Douglas
Holtz-Eakin December 10, 2019
U.S. House of Representatives Committee on
Energy and Commerce Subcommittee on Health
*The views expressed here are my own and not those of the American
Action Forum. I thank Christopher Holt and Andrew Strohman for their
assistance.
Chairwoman Eshoo, Ranking Member Burgess, and
members of the committee, thank you for the opportunity to testify today on the
subject of proposals to expand insurance coverage. You have before you a number
of legislative proposals aimed at expanding insurance coverage ranging from a
single-payer “Medicare for All” system, to expanding access to Medicare and
variations on the concept of a public option plan. While I will not go into
each proposal in detail, I believe they can be organized into two general
categories.
1.
The first category is
made up of proposals like H.R. 1384, the “Medicare for All Act of 2019.”
Medicare for All proposals would seek to achieve universal health insurance
coverage by replacing the entire United States health care system with a
single-payer, government-financed and managed health care system.
2.
The second
category—which includes the majority of the proposals before the committee
today—encompasses proposals that can be described as short of Medicare for All.
These proposals would not aim to achieve universal coverage directly but would
instead attempt to make marginal gains in coverage rates through the
establishment of new, or expansion of existing, federal insurance programs.
These proposals appear mostly intended to serve as stepping stones to an
eventual single-payer approach.
I believe both approaches are flawed. Medicare
for All would be one of the most disruptive policy undertakings in our nation’s
history, both in terms of the health care system and the wider economic
impacts. Further, I do not believe the tradeoffs in terms of access and quality
of care, inherent in such a transition, have been adequately considered.
Finally, the costs of financing such a system would be substantial, and the
incentives could well exacerbate rising health care costs.
As for those proposals short of Medicare for
All, they typically would spend a great deal of money to achieve minimal
increases in coverage because they are not targeting the portion of the
population that lacks coverage options.
Let me discuss each of these categories and
their pitfalls further.
Medicare for All: Considering the Implications
First, Medicare for All would be incredibly
disruptive. Disruption in and of itself is not always a bad thing, but it is an
important factor to consider in setting policy. A key characteristic of our
country and our health care system is phenomenal diversity. There are
for-profit and not-for-profit providers, clinics and large hospitals, large
multi-specialty practices and sole-practitioners, huge differences in
population health across the country, and both state and federal regulations.
As a result it would be extremely complicated to implement a one-size fits all
approach, and such an approach would almost certainly have unforeseen ripple
effects.
Second, coverage expansion under a Medicare for
All system would come with tradeoffs. You will invariably sacrifice some
quality and some access in exchange for government control and universal
coverage. Dr. Craig Garthwaite of Northwestern University’s Kellogg School of
Business has done some excellent work in this area. He argues that hospitals
make investments in improving quality when they believe they will able to
recoup that investment from private payers, even when such investments decrease
their margin on care provided to Medicare recipients whose payment rates will
not change to reflect the quality of care being provided.[1]
One can extrapolate that a hospital with a disproportionate share of Medicare
beneficiaries and fewer privately insured patients will be less inclined to
make investments that they are unlikely to be able to recoup. While the exact
payment rates under a Medicare for All proposal are unclear, if one objective is
to control health care spending it would follow that rates would be set close
to, or at, current Medicare reimbursement rates. Dr. Garthwaite argues that
under a scenario where the government paid Medicare rates for all patients,
hospitals would make fewer investments in quality, concluding “The decline in
overall quality in exchange for expanded coverage and reduced prices might be
an optimal decision from the view of society. This, however, is the ultimately
the debate that we should be having.”
More broadly, a federally run system will need
to constrain costs, whether those cost reductions come from lower investment in
improved quality, lower overall medical innovation (including the area of
pharmaceuticals), fewer providers due to lower reimbursements, or all of the
above. There will be trade-offs around quality of care and access to care of
varying degrees, depending on the specifics of the proposal. Further, expansion
of coverage will only exacerbate demands on the system, impacting access to care
more.
Third, the cost of a Medicare for All,
single-payer system would be high. Assuming rates close to Medicare
reimbursement, the Urban Institute has estimated that the Medicare for All
legislation from Senator Bernie Sanders would cost roughly $32 trillion.[2]
AAF’s Center for Health and Economy modeled the Sanders proposal in 2016 and
showed a ten-year cost between $34.67 trillion and $47.55 trillion, depending
on the generosity of the plan’s benefits.[3]
A Medicare for All system would almost certainly end up being a fee-for-service
system because it’s simply easier to pay providers for services. Any attempt to
do otherwise could well cut into any anticipated administrative cost savings.
Additionally, any increase in rates to mitigate the aforementioned tradeoffs
would necessarily increase the cost of the program. Financing such a program
would require substantial tax increases.
