Photograph of a Medicare for All rally

Medicare-for-All Wouldn’t be Medicare if it Eliminated Private Insurance

By Robert Field

Should Medicare-for-All replace private insurance? That question, although central to many current health reform debates, presents a fundamental contradiction. If Medicare-for-All were to eliminate private coverage, it wouldn’t be Medicare, which has made room for private insurers from the start.

Medicare could have been designed as a pure single payer with comprehensive coverage for all health care needs. However, that approach would have risked alienating several important constituencies, including the insurance industry, and provoking their opposition. Before the program was enacted, private Insurers enjoyed a sizeable market through which they sold coverage of some sort to about half the nation’s elderly. Medicare eliminated that market but created an attractive new one to replace it. It did this by enabling insurers to sell Medigap policies that filled some of the program’s most significant coverage gaps, such as coverage for vision and dental care, and that reduced or eliminated its sizeable copayments and deductibles. When the program launched, more than 80 percent of beneficiaries who had previously maintained private coverage purchased these new supplemental policies. Medicare also gave some insurers the chance to earn additional revenue by administering claims as carriers and intermediaries.

The role of private insurance companies in Medicare has continued to grow over time. They now provide coverage to almost a third of beneficiaries through Medicare Advantage, and they play the central role in providing coverage for prescription drugs. Plans offered through Medicare now account for almost a quarter of industry revenue.

With this combination of public and private elements, Medicare has not only survived for more than half a century but become a mainstay of much of the health care system. It is also extremely popular. In a 2014 Kaiser Family Foundation poll, 77 percent viewed it as a very important government program, and 76 percent saw it as important to them personally. Its hybrid structure helps generate broad support across the political spectrum, appealing to Democrats with its government foundation and to Republicans with its element of private sector choice.

Of course, the program faces serious challenges, especially concerning costs. However, in this regard, it is largely a victim of its own success. Americans are living longer and therefore enjoying more years of Medicare eligibility in large part because the program has given them access to ever more sophisticated care. It also provides essential funding for the introduction of expensive new technologies and for the training of new physicians who provide them. It would not be an overstatement to say that without Medicare, much of health care as we know it in the United States would not exist.

As Medicare-for-All proponents are quick to note, Medicare’s private component remains controversial. Private insurers generate higher overhead costs than the program’s traditional, government-run coverage and are often accused of trying to avoid sicker potential customers. Moreover, cost increases for private insurance tend to outpace those for Medicare. However, regulatory oversight of Medicare’s private component has helped to mitigate some of those concerns, and stronger oversight could address remaining regulatory gaps without eliminating private coverage altogether.

The premise behind Medicare-for-All should be simple. Take a successful program with a limited range of beneficiaries and extend it to everyone. Perhaps a pure single payer plan could improve on Medicare’s decades-long success, but it would be misleading call such a plan “Medicare.” It would be something quite different. To bring Medicare-for-All to fruition, there is no need to change a formula that has worked remarkably well for over half a century.

 

This blog post first appeared as an op-ed in the Philadelphia Inquirer.

Robert Field

Robert Field

Robert I. Field is professor of law at the Kline School of Law and professor of health management and policy at the Dornsife School of Public Health at Drexel University. He is also a senior fellow of the Leonard Davis Institute of Health Economics at the University of Pennsylvania.

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