By Merton C. Bernstein
Special to The Kansas City Star
Posted on Sun, Nov. 06, 2005
Faced with daunting health insurance costs, American enterprises are eliminating coverage or passing along more of the cost to employees and retirees.
State legislatures, particularly in Missouri, are shrinking Medicaid eligibility and benefits.
There is a better way to tame health-care budgets — eliminate administrative costs by covering everyone through Medicare.
Imagine if the electronics industry used thousands of differently shaped plugs on their appliances, each requiring a matching socket before they could be used. Absurd! But this describes American health insurance: doctors, hospitals, labs and other providers must match their billions of bills with thousands of differing insurance plan provisions, many designed to promote sales rather than sound treatment. Intelligent design? Hardly.
The resulting chaos is unnecessarily costly, with as much as 30 percent of our medical care payments going to process claims. In contrast, in 2004, Medicare administrative costs were 1.9 percent. If Medicare applied to everyone, insurers and care providers would be saved most of what they spend on trying to fit their innumerable plugs into that almost-infinite number of sockets.
Medicare-for-All is the practical answer to the double-digit health-insurance cost increases we’ve faced over the last four years. What’s standing in the way is the outmoded and discredited ideology that the market will discipline health-care costs.
In reality, health-care costs rage out of control. More and more individuals and families lose insurance protection, and medical care charges constitute one of the three major causes of personal bankruptcy. Health-care costs are strangling business and threaten the very existence of many employers with costs that competitors in countries with national health insurance do not face.
State budgets are staggered by the double whammy of having to increase Medicaid outlays for the poor while confronting surging health-care costs of government employees, including teachers.
Health maintenance organizations, touted as a cure, became a disease. Many HMOs collapsed, shriveled or bugged out, stranding their participants. Tax-favored medical savings plans have proven useless, except perhaps to the wealthy.
Tax breaks and other subsidies to encourage coverage only add to total medical care costs, delaying the goal of universal coverage. And as costs escalate out of control, that goal becomes more and more unattainable.
Applying Medicare to everyone would achieve annual savings on the order of $300 billion, enough to cover everyone with a comprehensive plan that surpasses most private coverage and means-tested public programs, even Medicaid.
Establishing and periodically recertifying eligibility for tens of millions of individuals and families under Medicaid incurs administrative costs 5 percent greater than Medicare’s administrative costs. Other federal and state means-tested programs produce similarly unnecessary costs.
For example, Massachusetts operates means-tested programs that use eight different formulas for eligibility and benefits despite similar program goals. Consolidating those programs into Medicare would save tens of billions in administrative costs and give greater assurance that individuals, especially children, would receive timely medical care.
Medicare uses private insurers as intermediaries between providers and patients. These private insurers, under Medicare, operate efficiently and at low cost. Their inclusion in Medicare-for-All would prevent the allegation of “too much government.”
Medicare-for-All would tame costs and make coverage universal. We can readily pay for it by pooling what we already spend on health care. That means no new taxes.
Business, government, individuals and families cannot afford the current costly chaos. It makes economic sense to cut nonbenefit outlays rather than eligibility and benefits.
Those avoidable costs are present but unseen in what we buy or cannot afford. Those unnecessarily higher prices reduce the ability to pay for other needed and desired goods and services. Healthier people incur lower health-care bills, work more productively and avoid the absences and other dislocations that sickness usually brings,
Everyone would be in better hands with Medicare-for-All.
Merton C. Bernstein is a Coles Professor of Law Emeritus at Washington University and a founding board member of the National Academy of Social Insurance.
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