Leading lawmakers are advocating proposals that would vastly increase the role of government in health care. Some argue for an approach that would abolish nearly all existing coverage arrangements and replace them with a single, government-controlled plan. Others argue for a more “moderate” incremental approach, that would create a new government-controlled health plan to “compete” with existing, private arrangements.
These ideas are increasingly popular with some Members of Congress and the public at large. Which should come as no surprise: Proponents of a government-controlled system (also known as a single-payer system) in the United States make numerous claims about the benefits of such a system. Among them are:
- “Public option” proposals are a more “moderate” version of single-payer that would allow Americans more choices of coverage, by creating a new government plan that would compete against existing private coverage.
- Single-payer health care can effectively build on the Medicare program via a proposal called Medicare for All.
- The average American family would be financially better off under Medicare for All.
- Government-controlled health care would ensure that everyone has equal access to high-quality health care.
- Single-payer health care would save money by eliminating the administrative costs generated by private health insurance.
These claims are false. There is a wide gap between the rhetoric and the reality. Policymakers should reject single-payer policies, which impose a high cost on patients and put medical coverage decisions in the hands of government bureaucrats. Leaders should support policies that reduce costs and empower consumers to make their own personal medical decisions.
Rhetoric: Public Option Proposals Are a “Moderate” Alternative to Single Payer.
The public option was once considered too far reaching … but it is now seen as a more moderate alternative to Mr. Sanders’ plan, which would all but eliminate private health insurance and enroll everyone in a government-run plan.
—The New York Times
Reality: “[T]he public option is a Trojan horse with single-payer hiding inside.”
—Seema Verma, Administrator,
Centers for Medicare and Medicaid Services,
The Washington Post, July 24, 2019
The truth is that, other than timing, there is little difference between the public options and Medicare for All proposals. There are seven leading public option proposals, as outlined in this book. They each do slightly different things, but all rely on a government health plan competing directly against private health plans—rather than outlawing virtually all private coverage and replacing it with a single government plan. Yet, the economic and political dynamics of these public option proposals would still lead to a single, government-controlled health care system, though more gradually and generally without explicit initial tax increases.
And this is by design. As then-Representative Barney Frank (D–MA), who, during the debate on Obamacare, said, “I think that if we get a good public option, it could lead to single payer and that is the best way to reach single payer.”
Research by Dr. Lanhee Chen, a health policy analyst with the Hoover Institution at Stanford, finds that public option proposals
would increase the federal deficit dramatically and destabilize the market for private health insurance, threatening health-care quality and choice.…
The fiscal effects are even more pronounced over the long run. We estimate that federal spending on the public option would exceed total military spending by 2042 and match combined spending on Medicaid, the Children’s Health Insurance Program and ACA subsidies by 2049. In the latter year the public option would become the third most expensive government program, behind only Medicare and Social Security.…
Beyond fiscal considerations, the public option would quickly displace employer-based and other private insurance. This would force some private insurers to exit the market and encourage greater consolidation among remaining insurers. Consumers seeking coverage would be left with fewer insurance options and higher premiums.
Meanwhile, many health-care providers would suffer a dramatic drop in income, while at the same time experiencing greater demand for their services. Longer wait times and narrower provider networks would likely follow for those enrolled in the public option, harming patients’ health and reducing consumer choice. Declines in provider payments would also affect investment decisions by hospitals and may lead to fewer new doctors and other medical providers.
The end result? A “Medicare for All” program, just with more intervening steps.
Rhetoric: “Medicare for All” Builds on the Medicare Program.
We need to build on the strength of the 50 years of success of the Medicare program.
—Friends of Bernie Sanders
Advocates point to the Medicare program as the foundation for their plan and claim their plan would add new benefits for seniors. They make use of the program’s enormous popularity, not only with seniors, but with the public; they claim that it provides guaranteed benefits, financial security, and broad access to care.
Reality: Medicare for All Would Abolish Medicare as We Know It.
Under the two leading congressional proposals, Medicare itself would be replaced by the new government health insurance program. Over 63 million seniors and disabled Americans would be displaced from their current Medicare coverage and transferred to the new national health insurance program.
Medicare “as we know it” includes several programs. Traditional Medicare is a “fee-for-service” program that provides coverage for hospital services (Medicare Part A) and physician and outpatient services (Medicare Part B) and optional coverage for prescription drugs (Medicare Part D). Seniors and certain disabled citizens who choose these programs can also purchase and enroll in supplemental coverage (Medigap) to fill in significant coverage gaps in traditional Medicare, such as coverage for catastrophic illness. Alternatively, seniors can forgo the traditional program and enroll in Medicare Advantage (Medicare Part C), which is a defined contribution system of competing private health plans that offer comprehensive benefits packages. These plans must offer the traditional Medicare hospitalization and physicians’ benefits but can also offer a variety of benefits that traditional Medicare does not cover, including catastrophic coverage. Under the House and Senate “Medicare for All” bills, those private health plan options, as well as the traditional Medicare program, would be abolished and replaced by the new government plan.
