On the Money: Getting to Medicare for All

Recent events make it more likely we will achieve it (after Trump is gone)

For-profit health care company executive pay drives up costs. Last year, HCA Healthcare CEO Sam Hazen made $23.8 million. (Photo: HCA Healthcare)

I have long been a fan of universal Medicare. While some time back I thought we could get there fairly quickly, I became a fan of incrementalist approaches as I watched even much smaller changes, such as the Affordable Care Act, get bogged down in petty politics and industry lobbying. As bizarre as it may seem, President Trump’s second term makes me more optimistic about a quicker transition.

There are three reasons for my newfound optimism.

The first is the public response to the murder of Brian Thompson, the CEO of UnitedHealthCare. I am not going to in any way endorse violent actions against insurance executives or anyone else in the industry, but the widespread sympathy for Luigi Mangione shows considerable hostility toward insurance companies. The era when most people liked their insurance company seems to be behind us.

The second has been Trump’s ability to walk all over long-established norms and rules of conduct. It’s true that Trump has a cult following that will literally buy anything he says or does, as well a money-man enforcer in the form of Elon Musk. But a Democratic president elected on a clear agenda for universal Medicare could look to apply similar pressure on congressional holdouts if he or she established the case for it during the election campaign. If people understand the issues and have given the president a clear mandate for universal Medicare, the president will have some ability to push recalcitrant senators and representatives.

A Democratic president also could pull a Trump and threaten to withhold important funding for a state or district. Yes, that’s bullshit politics, but when billionaires can buy elections, there is no point in playing nice. And it doesn’t look like the courts will do much to block this unless they become even more political in applying different standards for Republicans than Democrats.

The third reason is that Trump’s loony tariff fest shows that people are not as allergic to taxes as has generally been believed. Trump has imposed one of the most massive tax increases in the last half century with his tariffs, likely on the order of $300 billion a year, or $2,200 per household. And it could go much higher. The tariffs have hurt him in the polls and will likely hurt more when they really start to bite, but the reaction is nothing like we would have expected with such a huge tax increase.

Trump’s tax increases are literally for nothing. Yes, he tells his followers that we will get back good-paying manufacturing jobs, but it’s not likely anyone other than his extreme cultists buy that. Does anyone really think workers will get paid $35 an hour, with benefits, sewing together dolls or turning tiny screws in an iPhone?

The other rationale is offsetting the cost of Trump’s big tax cuts for corporations and the rich. This is a priority for Trump’s billionaire backers, but not a huge winner at the kitchen table for most of the country. If Trump can get away with his massive tariff-tax increase, surely raising taxes to provide everyone with good quality healthcare would be politically doable.

A universal plan has to be broad in scope

There are a million ways to slice and dice a universal Medicare plan and the transition to one, which will pose real problems. However, it is important for any plan be comprehensive. That doesn’t mean it has to cover the plastic surgery needed to give people the Mar-a-Lago look, but it does need to cover the cost of dental, vision and hearing expenses, which are excluded from traditional Medicare.

Dental care is by far the biggest of the three. It has historically been separate from more general healthcare. That may have made sense 60 years ago, when dental care was relatively simple and cheap. (Dentists mainly filled cavities and pulled teeth.) It doesn’t make sense today. Americans will spend nearly $200 billion this year—$1,600 per household—on dental care. That’s a lot for people to absorb out of pocket, especially since it is very unevenly distributed. Some will have bills as high as many thousands of dollars, while others will pay little or nothing.

Much of the story in having the government pick up the tab for healthcare is getting the money that is currently paid by companies and workers for private health insurance. That will be close to $1.5 trillion this year. Most of it from employers.

This is where the tax would come in. If it takes the form of an employer-side payroll tax, it will largely replace the money that employers are now paying to insurance companies. While there are some tricky implementation issues, it is unlikely many workers would be upset if their employer were paying money to the government for insurance rather than to a private insurer, especially since the coverage would likely be better than what they are getting now.

Excessive profits drive up health care costs

It is also important that we take a chainsaw to health care industry costs. As has often been pointed out, our federal, state and local governments already pay enough for national health insurance. All together, they will pay more than $8,500 a person this year for healthcare through Medicare, Medicaid and other public programs. This does not even count the tax deduction for employer-provided health insurance. By comparison, Germany and the Netherlands both spend around $6,000 per person in total for their healthcare.

Part of the story of reducing costs is easy. We pay $350 billion a year for the administrative costs of private health insurance, more than 25 percent of what they pay out to providers. By contrast, the administrative costs of Medicare are just a little more than 1 percent of what it pays out to providers.

There are a number of reasons for these differences, but an obvious one is that the insurers pay their top executives tens of millions of dollars a year. By contrast, the top administrators in Medicare get slightly more than $200,000 a year. If someone is looking for waste, the insurance company executives’ excessive pay would be a good place to start.

In addition, the insurers are in business to make a profit for their shareholders, and at least some of them have been doing a good job of that lately. The stock of HCA Healthcare, the country’s largest insurer, has increased more than fourfold over the last five years.

On top of the money directly paid to the insurers, there are also enormous indirect costs. Hospitals, doctors and other providers have to spend an enormous amount of money on staff to deal with the differing rules and forms of various insurers. A recent study found that in 2017 almost a third of U.S. healthcare expenditures went to cover the direct and indirect costs of insurance, almost five times what Canada was spending on a per-person basis for its universal Medicare system. Eliminating this waste would get us most of the way toward covering the cost of universal Medicare in the United States.

Universal Medicare is affordable

But there is also enormous waste in what we pay providers. We pay twice as much for most of our healthcare inputs as people in other wealthy countries. The first place to look is prescription drugs. We will spend more than $700 billion this year—$2,200 per person—for drugs and other pharmaceutical products. Other countries spend less than half this amount. If we let drugs be sold in a free market, without patent monopolies, we would likely be spending close to $100 billion a year.

There is a similar story with medical equipment, where we pay far more for everything from MRIs and other scanning equipment to kidney dialysis machines. We also pay our doctors roughly twice as much as doctors in other wealthy countries. (This is much more the case with specialists than family practitioners.) Getting doctors’ pay down to something close to what they receive in Germany and Canada could save around $100 billion a year.

In short, there are ways to squeeze out the savings that would make universal Medicare affordable in the United States. There are obviously tons of things that need to be worked through in the details of a universal Medicare plan, which will matter a lot, but the main thing is to put the idea on the table. The details can be worked out after the fact.

Will a plan for universal Medicare sell politically? That isn’t my area of expertise, but I can say that what the Democrats have been selling has not done especially well. They just lost an election to a former reality-TV show host and failed president who tried to overthrow the government. And as Trump has made an unprecedented assault on democracy, the response of the Democratic Party’s two leaders in Congress has been to embark on tours hawking their new ghost-written books.

Perhaps a plan for universal Medicare will scare away billionaires who might otherwise support Democrats. That seems to be a risk worth taking. On the other hand, the prospect of the Democratic Party taking and holding power, while offering most people no real change in the system, does not seem very promising at all.

Dean Baker is a senior economist at the Center for Economic and Policy Research. A version of this column originally appeared on his Substack site.

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