Medicare-for-All Could Have Benefits, Drawbacks, CBO Report Says

Kerry Dooley Young

May 02, 2019

WASHINGTON — Eliminating or marginalizing private medical insurance in the United States might significantly expand coverage and lower administrative costs through a new government-run plan, while also creating the risk that Americans might struggle to get needed care, according to a new federal report.

A report yesterday from the Congressional Budget Office (CBO) provided talking points for both critics and supporters of a so-called single-payer approach to US healthcare. Unlike many of the CBO's reports, this new one did not offer detailed cost estimates of a particular bill, such as the Medicare-for-all legislation offered by Rep. Pramila Jayapal (D-Wash.) and Sen. Bernie Sanders (I-Vt.)

Instead, the CBO report looked broadly at the possible benefits and drawbacks of expanding the federal government's already dominant role in US healthcare. Medicare last year covered about 60 million people who were age 65 and older or had disabilities, according to the program's board of trustees. In addition, the federal government contributes to Medicaid, the State Children's Health Insurance Program (SCHIP), and subsidies paid through insurance exchanges created by the 2010 Affordable Care Act.

The CBO report set the stage for hearings that the House Budget Committee plans to hold on a potential overhaul of the US healthcare system. The committee's chairman, Rep. John Yarmuth (D-Ky.), who asked the CBO to compile this report, on Wednesday argued for a need to expand Americans' access to healthcare.

"The fact remains that we have made immense progress in the past 10 years, yet access to quality and affordable health care is still too often out of reach for families and hardworking Americans across the country," Yarmuth said in a statement. "We must do more, which is why I believe it is no longer a matter of if we will have a single-payer health care system in our country, but when."

Rep. Steve Womack of Arkansas, the ranking Republican on the House Budget Committee, said the CBO report "illuminates several consequences of Democrats' one-size-fits-all healthcare approach, such as higher premiums, out-of-pocket expenses, and taxes."

In the Senate, Majority Leader Mitch McConnell (R-Ky.) on Wednesday described a potential single-payer system as "a new, built-from-scratch government-administered plan."

"Democrats want to take the program that seniors have paid into — which we ought to be shoring up and stabilizing — and instead pile every other American into it," McConnell said in a statement. "That's what this is. End Medicare as we know it; reuse its name for and make sure the resulting Washington D.C. nightmare is the only game in town by outlawing choice and competition from the private sector."

In the House, Speaker Nancy Pelosi (D-Calif.) on Wednesday chose to focus on GOP efforts to undo the 2010 Affordable Care Act (ACA), highlighting the Trump administration's support of a lawsuit known as Texas v. United States.

In particular, House Republicans are seeking to end the ACA's provisions that compel insurers to offer plans for people who have been treated for, or diagnosed with, serious medical conditions, Pelosi said.

The Trump administration "is continuing Republicans' monstrous campaign to destroy pre-existing condition protections and Americans' access to affordable health care," said Pelosi in a statement.

Pelosi is not among the 108 House Democrats backing Jayapal's Medicare-for-all bill.

What CBO Said

The creation of a single-payer system would be "a major undertaking that would involve substantial changes in the sources and extent of coverage, provider payment rates, and financing methods" of US healthcare, the CBO said.

Key issues would include deciding who would be eligible for such a program and establishing a path for selecting which medical treatments and drugs are covered, the CBO said.

An average of 29 million people per month — 11% of US residents under age 65 — were uninsured in 2018, the CBO said.

In trying to broaden coverage, lawmakers would need to address the eligibility of people who are not citizens of the United States and are living in the country illegally. CBO estimates an average of 11 million people per month fell into that category in 2018, with about half of this group having had health insurance last year.

For coverage decisions in a single-payer system, lawmakers might explore options such as having an independent board make recommendations or work with Medicare's existing national coverage determination process, the CBO said. Congress also could consider having states manage the single-payer program and its coverage decisions, building off the current Medicaid model.

A public plan might not be as quick to cover new treatments as private insurers who now compete for customers, according to the CBO report.

The CBO also said lawmakers would need to hash out whether people could still purchase supplemental insurance, and if so, determine how much they would need to contribute toward the public plan. Private insurance might pay high rates to physicians and other healthcare professionals, putting people in the public plan at a disadvantage.

"If many people enrolled in substitutive insurance, patients in the single-payer health plan might have longer wait times," CBO said.

There's already debate about whether Medicare today can be considered truly a single-payer system, the CBO said. The private insurance industry is threaded throughout the program. Insurer-run Advantage plans now cover about 37% of Medicare enrollees, according to the program's board of trustees. Insurers also run the Medicare Part D pharmacy plans. And, behind the scenes, insurers manage Medicare payments to providers of healthcare through the administrative contracts.

The CBO noted that Medicare already has lower administrative costs than do private insurers. The federal government's cost of administering Medicare in 2017 accounted for 1.4% of the program's total expenditures.

"When the administrative costs of Medicare Advantage and Part D plans are included, total administrative costs for the Medicare program accounted for about 6 percent of its expenditures," the CBO said. "By comparison, private insurers' administrative costs averaged about 12 percent in 2017."

The CBO also noted that a single-payer system may have a greater incentive to spend money on its enrollees to stave off future illnesses. Private insurers experience substantial turnover, meaning they may not get a financial benefit from such an investment.

A "single-payer system without that turnover would have a greater incentive to invest in measures to improve people's health and in preventive measures that have been shown to reduce costs," the CBO said. "Whether the single-payer plan would act on that incentive is unknown."

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