Rhetoric: The Average American Family Would Be Financially Better Off Under Medicare for All.
Under Medicare for All the average American family will be much better off financially than under the current system, because you will no longer be writing checks to private insurance companies.… While, depending on your income, your taxes may go up to pay for this publicly funded program, that expense will be more than offset by the money you are saving by the elimination of private insurance costs.
—Senator Bernie Sanders
Government-controlled health care, according to its advocates, would be less expensive for working families. Diane Archer, founder of the Medicare Rights Center, writes, “Under Medicare for All, the typical family will see higher wages and lower expenses and spend much less on health care than it does today.” While single-payer advocates acknowledge that federal taxes would increase, they also claim that the overall cost to the consumer would be less with the elimination of premiums and with the additional savings generated from a combination of consolidated administrative costs, reduced provider reimbursements, and superior government cost control.
Reality: Americans Would be Financially Worse Off Under Medicare for All.
Original research by Heritage Foundation scholars shows this claim to be false. Politicians and advocates for government-controlled care are promising far more than they can deliver.
All told, roughly three-quarters of Americans would be worse off. That’s because they would pay more in additional taxes than they would save from no longer paying privately for health care. Paying for the new program will require taxes to go up—a lot. Fully funding Medicare for All requires a new, additional tax of 21.2 cents on every dollar every American earns. That is on top of what they pay now (an average of 31 percent in total federal, state, and local taxes)—meaning that, under Medicare for All, working Americans would see half their paychecks going to the government.
Households that currently have employer-sponsored coverage would be particularly hard hit, as their disposable incomes would shrink by an average of $10,554, and 87 percent of them would be financially worse off. Even lower-income working families, currently getting health care through government programs such as Medicaid and the Children’s Health Insurance Program, would be worse off. Their average household disposable income would decline by $5,592 per year. Depending on how much they earn and where they get their coverage today, Medicare for All would cost some working families more than what they pay for electricity; for others, it would exceed their gasoline budget; and for others, their food budget.
Rhetoric: Single-Payer Health Care Would Ensure that Everyone Has Equal Access to High-Quality Health Care.
A single-payer system will ensure that everyone has access to a single tier of high-quality care, based on medical need, not ability to pay.
—Physicians for a National Health Program
Advocates argue that single-payer health care would replace the current system of public and private coverage that exists today with guaranteed, universal coverage so that everyone would have a basic level of health care.
Reality: In Government-Controlled Health Care, Universal Health Coverage Is Not the Same as Universal Access to Care.
Coverage is not the same as care. The British National Health Service (NHS) and Canadian health systems (both single-payer systems) establish “global” budgets for health care spending. These take the form of annualized caps on aggregate heath spending. While these measures are designed to control costs, they often result in long waiting lists, and thus delays and denials of care. In both systems, these waiting lists are well documented, and they highlight the inevitable problems patients face in accessing care.
Waiting lists, in particular, are a significant problem in the Canadian system. In 2017, Canadians were on waiting lists for an estimated 1,040,791 procedures. Physicians reported that only about 11.5 percent of patients “were on a waiting list because they requested a delay or postponement.” Often, wait times are lengthy. For example, the median wait time in Canada for arthroplastic surgery (hip, knee, ankle, or shoulder) ranges from 20 weeks to 52 weeks.
By contrast, the United States outperforms other developed countries in wait times. A 2018 study of 11 developed countries published in the Journal of the American Medical Association found that in the United States, only 6 percent of patients waited two months or longer to see a specialist. In Canada, 39 percent of patients had to wait that long, and in the United Kingdom, 19 percent experienced the same wait time.
In the British NHS, cancellations are common. In 2017, the NHS canceled 84,827 elective operations (in England alone) for non-clinical reasons on the very day the patient was due to arrive. The same year, the NHS canceled 3,845 urgent operations in England. Episodes of frequent illness tend to aggravate this problem. During the 2018 flu season, for example, the NHS canceled 50,000 “non-urgent” surgeries in England.
American medical interventions, particularly for cancer, stroke and heart disease, are particularly impressive. In the aforementioned JAMA study, researchers noted that “the United States had among the highest breast cancer screening rates and the lowest 30-day mortality rates for acute myocardial infection and stroke.”
In the United States, the Veterans Administration (VA) health program and the Indian Health Services (IHS), both government-run health care programs, have a history of poor performance. With the VA, America’s veterans suffered from shocking delays and denials of care. A few years ago, the Chairman of the U.S. House Committee on Veterans Affairs requested an investigation by the Office of Inspector General into concerns that tens of thousands of veterans had died waiting for care. These concerns led to congressional efforts to allow veterans to seek care from private doctors outside the VA system.
Not only patients, but also doctors, would face a more difficult practice environment under a single-payer program. Earlier this year, the British Medical Journal published a study of general practitioners who have left practice or are planning to leave. The most commonly cited reasons were the lack of professional autonomy, administrative challenges, and increasingly unmanageable workloads.
