This post is part of our symposium on Medicare for All. You can find all the posts in the series here.
Christina S. Ho –
The early contours of the health care debate have featured a loose divide between those favoring so-called “single-payer Medicare for All,” and those who propose some kind of “public option.”
To drill down to what’s really at stake, I looked at the leading and most detailed proposals representing these two basic outlooks. To understand “single-payer Medicare for All,” I read the “Medicare for All Act of 2019,” H.R. 1384 introduced by Reps. Pramila Jayapal and Debbie Dingell, which largely tracks the Senate counterpart introduced by Bernie Sanders. I also looked at the most ambitious and developed “public option” proposal, the “Medicare for America Act of 2019,” H.R. 2452, sponsored by Reps. Rosa DeLauro and Jan Schakowsky and drawn in part from the Center for American Progress’ (CAP) Medicare Extra for All plan.
I argue that there may not be as much of a difference between the two plans as the Presidential primary camps will be motivated to portray, and I want to lay out why – with the caveat that at this stage of the debate, no one’s views should be immune from revision, least of all mine.
To begin, I will briefly outline the terms of each as they would affect three main groups: the beneficiaries/patients, the payers, and the providers (including doctors and hospitals).
Medicare for All is a true (or at least an almost true) single-payer bill. After a two-year transition period, there will be (practically) one lone payer, the federal government through the Universal Medicare Trust Fund. Beneficiaries will be (almost) universally enrolled in one health coverage program which is called Medicare, albeit considerably beefed up and transformed. Benefits will be free at the point of care, though obviously financed ultimately through government revenue. Providers will remain private and free NOT to participate in Medicare for All but to sell services outside the program instead. The practical reality is that most would struggle to completely avoid engagement with the one dominant payer that is Medicare for All and its highly structured conditions of payment.
Medicare for America also offers beneficiaries one default public health coverage program available to (nearly) everyone. A significant difference is that employers may continue to offer coverage to their employees. But notably those employees who are offered employer-sponsored insurance (ESI) always have the option of enrolling in the public health coverage program, which is again, a next-generation Medicare. I flag here that under this proposal, the significantly enhanced Medicare retains one structural feature of Medicare as we know it now, which permits beneficiaries to choose managed care or other private options offered by insurers as an alternative to traditional Medicare. This choice structure is referred to as Medicare Advantage (MA), and I will say more on this later. Providers under Medicare for America would also stay private, and the options and constraints they face will not be so dissimilar from what private providers would confront under Medicare for All. The key difference lies in the multiple payers that would persist under Medicare for America, the most prominent of which are the ESI plans and the aforementioned MA options.
What does it matter if we pursue a single-payer versus a public option approach? This question is frequently framed, particularly to Democratic presidential primary candidates, as a question about whether one favors the abolition of private health insurance. But “ending private insurance” is an imperfect proxy for what I think we are really asking, which is whether we allow significant contracting around the muscular new default public Medicare programs each proposal would establish.
The extent of “contracting around” should be our core concern because any opportunity to exit – or seek a different type of patient, class of provider, or level of payment – opens the door to further stratification of the health care system. In the domain of health coverage, the option-design must particularly guard against the risk-selection endemic to insurance which always threatens to splinter health financing back into health “have-nots,” bearing the full catastrophic cost of their care, and health “haves,” seeking to shed their obligation for a collective system of mitigating disastrous health losses. Two problems loom. Virtually every health “have” becomes a health “have-not” and inevitably meets the same catastrophe they down-played before. This circumstance would mark the failure of rational health financing, the very purpose for which any health system reform is designed. Second, the health “haves,” once disinvested from the collective financing system, may reconstitute a separate mutuality that if better resourced, will exert a gravitational pull drawing enrollees, attention, and medical talent away from a residual abandoned public system.
With this in mind I examine the two representative proposals. In today’s post, I will consider Medicare for All. In tomorrow’s, I will turn to Medicare for America—and gauge the extent of the difference between the two plans.
Private Insurance. Medicare for All certainly prohibits private insurance in the following sense: no private insurance can be sold that duplicates or overlaps the coverage that Medicare for All provides. But so-called wrap-around coverage, offering benefits to supplement the Medicare for All package, remains permissible. In this sense, private insurance survives in a single-payer system.
Direct Billing. Paying the provider à la carte at the point of service is another way to opt out, and Medicare for All permits some of these transactions as well. Under Section 303, a provider participating in the new public Medicare may not bill any eligible individual for any item or services that overlap with what is already covered under Medicare. Again, this language does not exclude contracting for wrap-around services. The text does attach certain process requirements, however, stipulating that the direct billing contract has to be reported to the government, cannot be entered into in an emergency, and must not involve provider double-dipping in the sense of getting paid directly by the patient while also submitting a claim to Medicare for the same expense.
Patient/Beneficiaries Outside Medicare for All. Certain individuals will still not qualify for this so-called “universal” public program. Only “residents” are eligible for Medicare for All, and therefore private contracting is allowed, even for overlapping services, if they are delivered to the ineligible. In fact, for individuals not enrolled in Medicare, the provider may not only direct bill but may even “extra bill,” or charge more than comparable public rates, at least as I read the language. This is true in part because the Medicare-for-all bill, by using a global budget system, which I explain later, technically would not prescribe rates for individual services.
Providers Outside Medicare for All. Finally, non-participating providers may privately bill or contract with individuals (whether eligible or ineligible) even if the benefits overlap. The only consequence is that as in current Medicare, a provider cannot “moonlight,” serving some as a participating provider, and others by direct billing. If they leave Medicare to engage in direct billing, again, unconstrained in the extra-billing rates they charge, then they remain non-participating for least two years thereafter.
Stratification is not the only concern when designing these border-crossing opt-outs. One goal of single-payer is the reduction in the administrative transaction costs. Competitive markets are in some sense premised on waste. There is inherent duplication in competitors offering comparable products, and in the non-productive activity devoted to capturing competitor market share. There is also waste built into the efforts of those market entrants who are subsequently driven out of the market, exacerbating useless churn and administrative switching costs.
Moreover, the constant tinkering with and channeling of market incentives has produced a payment system of monstrous complexity. Some have calculated that our health system now features ten administrators for every one doctor providing patient care.
Alas, the Medicare-for-All single-payer bill does not eliminate the opt-outs, as we have seen, and also cannot disentangle completely from this sticky transactional byproduct of financing and delivering health care. The bill does envision that each institutional provider will receive a quarterly lump sum (“global budget”) to cover the provision of medically necessary health care to all who seek it, yet Section 612 preserves fee-for-service payment for some physicians.
Furthermore, that lump sum amount is negotiated between the provider and the Regional Director (surely no gaming there) and must be based on a “comparative payment rate.” Section 611(c) identifies this “comparative payment rate” as the same dizzying payment system we hate now though modified by “any other factor determined appropriate by the Secretary.” The documentation, measurement, coding, and reporting to calculate the budget must still take place, in part to justify the lump sum amount, and also because of the job dislocation caused as Section 601(a)(8) of the bill recognizes.
In short: the full advantages of single payer, and the underlying aspirations of Medicare for All, may remain beyond the horizon of this bill. Tomorrow, I will turn to the Medicare for America bill, which would establish a strong “public option” while deliberately maintaining a market system for those who choose to opt out.
Christina S. Ho is the Associate Dean for Faculty Research, Development and New Programs and a Professor of Law at Rutgers Law School.