In fact, recently published research by the
Heritage Foundation found that funding Medicare for All at a cost of $2.387
trillion in 2020 “would require additional payroll taxes equal to 21.2 percent
of all wage and salary income.” That rate is in addition to current taxes. They
further determined that most American households would pay more in new taxes
than they would save by no longer paying for their health care. According to
the research, 65.5 percent of all households and 73.5 percent of the total
population would pay more in taxes than they otherwise would have spent on
health care services, making them worse off financially under a Medicare for
All system.[4]
The irony is that most uninsured Americans
already have access to federally subsidized insurance programs. According to
the Kaiser Family Foundation, of the 27.4 million individuals who were without
insurance coverage for some portion of 2017, 8.2 million were eligible for
premium tax credits for coverage through the Affordable Care Act’s (ACA)
individual market exchange but did not elect to sign up. Another 4.4 million
adults and 2.4 million children were eligible for Medicaid or other public
insurance programs but not enrolled. Additionally, 3.8 million individuals
declined an offer of employer-sponsored insurance, and 1.9 million individuals
had incomes above 400 percent of the federal poverty level (FPL) making them
ineligible for subsidies. There were also 4.1 million immigrants who did not
qualify for public assistance because of their undocumented status. It is not
clear that a single-payer system would necessarily cover these individuals
either.
Finally, there are about 2.5 million individuals
who are in the coverage gap as a result of states electing not to expand their
Medicaid programs under the ACA and subsidies for individual market coverage
only going down to 100 percent of FPL.[5]
All told, 15 million of the 27.5 million uninsured in 2017 were eligible for
existing federal insurance programs. Another 3.8 million had access to tax
preferred employer-sponsored insurance, and only 4.4 million individuals
legally residing in the United States were uninsured without access to federal
assistance—almost 2 million of whom have household incomes higher the 400
percent FPL. Systemwide reform on the scale of Medicare for All seems
disproportionate to the problem actually before us.
Incremental Steps to Single Payer: More
Spending, Few Results
The rest of the proposals before the committee
are efforts that do not attempt universal coverage; they are framed as more
moderate approaches to expanding coverage and consist largely of new federal
programs aimed at specific populations. While AAF has not undertaken a detailed
review of every one of these proposals, we have recently undertaken modeling of
one of the proposals before the committee, H.R. 1346, the “Medicare Buy-in and
Health Care Stabilization Act of 2019.” This legislation, similar to other
proposals, would allow people from 50-64 years old to buy Medicare coverage for
a premium based on the cost of their benefits. The premium charged will be the
average of the amount per person “for benefits and administrative expenses
that will be payable under parts A, B, and D.” The legislation also makes a
number of changes to the ACA. Our modeling found that the legislation would
cost a bit more than $184 billion over the first 10 years. Despite this price
tag, only 293,000 individuals are expected to sign up for the Medicare
plan in the first year, and the number enrolled drops to 187,000 by 2029.
According to our modeling, because of low uptake, most of the cost of H.R. 1346
comes not from the Medicare Buy-in portion but from spending on the ACA’s
individual markets—in particular a new reinsurance program. Those changes do
result in lower individual-market premiums, but the overall rise in the number
of covered individuals is still less 500,000.[6]
This analysis is instructive of many of the proposals seeking to expand
coverage short of single-payer. The proposals spend a great deal of money to
target narrow populations, who often already have coverage options, and make
only incremental improvements in the total number of insured.
Conclusion
In summary, ensuring that all Americans have
access to reasonably priced insurance coverage is a laudable goal. Many of the
legislative efforts before you today, however, seem aimed at forcing people to
take advantage of that coverage. I would advise a different approach.
Policymakers would be well served to identify those populations that are truly
without coverage options and target solutions directly to those individuals. Of
primary concern are the 2.4 million people in the Medicaid coverage gap.
Helping that population does not require a complete restructuring of the
American health care system, a one-size-fits-all approach, or $30 trillion or
more in increased federal spending.
[2] https://www.urban.org/research/publication/sanders-single-payer-health-care-plan-effect-national-health-expenditures-and-federal-and-private-spending
[5] https://www.kff.org/uninsured/report/the-uninsured-and-the-aca-a-primer-key-facts-about-health-insurance-and-the-uninsured-amidst-changes-to-the-affordable-care-act/
[6] https://www.americanactionforum.org/research/the_medicare_buy-in_and_health_care_stabilization_act_of_2019/
https://www.americanactionforum.org/testimony/testimony-regarding-proposals-to-achieve-universal-health-care-coverage/#ixzz67u2J6DCb
Follow @AAF on Twitter
No comments:
Post a Comment