete at lower margins will close, with the tradeoff being consumers' overall cost for health care will be lower? Isn't that the exact outcome you've told us would result if health care was a free market system? 

As well as schools.

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