"What a Medicare for All program does is finally provide in this country
healthcare for every man, woman and child as a right."
-- Sen. Bernie Sanders
"I don't want to see us start over again with a contentious debate."
-- Sec. Hillary Clinton
And yet, the debate has already begun.
On Monday, Iowan voters split right down the middle on the decision to nominate Secretary of State Hillary Clinton or Senator Bernie Sanders as the Democratic candidate for President. On Tuesday, New Hampshire voters will attempt to break the tie, and the healthcare debate could play a crucial role in their decision. Although she suggests various improvements and expansions, Secretary Clinton is basically in favor of sticking with the current healthcare system, based on the Affordable Care Act (aka "Obamacare"). Sen. Sanders, on the other hand, thinks Obamacare didn't go far enough -- and it's time for America to move to a single-payer healthcare system.
He calls it "Medicare for All." Here's what it means to you.
Simpler medical bills
A few years back, consumer finance website NerdWallet released a survey illustrating how extending Medicare coverage to all Americans could cut costs for everyone. According to NerdWallet, Medicare pays just $0.27 for every $1 that hospitals bill it for medical services -- a savings of 73%. Put another way, if two patients walk into a hospital -- one with Medicare and one uninsured -- the typical uninsured patient would be billed nearly four times more.
And that's just the average. Echoing similar findings by the Department of Health and Human Services, the survey noted that, among the many, many different medical procedures offered here in the 21st Century, different hospitals offer one and the same procedure for vastly different prices. In some instances, a procedure performed at one hospital can cost 40 times more than the same procedure offered elsewhere.
Simpler ... and cheaper medical bills
Obamacare has done a good job of getting more Americans onto the insurance rolls, but not everyone is pleased with what they find when they get there.
A report by the Kaiser Foundation last year, for example, found that as compared to the "old" system of employer-provided health insurance, deductibles for Obamacare bronze, silver, and gold insurance plans all cost patients more. Caps on out-of-pocket expenses for insured customers, too, were higher in all Obamacare plans save "platinum." Co-pays for visits to a primary care physician cost more for bronze and silver plans, while hospital stays cost more under all Obamacare plans.
At the same time, news reports from multiple sources warn that insurance premiums -- the admission ticket that must be purchased before all these other costs can be incurred -- are spiking faster than expected. By at least one estimate, premiums across the four "metal" levels of Obamacare could rise as much as 20% on average in 2016.
That shouldn't happen under a Medicare for All system. Indeed, according to Sen. Sanders, most Americans will reap significant savings under Medicare for all. A CNN analysis of the Senator's plan suggests that a family of four with one wage earner, earning the average annual wage of $50,000, would save about $7,000 through the elimination of premiums and deductibles, while paying only $1,100 more in taxes in lieu of insurance premiums. That's a net savings of roughly $6,000. (Higher income families wouldn't fare as well, because they'd pay significantly more in taxes).
This would be welcome news for many patients, frustrated with how the hospital system (still) works under Obamacare. It could also be good news for taxpayers. According to Harvard Medical School visiting professors David Himmelstein and Steffie Woolhandler, a Medicare for All healthcare system would be incredibly efficient, cost-wise. On average, only 2% of the revenues that flow through Medicare today go to "overhead." In contrast, patients who subscribe to private Medicare Advantage plans, for example, spend 14% of their money on overhead -- and Obamacare's 80-20 rule permits insurers to divert as much as 20% of healthcare spending to things other than paying for actual healthcare services.
Meanwhile, even under Obamacare, the overall cost of healthcare keeps rising. Just last year, we saw 231 health insurers request permission to raise their rates by double digits.
Sounds good. Where do I sign up for Medicare for All?
Surveys show that a bare majority of Americans favor a single-payer system like Medicare for All proposal -- but not everyone is a fan. Seventy-three percent savings on medical costs might be good for patients. But companies are already smarting from the pains imposed by Obamacare, and may not be eager to see government horn in on their business any more.
UnitedHealth Group (NYSE: UNH), for example, was an early supporter of Obamacare and enthusiastic about the program's ability to bring it millions of new paying customers. But after seeing profits drop 19% in the last quarter, UnitedHealth Group says it may now exit Obamacare and cease to offer plans under the current system.
Would it prefer Medicare for All? Unlikely. Indeed, there's a very real question about whether private health insurers like United Healthcare could compete with -- or would be allowed to compete with -- a Medicare for All system covering the whole population.
At the same time, hospital chains like HCA Holdings (NYSE: HCA) that are just beginning to figure out how to make money from rising spending on healthcare under Obamacare, may not want to see their boats rocked by another change. HCA saw profits sink 13% last quarter, triggering an earnings warning on Q4. Actual Q4 results came out this week, though, and showed record earnings for HCA. Medicare for All's potential 73% discount would almost certainly put a kibosh on those profits.
Under a President Sanders, Medicare for All would clearly be a priority program, and one that it seems many voters would support. It's not hard to see how a President Clinton, too, might "move to the left" on single-payer healthcare in an attempt to capture the votes of Sanders supporters. Heck -- for that matter, even a President Trump might favor Medicare for All. He has, after all, advocated it in the past.
But given the armies of lobbyists that companies like United Healthcare, HCA, and other members of the medical establishment would deploy in Congress, opposition to Medicare for All could be fierce. Attractive as those 73% savings might be, they might also be a long time coming.
Having just opened his latest doctor's bill, Fool contributor Rich Smith would jump at the chance to cut that bill by 73%. Rich Smith does not own shares of, nor is he short, any company named above. You can find him on Motley Fool CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 249 out of more than 75,000 rated members.
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