The Pros And Cons Of ‘Medicare Extra For All’ Plan From Center For American Progress
The fact that the Center for American Progress (CAP) has moved dramatically leftward on health care is by far the most important aspect of their recently unveiled “Medicare Extra for All” plan. It signals a major political and cultural shift.
The reception the plan has received so far seems to depend heavily upon what people think is the impetus for it. Some see it as an attempt to undermine the growing support for Senator Bernie Sanders’ Medicare for All or a secret plan by private insurers to secure a place for themselves in a changing political climate. Others see it as a legitimate attempt to bridge the divide in the Democratic party to be ready to act in 2021. (We already know who one third of the senators will be in 2021, and so far, eight of the 12 Democratic senators in that class have yet to co-sponsor Sanders’ bill.)
I won’t try to divine true motivations here, but I can talk about the merit of the policy ideas.
When Shadowproof published my “Road to Single Payer” series and Medical Insurance and Care for All plan last year, the main goal was to start a detailed conversation about health care well in advance of 2021—for the left to decide what are the most critical elements we should support, to choose how we define “affordability,” figure out the biggest political obstacles, and decide what political modifications are worthwhile.
Now that big groups like CAP are joining the conversation, this is a critical moment. For the best chance to shape policy, it’s important to act early.
Below are the biggest pros and cons of the CAP plan.
PRO: The plan calls for eventually making every legal resident automatically eligible for “Medicare Extra” and automatically enrolls everyone who doesn’t have other coverage. This should be a bare-minimum for any plan on the left. Automatic enrollment is basically the only way to get to true “universality.”
PRO: The plan calls for a full range of health benefits including dental, vision, and hearing.
CON: Both the premium/tax rate as well as the cost-sharing in the plan are simply too high. I could not call this plan “affordable,” and that is the biggest con of the entire plan.
According to CAP, “For families with income between 150 percent and 500 percent of FPL, caps on premiums would range from 0 percent to 10 percent of income…The actuarial value would range from 100 percent to 80 percent for families with middle incomes or higher.”
An insurance policy with an actuarial value (AV) of 80 percent would be equal to a so-called “gold” plan on the ACA exchange, and one of the most annoying things about the ACA is how it labeled pretty terrible insurance plans “gold.” For comparison, a standard “gold” plan in my city has a deductible of $1,000 per individual, a 20 percent coinsurance rate for most hospital care, and an out of pocket limit of $6,850.
For a person making $60,000 a year (500 percent FPL), that is 11.4 percent of their income that could potentially go to out of pocket costs. That’s on top of the 10 percent of their income that goes to premiums, and while the CAP proposal does not say, I presume they are keeping the 2.9% combined Medicare payroll tax (if self-employed). The net result is a middle class person with a medical emergency could end up spending a quarter of their income on health care. It is bad policy and politics.
In addition, some complex combination of deductibles and coinsurance is basically unavoidable with just a low AV. This is confusing, frustrating, and ineffective. The only cost-sharing MICA included was very limited and simple, to understand co-pays to basically encourage choosing general practitioners over specialists, with a review system in place to make it easy to get rid of those copays with just executive action after the law is passed.
Even that limited cost-sharing was only added primarily because the Congressional Budget Office is likely to score a bill with small co-pays as significantly cheaper than one with free at-point-of-service care. Democratic members of Congress and the media put substantial weight on the CBO’s estimates.
Any groups pushing for free at-point-of-service care should right now be developing a strategy to deal with this CBO issue. They can do research to convince the CBO it won’t be more expensive. They can push for Democrats to ignore the CBO or settle on a backdoor strategy like my own.
On the other hand, any group pushing for significant cost-sharing should be required to explain why they made this choice, which CAP has not done.
Finally, this AV level is bad politics. If we want this program to succeed, we need to give a significant number of people something better than what they currently have. In 2011, employer provided insurance had an AV of around 89 percent (likely lower now). The ACA was a great example of the political problem of promising “affordable” but not delivering.
This is why it is critical we get serious about defining affordability holistically. Even a free at-point-of-service single-payer plan could be unaffordable if the tax rate is too high for middle class people. I think we should keep total middle class spending, even under the worst-case scenario, under 14 percent.
Long-term Services and Support
PRO: It’s good to include coverage of home and community-based services
CON: The plan continues to allow for-profit private insurance to exist in this new Medicare Advantage-like program. The new “Medicare Choice” would at least be a regulated quasi-all-payer system that in theory should prevent some of the biggest problems with the ACA marketplaces, but Medicare Advantage has often been a wasteful mess. CAP owes an explanation for why they made this choice.
