By Steve Bowden
How Medicare for All Could Decrease the Number of Uninsured
Currently, Medicare provides health insurance for people who are over the age of 65, people with certain disabilities under the age of 65, and people with End-Stage Renal Disease. Thirty two million Americans do not currently have health insurance, even after the efforts of the Affordable Care Act. However, many more would have access to health insurance if the federal government expanded Medicare to cover all U.S. citizens and permanent legal residents.
How Employer-Based Health Insurance Fails to Rein In Health Care Spending
As of 2013, nearly 60% of Americans received their health insurance through their employer. Under the current, employer-based health insurance system that exists in the U.S., employers often help employees purchase health insurance from a private insurer by paying all or a part of the employee’s health insurance costs.
When people with private health insurance receive medical treatment from a health care provider, the health insurance company that covers the patient negotiates with the provider the amount of money it will pay for the procedure. Because private health insurers independently negotiate price with health care providers, they frequently lack bargaining power that could hold down their annual expenditures. The employer-based system of health insurance coverage that exists in the United States thus leads to unnecessary health care spending that insurers could prevent if they had greater leverage to negotiate the prices of medical procedures with health care providers.
How Medicare for All Could Decrease Health Care Spending
To reduce annual health care spending, the federal government could abolish the employer-based system of health insurance and provide Medicare to every U.S. citizen and permanent legal resident. Presently, Medicare insures 49.4 million Americans, but if the federal government eliminated the employer-based health insurance system and expanded Medicare so that it provided health insurance to all U.S. citizens and permanent legal residents, Medicare would cover a majority of people who reside in the United States. If Medicare was the sole health insurer of all U.S. citizens and permanent legal residents, it could gain bargaining power that private insurers lack and use that bargaining power to negotiate lower prices for medical treatments than currently exist. Furthermore, Medicare’s administrative costs are only about 3%, which is significantly less than the administrative costs of various other types of health insurance, including large companies that self-insure, individual insurance, and Medicare Advantage. The elimination of the employer-based system of health insurance and the expansion of Medicare so that it covers all U.S. citizens and legal permanent residents could decrease the amount of money it costs to administer health insurance in the United States.
Medicare for All may also decrease health care spending by setting caps on the amount of money Medicare could pay to health care providers. The cost of medical treatment in the United States is often much higher than it is in other countries. If the federal government implemented a Medicare for All system and enacted caps on the amount of money Medicare paid health care providers, it would effectively set the cost of medical treatment, which could decrease the amount of money that Americans as a whole would have to pay for various health care procedures and therefore decrease overall health care spending. It is unlikely that health care providers would respond to the imposition of caps on the payments they would receive for medical procedures by refusing to accept Medicare because Medicare would be the source of health insurance for the majority of people who reside in the United States.
Steve Bowden is a first year MPH in Health Policy student at George Washington University. He adapted this blog entry from a paper he wrote for the “Fundamentals of Health Policy” course. He currently works as a research assistant in the Department of Health Policy and Management. You can follow Bowden on Twitter @steveabowden.