This post is part of our symposium on Medicare for All. You can find all the posts in the series here.
Allison K. Hoffman –
Medicare for All (MFA) has become the symbol of a larger, brewing movement that is attempting to bring major change to how we pay for and regulate health care in the United States. Even if MFA never becomes law, the conversation around it is building popular support for significant reforms and is creating fissures in the decades-old market-based approach to health care financing and regulation—and in the justification that this approach promotes choice.
Many Americans are well aware that our current health care system is failing them, as nearly 27.4 million people (14 percent of adults) remain uninsured, even after the Patient Protection and Affordable Care Act (ACA), and even those with insurance are struggling to pay for the care they need. The U.S. spends twice as much per capita on health care than the average OECD nation and has worse outcomes on critical measures, like life expectancy and infant mortality.
Over the past three decades, the primary policy solution to the mismatch between high spending and poor outcomes has been to turn to consumerism and market competition for a fix. The underlying theory is that if people have options—options for health plans, hospitals, prescription drugs, providers, and so on—they will choose the higher-value options. In turn, competitors will in theory produce higher-value options to win more customers.
These approaches are hailed as more efficient (meaning more responsive to what people prefer) and less bureaucratic than alternatives such as direct regulation. However, they have fallen short of both of these goals in practice, as I explore detail in a forthcoming article in the UCLA Law Review, Health Care’s Market Bureaucracy.
Take the example of the ACA’s health insurance exchanges—a new marketplace for people to buy health insurance policies directly from insurers. Based on a concept called “managed competition” that Alain Enthoven coined decades ago, the idea was that people will choose higher value health plans in these marketplaces, which will prompt insurers to compete on value—better care and/or cheaper premiums—to get more subscribers. This same idea motivated the design of Medicare Advantage, which offers enrollees the option to buy a private plan for basic Medicare coverage, and Medicare Part D drug coverage, where enrollees choose from among private health plans.
Reality quickly diverges from theory. Market-based health care policies are not helping people choose in a way that makes them better off, and they are certainly not avoiding accretion of bureaucracy. In fact, decades of studies of employer plans, Medicare, and the ACA show that people do poorly at choosing among health plans, even when there is a clearly superior choice.
For example, one study of the University of Michigan employee plan found that over one-third of all workers enrolled in a plan that was identical to another option in every way, except that it had a more restricted provider network. No worker would be better off enrolled in this plan. Another study of a large U.S. firm similarly found that a majority of employees chose a plan where they paid 24 percent more on average than they should have on premiums. Lower-income employees were more likely to err.
Likewise, a study of Medicare’s private prescription drug plans revealed that 73 percent of enrollees could have chosen a plan with lower premiums without any risk of spending more on prescription drugs over the course of the year.
The ACA’s convoluted marketplaces produce the same disappointing outcomes. One simulated study showed that participants who passed a screening test for basic insurance literacy, which makes them more sophisticated than many ACA consumers, selected the best choice only about half of the time.
ACA buyers often choose plans that will cost them more in the long run. Plans with lower monthly premiums may make buyers ineligible for significant cost-sharing subsidies, like help with deductibles and copayments when they use care. These buyers either do not know that the plan they chose will cost them more in the long run, or they cannot stomach a dollar more in premiums upfront. Either way, they are not making a meaningful choice.
The reasons for failure are multifaceted. To begin, the idea that people have endemic preferences for the kinds of things that health insurance options offer is a stretch. Even if they did, most people would struggle to identify which health insurance plan best matched their preferences. Health insurance is complex. Most Americans lack the basic literacy and numeracy skills to navigate options among plans (even college educated people show high levels of error on simple arithmetic tests). Plus, most people do not understand the basic features of health insurance that should shape their decisions—such as the monthly premium cost and what benefits are covered. Even with the necessary skills and knowledge, people make bad decisions because health insurance has particular characteristics that impede good decision-making. People are overly optimistic about their health and struggle to factor risk into decision-making. This is why young, healthy people often forgo buying health insurance, even if it’s cheap.
The attempted fix to these failures has been endless technocratic tinkering to improve the functioning of the markets and the behavior of the consumers in them. We invested billions of dollars to build the ACA exchanges and the states and the federal government continue to spend billions of dollars annually to run them on an ongoing basis.
The bottom line is that market competition among private health plans has not helped people get what they want and has created a massive market bureaucracy. And people are taking note.
That’s what fuels Medicare for All. It offers Americans a straightforward way to express what they want for their own health care, in a language simpler than that of convoluted markets. They do not want to have to navigate among health plan choices. They want to get better when they are sick—and they want their families and friends to have the same right—and they do not want their medical needs to bankrupt them and undermine their financial security.
Many factors weigh against MFA, from inertia to deeply entrenched interests who profit richly from our current system—ranging from insurers to pharma and medical device companies to hospitals and doctors—to more legitimate objections about disrupting employment (health care is responsible for about 14 percent of US employment, and is quickly growing). These barriers cause many people to throw their hands up and say “it will never happen” and to ask for more realistic alternatives. Already Democratic primary candidates, including Beto O’Rourke, Pete Buttigieg, John Delaney, Michael Bennet, and Vice President Biden, all defended the preservation of current private insurance structures as choice promoting, despite the evidence otherwise.
But a countervailing narrative is defining the 2020 election and, perhaps, the future direction of health policy. MFA has become a mantra for Americans’ discontent with our expensive and inequitable market-based system of healthcare. It is a way for the polity to express a collective desire for something better than the current, unnavigable mess of insufficient options. Health policy is igniting a resurgence of democratic expression in town hall meetings, at protests, and at the polls. Notably, people are not crying out for choice. They are demanding access, affordability, and equity.
MFA might prove more symbol than policy reality, but it is a charge to the future policymakers to do better. And the first step to doing better demands giving up the myth that markets and health insurance choices are going to produce what Americans want.
Allison K. Hoffman is Professor of Law at the University of Pennsylvania Law School.