GOLDEN MEDICARE FOR ALL

Will it be another Democratic Cross of Gold?

Oh my, until Tuesday we again faced a Republican radical alternative to the Affordable Care Act (ACA). One more repeal effort with great feeling, but no wisdom.

This time the Republican folly was the Graham-Cassidy bill, which had virtually nothing to do with healthcare and everything to do with febrile efforts to resurrect states’ rights, block grants, keeping donors contented and passing anything that has “healthcare” somewhere in its first sentence or two. The announcements that Senators Rand Paul, John McCain and Susan Collins would not support this latest Republican effort to dismantle the ACA is what passes the low threshold of good news for the 319 million (M)  people who have some type of healthcare coverage.

However, Graham-Cassidy is not the only radical idea that Congress has for replacing the ACA. Nope, on September 13 Senator Bernie Sanders introduced his “Medicare for All Act of 2017” proposal that would end the ACA, replace it by expanding Medicare and provide it to every American, not just to those of us who are 65 or older. It would also increase the services now provided by Medicare to include dental, vision and hearing aid coverage. In 2015 (the latest year data are available) Medicare covered 43.3M people, representing 13.4% of Americans. The goal of expanding healthcare coverage to be universal is worthy; it’s the objective of the ACA.

The progressive left-side of the Democratic Party has enthusiastically supported Sen. Sanders’ new, universal healthcare proposal for the nation. These supporters include 16 other senators who are co-sponsoring his proposal, six of whom are up for election next fall, and 119 Democratic Representatives in the House. Sen. Sanders’ proposal, like the previous one he created nearly four years ago, has zero chance of being considered in this Republican-led Congress because by themselves the minority Democrats have no legislative power.

Nevertheless, his 2017 Medicare for All plan is rapidly becoming a necessary political talisman for liberal Democrats, reflecting a leftward shift of the Democratic Party. Its supporters are a rising political clan that has defiantly stuck its single-payer healthcare flag into the political sandbox. These Democrats reflexively prefer the Medicare for All designation rather than “single-payer” because Medicare is a well-regarded, very popular government program; even right-wing Tea Partiers have usually avoided directly denouncing Medicare. In contrast, single-payer frankly connotes BIG government, something that may appeal to long-devoted progressives, but far fewer others. So Medicare for All it is.

These are relatively cheery times for Bernie’s single-payer healthcare backers. Because it has yet to be an actual piece of legislation, no one needs to provide many details about how it would be structured or financed and no one needs to round up Congressional votes.

The proposed bill proffers nothing about how Medicare for All would be funded. His proposed Act says that American healthcare will be greatly improved, offers a basic description of the plan and how this improvement would be implemented. As now described, Bernie’s plan would phase in the provision of universal healthcare to these hundreds of millions of people over a four-year period. To say this four-year implementation effort would be a challenge is to significantly downplay the extent of the new healthcare market’s likely turmoil.

Sen. Sanders has separately provided funding “options” that added up to $1.62 trillion (T) dollars per year during its first decade. I’ll talk about these later. Critics say this funding level is wholly inadequate. They have a point, in 2015 the US spent $3.2T on healthcare ($9,990 per person), representing an all too impressive 17.8% of our GDP. Sen. Sanders’ funding options would cover just 50.6% of current healthcare expenditures.

I believe Bernie’s’ new Medicare for All plan can serve an important purpose to muster Democrats into action amid the Republican’s fusillade of ill-considered efforts to replace Obamacare. The Graham-Cassidy bill is merely the latest and most contemptable, which is saying something, but not the last. However, I fear that by making Medicare for All the official Democratic plan for fixing American healthcare (that in this case means completely retreating from the ACA), it could become a modern-day Cross of Gold for Democrats in next year’s elections.

At the July 1896 Democratic National Convention William Jennings Bryan delivered one of the greatest political speeches in American history, his Cross of Gold speech. The defining issue of that year’s presidential campaign was how to get the American economy out of the continuing, severe depression that starting in 1893 and bring the nation back to prosperity. The Bank Panic of 1896 (when many depositors simultaneously asked for their checking account funds in cash) was emblematic of the severe economic troubles that beset most Americans that year. The previous three years were equally bleak. There was a bank panic in 1893, one-quarter of US railroads – then the new technology sector – declared bankruptcy (including the Pennsylvania Railroad), Wall Street stocks dropped precipitously, a series of violent labor strikes occurred and unemployment rose to between 12% and 14.5% in the election year, unemployment in some cities was twice as high. And we think the 2007-09 recession was bad.

