Private insurers will make a lot of money off Medicare-for-all, but that’s okay: everyone will be covered and overall costs will go down

There are a number of myths floating around the mainstream news media that portray Medicare-for-all as politically unviable, too expensive and impossible to implement.

The biggest misconception is that there would be no place for the politically powerful private insurance companies if everyone is on the government plan. This myth proposes that the eradication of private insurers makes passing a Medicare-for-all bill virtually impossible. If it did pass, consumer choice in plans would be severely limited, because private sector competition creates choice. Yet even a cursory look at the real world proves that only people with no actual experience of Medicare could seriously entertain the idea that Medicare-for-all would eliminate private insurers.

Private insurance has been an integral part of Medicare for decades, in three ways:

  • Private insurance companies offer supplemental plans that pay for the 20% of medical costs that Medicare doesn’t cover.
  • Private insurers also sell Medicare Advantage plans, which replace Medicare coverage with coverage through a private insurance company that Medicare pays for. Typically these plans offer a dental and eye benefit and wellness programs, but they also usually force participants to use a limited healthcare network of physicians and facilities. All of the Advantage plans saddle participants with co-pays.
  • Private companies offer prescription drug policies (Medicare Part D).

I doubt an American single-payer system could exist without the support of private companies. What’s more, private companies should embrace the Medicare-for-all concept. Although they will be forced to offer less profitable policies, tens of millions more people will be covered, a bonanza opportunity for private healthcare insurers. Moreover, the more people who are covered, the lower the overall cost of healthcare coverage, which will cut costs at the level of the individual insurance provider.

The next myth is that Medicare-for-all will give people less choice. Nothing could be further from the truth. For one thing, people don’t get that much choice to begin with. Virtually every private healthcare insurer offers the same portfolios of benefits, with the same perks like wellness classes and on-line tools and apps, differing only in the size and composition of their provider networks and the combination of deductibles and co-pays they require. Everyone offers annual physicals. No one will pay for custom shoes unless the patient has diabetes. Cardiac stress tests, yes. Coronary calcium tests, no.

In fact, I would assert that Medicare offers more choice than private commercial insurance. For the past 15-20 years, it has been impossible to find a commercial plan that didn’t have co-pays or deductibles. I know, because I tried many times, having gotten use to buying healthcare plans without co-pays or deductibles for the employees of my company before the insurers did away with premium-only policies. (BTW, my company always paid the entire premium for employees and their families.)

By contrast, Medicare offers people the option of buying a supplemental plan—from a private insurance company—that pays all the costs that Medicare doesn’t cover without a deductible or a co-pay. That’s the kind of choice that appeals to this American!

Perhaps the most egregiously wrong-headed myth about Medicare-for-all is that it will be so expensive that it will bankrupt the country. That makes no sense, assuming that the money that companies and individuals now pay for commercial insurance goes towards taxes to pay for Medicare-for-all. It’s true that more people will be covered, but research and the results of Obamacare show that the more people who are covered, the lower the cost to insure each. The uninsured tend to wait until they are very sick to seek medical care, often using the very expensive emergency department. Society pays for those costs in one way or the other. It is much less expensive when people get regular check-ups, get their flu shots and other needed vaccinations, and are encouraged to go to the doctor as soon as they get sick. Most economic estimates predict that Medicare-for-all will eventually drive down the cost of medical care.

But who will pay? That’s the big question and the big fear. The answer, however, should be obvious: raise the Medicare tax on both employers and employees so that the additional tax collected is somewhat close to the current total cost for non-Medicare related commercial policies. We could exempt employees earning under a certain amount, but not their employers. We would, of course, have to make certain the tax applied to sole proprietors, freelancers and the companies who hire gig economy employees. At the end of the day, though, rich folk will tend to subsidize a Medicare-for-all system, while poor people will pay less than what they use. The same will be said for healthy people and young adults who will use the system less and the elderly and infirm, who will use it more.

This solution will leave some companies and individuals paying less for healthcare than they currently do and some paying more. But let’s remember that when governments decided to standardize weights and measures, merchants with scales that were “light” made less money as they adjusted what a pound meant up and merchants with “heavy” pound scales made more as they started selling “pounds” that weighed less. Likewise, when governments decided to prevent bakers from putting sawdust in bread—some bakers made more money and others made less. When American governments in the first half of the 20th century decided to tax mass transit systems while subsidizing the construction of highways, some companies and individuals made more money and some made less. When a government decides to go to war, change a safety standard, ask for a new piece of paperwork, or do just about anything, someone is going to make more money and someone is going to make less. That’s the nature of all economies. Don’t mistake these comments as an argument against regulation, though: the decisions of companies and consumers also always economically benefit certain parties and hurt others. Just ask towns when factories move away or the employees of small downtown stores when Wal-Mart builds a super store at a nearby mall. Or the people who manufacture Cleveland Cavalier paraphernalia.

Political questions always come down to who benefits and who pays. In the case of Medicare-for-all, a system can be created in which everyone, including the private insurance industry, benefits, except those rich folk who don’t like to subsidize the health care of others, those racists who don’t like society to help minorities, and those fanatics deathly afraid that people will like Medicare-for-all so much that they’ll start doubting the ideology of the free market which to many conservatives is their most cherished religious belief. In other words, only those who believe in or benefit from the politics of selfishness should fear Medicare-for-all.

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