Paul Hewitt
Nov 1 · 2 min read

There are real weaknesses in this proposal. Consider that for a working family of four, the all-in cost of coverage (premiums and out of pocket) has gone up roughly $20,000 since 2001. Sen. Warren’s plan would not only freeze this inflation in place, it would allow costs to continue growing! All of the $52 trillion in health spending projected for the next decade — a number that envisions continued high rates of medical inflation—are in her spending baseline. By 2030 working families would see costs rise by roughly one third over and above today’s already inflated levels. This doesn’t need to be the case. The Medicare program pays only about half as much for health services as employer plans. Applying Medicare rates to employer plans could immediately put $10,000 a year back into pocket of a working family of four. Rather than cutting costs for workers, Sen. Warren would redistribute their ever-escalating premiums to new beneficiary groups.

A second fallacy in her proposal is that Medicare is more efficient than private plans. In fact, Medicare Advantage plans — private plans that offer Medicare benefits but pay health providers at Medicare rates— provide better care at less cost than uncoordinated traditional Medicare. If Sen. Warren were to simply adopt Medicare prices for all — allowing employer plans to pay the same provider rates as MA plans — no one would have to change their coverage and no one would have to pay higher taxes. Instead premiums would go down by one-third. This could be done overnight, with an administrative stroke of the hand. All of the mechanisms for price-setting and provider reimbursement are already in place. The problem with American healthcare isn’t who’s paying. As a wise economist once observed, “it’s the prices, stupid.”

Of course, one really couldn’t implement Medicare prices for all overnight. The typical physician makes more than $420,000 a year. Pay would have to come down by roughly one third if everyone were to be reimbursed at Medicare rates. Hospitals would have to reverse their two decade-long hiring binge — which has seen the number of health workers persistently grow 3.5 times faster than the population being served. To minimize dislocations to the health system, Medicare prices would need to be phased in gradually — say, over a 10 year period. The good news is that this is simple to do. The same can’t be said for Medicare for All.

Of course, universal healthcare is an important goal. But it need not be implemented by replacing everything all at once. Once again, existing programs and systems are in place. Tax the rich to pay for new Medicaid expansions! Let working families directly enjoy the benefits of lower premiums — which will raise living standards and stimulate the (non-health) economy. Wiping the slate clean sounds attractive, but it is very, very hard — and completely unnecessary.

    Paul Hewitt

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