If they think the main goal is to prevent private insurers from opposing the bill, it requires some serious proof that such a major concession would help the law’s adoption. If they think the main goal is to save money, they need to explain how it won’t repeat Medicare Advantage’s problems. If this provision is purely to win over voters who claim they want choice or fear being “forced to switch,” then they should also outlaw for-profit health insurance at the same time. Switzerland did that when they adopted their health care law.
I think overcoming people’s general opposition to change is important and could potentially make or break any possible bill in 2021. That is why MICA decided to allow only highly regulated non-profit insurers to exist, to placate some people’s concerns about change. But MICA is structured to put them at a substantial disadvantage, to create a situation where they slowly die on the vine. “Medicare Choice” would be a fairly thriving market for for-profit insurers, although at least one decently regulated that people can choose to avoid entirely.
Now that expanding Medicare is part of mainstream Democratic thought, the question of whether private insurers will be allowed to remain and the very specific rules they must operate under will become a big point of debate. I know full single-payer supporters want a quick and full nationalization of all private insurers, but it is still important to pay attention to the details to shape the debate. The important question is what has the votes to pass in 2021.
Employer Choice/Employee Choice
PRO/NEUTRAL: The plan would have employers either provide “Medicare Extra,” provide private insurance as good as Medicare Extra, or pay a fee for not providing insurance. It would also let all employees take their employer benefit money and directly buy “Medicare Extra.” The way the plan treats small businesses differently than large businesses adds a needless complexity which could lead to companies gaming the rules.
The net effect of all this, though, is to basically redirect what we are currently paying in employer-provided insurance premiums into the new system without calling it a tax or needing to come up with new tax structure to try to perfectly replicate what we currently pay.
I personally think this is a good idea for two reasons. First, I think people would be more comfortable with it as a funding mechanism. It is not a new tax, it is just what they pay now but cheaper. Second, I don’t think we should be primarily trying to pay for health care by taxing the rich. We are already used to paying for health care and should just redirect our wasteful spending. There are many other progressive priorities that currently have no funding sources that I would prefer we save “taxing the rich” to pay for.
This issue of funding will likely be the thorniest part the next health care fight, though. It is what killed Vermont’s effort.
NEUTRAL: The plan requires states to pay “Medicare Extra” roughly what they currently spend on Medicaid and let them provide “wraparound” coverage. Medicaid makes up a big share of state budgets and a large share of overall health care spending. There is no easy answer to how best to deal with this rebalancing of state budgets if health care is more federalized. Any plan creates winners and losers. Erring on the side of minimizing funding changes is one strategy.
Transitioning to “Medicare Extra”
STUPID: The plan calls for only having “Medicare Extra” in a few counties on the exchanges in year one and taking eight years to fully implement it. This is just needlessly long and stupid. You want any program fully implemented within a single presidential term. Once something is established, it is tough to undermine.
Provider Payment Rates
PRO: The proposal does acknowledge the big problem with health care spending is that we simply pay too much to providers. Even many Medicare for All supporters refuse to honestly talk about the fact that hospitals are the biggest problem and the most dangerous opponent to single-payer. “Medicare Extra” would pay an improved Medicare rate and prohibit all providers from charging more than the “Medicare Extra” rate. That would at least make the remaining private insurance much cheaper and less inefficient.
Prescription Drug Costs
PRO: The plan would have “Medicare Extra” directly negotiate prices for prescription drugs, medical devices, and durable medical equipment.
CON: The drug makers are definitely going to oppose a bill containing this provision with everything they’ve got, so it would be smarter to cram it full of other ideas to bring down drug prices, including things like drug patent reform. The Sanders bill has a similar issue. If you are going to have a fight with the drug makers, you might as well try to get everything.
NEUTRAL: There is a certain irony to the fact that CAP doesn’t specifically lay out what all of their new taxes would be, since that has long been centrist Democrats’ big complaint against Sanders’ Medicare for All proposal. Their default premium and quasi-employer mandate provide most of the funding, and they offer several ideas to fill in any remaining gaps.
At some point, a specific package of taxes is going to need to be selected or Democrats are going to need to decide not the worry about “fully paying for” their health care bill. I personally think Democrats should begin rallying around the latter.
We already have a lot of federal health care dollars, which will be redirected to the new system, and we know a better system would be significantly cheaper in the long run. It is just impossible to really predict how much cheaper. Instead of wasting a lot of political capital trying figure out how to perfectly balance the long term estimates, we should just plan to deal with any issues when/if they come. The endless negotiations to try to get the CBO score of the ACA just right created some bad policies, wasted time, and gained no added support from the public.
If we pass a good program, people will be willing to find a way to fund it once it proves itself. But if we are going to adopt this strategy, we need to decide soon.