Two Challenges The Single-Payer Movement Must Address

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If efforts to pass Medicare for All are ever going to succeed, supporters are going to have to get serious about addressing two big political hurdles: taxes and provider pay.

These two issues form a web of potential challenges that have tripped up state single-payer efforts for decades. Now that basically every health care industry group has united to kill single-payer, ignoring these issues or assuming the public will just inherently see the wisdom in single-payer seems a poor gamble.

Similarly, simply pushing to make the concept of “Medicare for All” more popular is not enough. The idea has had majority support for years. If we can learn anything from the politics around the Affordable Care Act or failed state single-payer efforts, it is that bills aren’t judged by their most popular provisions but by their least.

If the hope is to have Democrats take action in early 2021, that gives just two-and-a-half years to engage with the public on multiple thorny issues: the value of a total restructuring of our tax code, the relative size and equality issues with current employer premiums, the balance of state and federal spending on health care, and the fact that providers in the United States are charging the public significantly more than they do in any other country. There is no time for “dealing with the details later,” since the opposition is already taking action to exploit them. That time is now.

Challenge 1: Taxes

Taxes are the big hurdle that has killed single-payer efforts time and time again.

Replacing current premiums with taxes would require a payroll tax of around 10 to 25 percent. Many activists seem convinced they can simply repeat the message, “Don’t worry, this big new tax will be less than or roughly equal to what you had been paying in premiums.”

This message has failed in battleground states like Colorado and even in blue states like Oregon, Vermont, and California. In California, 53 percent of likely voters back single-payer but support drops to just 41 percent when they are told it will require new taxes.

This is a pattern repeated in numerous states and national polls. Getting people to believe this message is going to require seriously confronting the issue — a massive educational effort directed at a large swath of the media and the public.

The added problem is the math is not nearly as simple as some people like to claim. Take, for example, this chart from a Rand analysis of a single-payer bill in New York.

The chart shows on average how people would fare if current premiums and cost sharing were replaced by taxes. It shows on average households making less than $291,000 would in theory be better off, but there are huge individual variations which make up those averages.

For starters, well-off young people who buy their own insurance and individuals who work for companies with relatively young, healthy work forces will do worse than average in this trade off.

In addition, underlying the whole message are some economic assumptions that can be tough for people to believe. The biggest is that, by ending a company’s need to provide health insurance, companies would raise their employees’ wages by how much they had previously been paying in premiums.

Even if that is true for many people over the long term, it will not be true for everyone, particularly in the short term. There are even some scenarios in which employers would be likely to pay less but nominal wages are sticky. For instance, a company may choose to withhold these wages from employees who aren’t as valuable as they once were. There are also struggling companies that will do anything to cut costs they think the can get away with, even if it just delays the inevitable. This big benefit/tax transition would give those companies an opportunity to try to hide a pay cut while trying to stay afloat.

Similarly, any federal single-payer bill that effectively takes over Medicaid and pays for it with a new federal tax would free up states’ current Medicaid spending. To make sure everyone is roughly as well-off, states would need to use the savings for a broad income tax cut which mirrors current premium spending.

The federal government can’t make states do this, and since many states don’t have an income tax, it would be difficult even if they tried. Some states might use the savings to only cut taxes for the rich or to plug long-term budget holes, hoping voters will blame the federal government when they don’t “feel” the promised tax relief.

The single-payer movement has three choices:

  1. They can run a public outreach campaign to fully educate the public about the trade-off and prepare for the blowback. Really take the issue head-on. Talk frequently about the actual taxes needed and the economics behind it. Be prepared to have a message for the tens of millions who will end up paying more, highlighting the broad social good and the non-financial benefits even for the “losers” in terms of long term security. If this education strategy is going to work, it needs to have started yesterday. As of now, the single-payer bills in Congress lack a tax section, so we don’t even know what taxes we are trying to get the public to back. Selling the public on a massive tax transition in just a few months during the final rush to pass a bill is a big problem waiting to happen.
  2. Avoid the issue almost entirely with creative policy. Instead of trying to design and create a large new payroll tax so that it closely matches what most employers were spending on premiums, you could just use an employer mandate. Just mandate employers “buy” their employees’ Medicare or pay what they would have paid in private premiums to the government. You can design an employer mandate to have nearly the same financial impact of any payroll tax. The political difference is significant: even in California, a single-payer bill that requires a new tax polls at an anemic 41% in favor, 41% opposed while nationally mandating employers pay for health insurance polls at 63% in favor to 37% opposed. Mandating employers pay basically the full cost of buying comprehensive coverage for their employees has proven to be very popular and political durable in Hawaii. Similarly, the federal government could require states to make maintenance-of-effort payments to the federal government equal to what they had been spending on Medicaid.
  3. Make the program super cheap. Finally, activists could push to make the single-payer program so much dramatically cheaper than our current system that basically everyone would clearly see a big financial improvement. It is way easier to sell “Your premiums will disappear, and most of you won’t pay any new taxes,” than “Don’t worry about the big new tax; it should cancel out via these half dozen other changes.” That is something we can do in theory. The amount of government money currently spent on Medicaid/Medicare/CHIP/Federal employees, etc., is greater than what the UK or Canada spends to provide everyone free insurance. We can, in theory, create a single payer system without new taxes.