William Jennings Bryan was a populist who supported “free silver,” farmers and factory workers. He decried big business and the gold standard that he believed had largely caused the bank panics and depression. His mesmerizing nomination speech at the Convention concluded with the often-quoted phrase, “You shall not crucify mankind upon a cross of gold.”

His speech propelled him to the Democratic presidential nomination. He lost to Republican William McKinley on November 3 by 95 Electoral College votes. William Harpine, a noted historian who has studied Bryan’s candidacy and the 1896 campaign, said “Bryan's speech cast a net for the true believers, but only for the true believers. By appealing in such an uncompromising way to the agrarian elements and to the [American] West, Bryan neglected the national audience who would vote in the November election.” In a real sense, Bryan’s populist Cross of Gold speech was the glittery vein that led to the realigning 1896 election, which kept the Democrats outside the White House for 28 of the next 36 years.

The 2016 election was certainly a realigning one, at least in the initial nine-months of Mr. Trump’s besotted presidency. If the Democrats rearrange their policy priorities around a progressive, true-believer single-payer healthcare system, I find it all too straightforward to believe it would inimically affect their electoral chances in 2018 and perhaps beyond.

As a slogan, Medicare for All sounds more enticing than any of the Republicans’ ideas to “enhance” healthcare. But in many ways it’s a far more radical departure from ACA than any alternative yet considered. It would fundamentally restructure our healthcare system by placing the federal government completely in charge as the “single payer.” In its expanded role, single-payer healthcare will require far more tax revenues.

Under Medicare for All the 178M people who have healthcare plans either through their employer or the individual market and the 112M on either Medicare, Medicaid or another public program, there would no longer be health insurance companies or the current health exchanges providing it. Private health insurance companies like Aetna, UnitedHealth, Kaiser and Anthem (Blue Cross/Blue Shield) would entirely disappear and the over 500,000 people who work in the health insurance industry would mostly be out of their jobs. When implemented, only the federal government would provide and pay for individuals’ healthcare. Most beneficially, the 29M people who remain uninsured would receive healthcare (it’s “for All,” after all).

With Medicare for All, doctors, nurses, hospitals, pharmaceutical companies and their customers would face a completely different market with one supplier, different stakeholders, incentives, operational requirements and regulations. Despite the potential benefits that supporters proclaim, with a brand-new national healthcare system, the psychic pain and frustration during its initial operation will be substantial. If you doubt this, just remember the flawed roll-out of the ACA’s website access to HHS health exchange.

Under Sen. Sanders’ plan, individual’s health insurance premium payments would drop to zero for virtually all people and businesses who offer health insurance for their employees. This is good, very good. In their stead, the government would pay for all healthcare expenses via higher taxes.

Unfortunately, these clear savings may not be that obvious for many people. That’s because the millions of employees whose healthcare is connected with their job, don’t directly write a monthly premium check to their healthcare provider. Instead, it’s indirect and automatically deducted from their paycheck, via the firm’s payroll system. Virtually all (96%) of US employees receive their paychecks from a payroll service’s direct-deposit service.

If employers decide to increase wages/salaries by the full amount of their premium savings, take-home pay would be larger, less the increased federal tax withheld.[1] This is good. But it’s not apparent in Sen. Sanders’ Act that employers would be obligated to do that. Thus, the premium savings may not be all that obvious. However, increases in nearly everyone’s federal taxes would be much more noticeable, if only from the media’s likely substantial attention.  

How does Sen. Sanders suggest his Medicare for All plan would be paid for? Federal taxes would broadly expand and rise for almost everyone and every business, substantially for some higher-income people and businesses. The payment options Sen. Sanders’ proposes include a 7.5% payroll tax increase paid by businesses (except for small businesses) that could likely reduce people’s premium savings, a 4% personal income tax premium, probably more for high-income households, a broader and increased estate tax, a new “wealth tax” levied on the Top 0.1%, a financial transactions tax and a “one-time” tax on overseas corporate profits.

