Why Medicare For All Is Logically Affordable

With the 2020 presidential election campaign just getting off the ground, health care is shaping up to be a foundational issue, as it should be. Health care in the the United States is expensive and complex. Per person spending in the U.S. is higher than other similarly wealthy countries. It’s actually twice the average spending of Europe and Japan.

Democratic candidates are unanimous in their support for reform. Nine candidates have come out in favor of Medicare For All, an aspirational statement with multiple meanings, or some form of universal health care. Another three have come out in support of an expansion of Medicare or Medicaid.

Critics first reaction to the idea, even though a concrete plan has yet to be proposed, is that it is unaffordable. But there is no logic behind this conclusion.

According to the Centers for Medicare and Medicaid, health care spending was $10,739 per person in the U.S. in 2017. Some of this was paid by insurance companies through employer sponsored or individual health care plans, some was paid for by Medicare and Medicaid, some was paid out of pocket by the patients, and some was paid by health care providers when patients were unable to pay their bills.

While the cost of health care is projected to continue to rise, the fact of the matter is someone will pay it. Single payer solutions to paying for health care, which is what Medicare is, don’t, by themselves, change the cost of health care.

As a thought experiment assume every dime of health care spending were paid for by the government through an increase in corporate and individual taxes. You must then assume the other ways you pay for health care would go away and compensate for the higher taxes. The cost of health care will still average $10,739 per person.

The average annual premium for employer sponsored insurance for single coverage was $6,896, and it was $19,616 for family coverage according to the 2018 Kaiser Family Foundation Health Benefits Survey. Average premiums for plans under the Affordable Care Act in 2018 were $5,280 for single coverage and $14,016 for family coverage. These expenses would go away if the government paid for health care.

Out of pocket costs paid by patients continue to rise and provider networks are getting more and more narrow. This makes patients responsible for more of the cost of their health care and subject to financially devastating bills. If the government paid for all health care you must presume that your own costs will go away, offsetting the increase in your taxes. Other expenses, like those paid by insurance companies and those paid by health care providers would all go away.

A single payer system does not mean that the government will be in charge of your health care. They aren’t now with Medicare enrollees. Why would they be under Medicare For All? It also does not necessarily mean that all insurance companies will close. There are European countries that utilize insurance providers under a single payer system.

However, health care could benefit from some government regulation. Pricing is far from transparent, and even if it were, it’s not like you’re going to call around if your baby’s fever spikes to 104, or your husband is having a heart attack. And the cost of some life sustaining medications is becoming unaffordable even if you have insurance. It is the pricing side of the equation that makes health care so expensive. Not who pays for it.

Similar to health care, we depend on our electricity to work at an affordable price. Utility prices are regulated by municipal boards. It might be worthwhile to consider a similar arrangement for health care.

So no. Medicare For All is not unaffordable. We are already paying for healthcare in one way or another. In exchange for higher taxes, companies, health care providers and individuals would pay less for health care. The overall cost of health care won’t necessarily change with the implementation of a single payer system, though with some creative thought, we might be able to get that under control as well.


Photo by Tbel Abuseridze on Unsplash

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For a comprehensive, step-by-step guide to building your own financial plan, pick up my book, Save Yourself; Your Guide to Saving for Retirement and Building Financial Security. It is now available on Amazon.

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