Challenge 2: Provider rates

What really makes single-payer “work” in other countries is that other governments don’t allow hospitals and doctors to rip people off. Yet in America we are being ripped off to an incredible degree.

If you listen to speeches or watch videos from politicians backing Medicare for All, you would never know this. You would think the reason why our health care system is so much more expensive than any other country’s had to do with administrative overhead and drug prices.

While there is a lot of administrative waste due to our private insurance system, even relatively optimistic estimates put savings that could be wrung from administrative simplicity at around 13 to 15 percent. You can do a lot of good with an extra 10 to 15 percent, like covering the current uninsured and improve people’s benefits somewhat, but you will never get American health care spending anywhere close to other industrialized countries. There is not enough waste in administration to expand coverage, increase benefits, and let most Americans spend significantly less of their income (be it in premiums or taxes).

Most single-payer bills heavily promote expanding coverage to the uninsured or underinsured, but what voters care about most is bringing down their own health care spending. With average family premiums having increased by $6,658 in just the past decade, that is not an unreasonable desire. Particularly when one considers that Canada spends just $6,604 Canadian ($5,056 US) per person to provide universal care.

American health care spending cannot be lowered anywhere close to Canada or Sweden or France levels unless salaries for American doctors, lab cost, MRI scans, and hospital prices are lowered as well. Prices would need to be cut across the board because the United States overpays in basically every part of the industry.

American specialists make effectively three times what similar doctors make in Sweden and twice what they do in France or the UK. This is a problem that is only getting worse.

Hospital prices for the same procedures have grown dramatically faster than inflation. Many hospitals are so comically bloated and inefficient they don’t even know how much it actually cost them to perform common procedures. Average physician income has grown by nearly $100,000 since 2011.

If doctor salaries had remained flat over the last decade — like most other workers’ salaries, since increased health care costs ate up all of their potential income gains — we would be spending $100 billion less a year on health care. To put that in perspective, that is roughly how much it would cost for federal tuition free college and paid family leave legislation. These inflated salaries, lab fees, and hospital prices cost the average family thousands a year in higher premiums (or will cost them thousands a year in higher taxes if  a single-payer plan is adopted without addressing the issue).

The movement has are two options for broaching the issue of America’s out of control hospital and doctor prices.

  1. Ignore the problem. While not explicitly acknowledging it, this seems to be the main strategy of the single-payer movement. High hospital prices and doctor salaries are rarely mentioned, and regular people are almost never told how much of their income is going to pay for them. The informal plan seems to be to make private insurers and drug makers the bad guys, and hope to squeeze enough money from them to make the financing work while trying to effectively buy-off the hospitals and doctors with the promise of no cuts. This has two big problems. The first is there is no reason to believe hospitals and doctors won’t oppose any single-payer bill even if it doesn’t stop them from overcharging people right now. The Federation of American Hospitals, the American Medical Association, and the American College of Radiology have already joined a new industry alliance with the insurers and drug makers to kill any form of single payer. They oppose single-payer because they love how bad private insurers are at negotiating lower prices. Prices paid by private insurers have risen much faster than for Medicare or Medicaid. Even keeping prices the same would not appease them since they know keeping private insurance alive will mean even crazier prices down the road. If hospitals start to oppose single-payer and supporters have laid none of the groundwork to counter or explain their opposition, it could hit the movement like a semi-truck. The other is that it’s tough to make single-payer an overwhelming net gain for most voters if you don’t actually take advantage of what makes the system so much cheaper. Letting hospital prices be unreasonably high means higher taxes, and every increase in taxes moves millions of voters from the category of clear financial “winners” to potential losers. A single-payer plan that doesn’t stop this overcharging could actually increase net health care spending.
  2. Tell people just how much they are being ripped off. This would take a real educational effort, but it is a message the public has not gotten before. It is a strategy that has not really been tried. Obviously, it would be high risk because it would ensure hospital opposition, but it would also be high reward. You can promise basically everyone not only total coverage with no deductibles but also thousands more in income or big sweeping new programs. The data is there. The concern about prices is there. People just need to be honest with the public about who bears a lot of the blame.

Conclusion

Ignoring these major challenges or hoping to deal with them later is not a solution. Eventually, a bill will need to be drafted in Congress, which means it will get a big Congressional Budget Office score.

If a “pure” plan is adopted, the public is going to need to be convinced that the big tax increase is not a big tax increase because four other things will happen to balance it all out eventually. And every extra dollar we let doctors and hospital executives charge well-above international norms is another dollar we are going to need to raise in taxes and another dollar we can’t spend on popular ideas like free college, universal pre-k, free childcare, or paid family leave. The amount we overpay for health care in this country could effectively fully fund a welfare state on par with most of Europe.





Source

USA News

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