Unlike now, his Medicare for All program would operate with an annual budget, a significant change. Establishing a yearly Medicare budget represents a fundamental modification that would soon force tradeoffs between services offered and expenses, to stay within budget. Such a Medicare budget would be subject to political forces that have been highly skewed away from cost-cutting or limiting what medical procedures are available to patients. Additionally, because 80% of US healthcare system spending is on medical care provided by doctors and hospitals, it’s likely that cutting healthcare costs will be as torturous and painful as it has been under ACA. Because of their prominence, reductions in doctors’ and other healthcare processionals’ compensation would be prime targets for savings.

The American Medical Association (representing doctors’ interests), the American Hospital Association (representing hospitals’ interests) and other medical/health lobbies have been very effective in preserving their clients’ well-being for decades. As an example, an American family doctor’s average salary is $207,000, about 160% higher than an English general practitioner’s operating within the UK single-payer system. Effecting cost reductions and improved efficiencies with Medicare for All will be exceptionally tough, just as it has been with ACA. For these reasons Bernie’s Medicare for All will likely remain fairly pricy.

Thus, if Medicare for All ever sees the legislative light of day, the adage, healthcare policy always involves tax policy will hold. Creating the required new and increased taxes will be highly contentious and broadly disliked. It is the rare citizen who gladly pays more taxes, especially new ones.

Governments have imposed taxes since at least Egyptian times, when Pharaohs used tax collectors then known as scribes to amass needed money, including from taxes on cooking oil. More recently, American history is replete with citizens protesting taxes, including the famous Boston Tea Party in 1773, when the words were uttered, “no taxation without representation” to dispute British taxes on tea. Our Revolution started two years later.

In June the media broadly announced the results of a Kaiser Family Foundation Health Tracking Poll that indicated there was a modest increase in the public’s support for single-payer health insurance to a majority; 55% of respondents said they were in favor of a government-based national health plan (single-payer/Medicare-for-all), 40% were opposed. Less reported was that the slim, “in favor” majority was quite fragile and disappeared when those people in favor were told that opponents might state such a plan would either ”give the government too much control over healthcare” or “require many Americans to pay more in taxes.” Respondents in favor of Medicare for all then changed their mind; opposition to single-payer increased and became a 62% majority of respondents (from hearing about more government control) and increased to 60% (from more taxes).

Significant popular opposition to single-payer healthcare and its perceived large costs have halted each of three liberal, blue states – California, Colorado and Vermont – from implementing their state-wide universal healthcare plans. A single-payer bill, the Healthy California Act, was introduced in the California Legislature this spring but was later dropped after the bill’s hefty anticipated costs – $400B per year – became known and opposition grew. I have previously discussed California’s fractured initial foray into single-payer healthcare. A Colorado single-payer referendum last November was decisively voted down 79% to 21%. Issues included an additional 10% payroll tax to fund ColoradoCare and how Medicare patients would be served.

Finally, in 2011 Bernie’s home state legislature passed the structure for a Vermont single-payer healthcare system, the first and only state to do so at this point. But three years later the legislature abandoned the effort because they couldn’t figure out how to finance it. Experts had estimated that the system would require state taxes to double, roughly $2B in extra tax revenues.

Could Medicare for All be another Democratic cross of gold? I believe it’s a risky, radical policy position for Democrats to take because it would run completely counter to the tamer, more broadly-accepted approach of improving the existing ACA. Appealing to voters for at least a $162B tax increase for the initial decade of Medicare for All will be an election-losing fantasy that, like William Jennings Bryan’s defeat, could lead to longer-term negative consequences. Democrats should remember what happened 121 years ago. Lashing themselves to a cross of golden healthcare is a mistake.

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[1] It’s not clear whether the Medicare for All Act’s increased payroll tax would preserve the substantial tax-break businesses have long received by paying for employees’ healthcare expenses with pre-tax dollars. This tax-break has been estimated to be $250B per year, probably the government’s largest single subsidy, more than 60% larger than the mortgage interest deduction subsidy.