Rhetoric: Single-Payer Health Care Would Save Money by Eliminating the Administrative Costs of Private Health Insurance.
Such a single-payer system would address one of the major deficiencies in the current system: the huge amount of money wasted on billing and administration.
—Senator Bernie Sanders
Senator Sanders and other single-payer proponents argue that the country as a whole would save money under a government-controlled health care system, in part because of savings generated from reduced administrative costs. They argue that administrative costs (as a percentage of total costs) in Medicare are smaller than in private insurance, and that therefore Medicare for All could squeeze out additional administrative costs through consolidating and centralizing administration at the federal level.
Reality: Administrative Savings Would Likely Be Small, and Administrative Costs Would Shift to Health Care Providers.
Comparing Medicare and private sector-administrative costs (administrative costs versus benefit expenditures) is not as simple as it may seem. Medicare’s administrative costs routinely appear low, but that is only because Medicare incurs such high claims costs that the administrative costs appear comparatively low. For example, a 2009 study by former Heritage Foundation Research Fellow Robert Book found that Medicare’s administrative costs were somewhere between 3 percent and 8 percent of total costs, depending on whether calculations included costs incurred by non-Medicare agencies (such as the IRS). In contrast, administrative costs in employer-sponsored insurance were between 14 percent and 22 percent. Thus, on the surface it looked like Medicare was more efficient than employer-sponsored insurance by a wide margin.
The truth is the opposite. In 2005, according to the same study, Medicare’s administrative costs were $509 per primary beneficiary, whereas private plans’ administrative costs were $453 per beneficiary. This is because employer-sponsored insurance costs less on a per capita basis than Medicare. Medicare’s claims costs are high because its population consists of the elderly and disabled—populations with high claims costs. When Medicare’s administrative costs are compared to claims costs, the administrative costs appear low. Conversely, employer-sponsored insurance covers a wider range of people, including those with much lower claims costs. Thus, when Medicare’s per capita administrative costs are compared to per capita claims costs, the administrative costs appear high.
In any case, administrative costs are not necessarily a dead-weight loss. In private health insurance, administrative responsibilities include health care management and claims reviews, especially in efforts to reduce the costs of waste, fraud, and abuse. In sharp contrast to private health insurance, fraud and waste, including “improper payments” to providers, is rampant in federal health programs. The failure of competent administration also imposes a severe cost on the taxpayers. As Charles Blahous of the Mercatus Center noted, “The Government Accountability Office found approximately $96 billion in improper Medicare and Medicaid payments in 2016, by itself more than twice the total government expenditures on health insurance administration.”
A Better Alternative
It is not surprising that Americans are looking for a solution to America’s health care problems—rising costs and gaps in coverage and quality. Government laws, regulations, and policies contributed to rising private market costs and reduced health plan choices
Naturally, this situation frustrates many Americans. According to a 2019 Gallup Poll, 55 percent of respondents say they worry a great deal about the availability and affordability of health care—making health care their top concern.
These concerns can’t be answered by further expanding government control over American health care. That path ends in unprecedented tax increases and public debt, discourages innovation, and gives politicians too much control over deeply personal—in some cases, life and death decisions.
A different approach is needed.
Opposition to a single-payer system or some form of public option is not an endorsement of the flawed American status quo. The status quo is far more costly than necessary; its insurance and delivery markets are consolidated and uncompetitive; it frustrates consumer choice as well as competition; its performance on quality measures is uneven and largely dependent on whether or not one is stuck in Medicaid or in a geographically remote area that is medically underserved. Policymakers should address these issues head on.
At the same time, American health care has many bright spots that policymakers should respect and build on. To name a few: rapid responsiveness, excellent performance in addressing big ticket items such as cancer and heart disease, encouragement of innovation in advanced medical technology. These all have a direct and positive impact on improving the quality of American lives and reducing mortality. And, despite the current dysfunctionality of American insurance markets and the top heavy burden of bureaucratic paperwork, generated in both the public and private sectors, there are still big islands of excellence and efficiency in care delivery that are largely absent in other countries, such as shorter lengths of hospital stays, a greater provision of outpatient services, and a greater reliance on less costly and widely available generic drugs.
Health care reform should be creative, and not, like the progressives’ single-payer proposals, destructive. Policymakers should build on what is best in American health care, including its embrace of advanced medical technologies and its superior capacity to combat deadly disease.
Reform should more closely mirror the goals Americans have for their health care. Policymakers should prioritize flexibility in coverage design and care delivery, and transparency in medical pricing and clinical performance. They should empower entrepreneurial providers to adapt quickly to changing conditions in the same fashion as private firms. And reform should empower consumers and expand their personal choices, so markets are consumer driven—rather than corporate dominated.
Any change should be evaluated by one, clear metric: Does it give Americans more control over their health care dollars and decisions?
Progressives’ ideas fall far short on that metric. Americans deserve, and can do, much better.