‘No precedent’ for abolishing private insurers
‘Medicare for all’ bill could disrupt entire medical industry.
At the heart of the “Medicare for all” proposals championed by Sen. Bernie Sanders and many Democrats is a revolutionary idea: Abolish private health insurance.
Proponents want to sweep away the complex, confusing, profit-driven health care system and start fresh with a single government-run insurer that would cover everyone.
But doing away with an entire industry would also be profoundly disruptive. The private health insurance business employs at least a half a million people, covers about 250 million Americans, and generates roughly $1 trillion in revenues. Its companies’ stocks are a staple of the mutual funds that make up millions of Americans’ retirement savings.
Such a change would shake the entire health care system, which makes up a fifth of the U.S. economy, as hospitals, doctors, nursing homes and pharmaceutical companies would have to adapt to a new set of rules. Most Americans would have a new insurer — the federal government — and many would find the health insurance stocks in their retirement portfolios much less valuable.
“We’re talking about changing flows of money on just a huge scale,” said Paul Starr, a sociology professor at Princeton University and author of “The Social Transformation of American Medicine: The Rise of a Sovereign Profession and the Making of a Vast Industry.”
“There’s no precedent in American history that compares to this,” he said.
Economists have begun wrestling with basic questions about what this sort of change would mean and disagreeing over whether it would cost more or less than the country’s current health care system.
No one has examined the full economic impact of such plans on jobs, wages, investors, doctors and hospitals — or the health insurance companies themselves. Such an undertaking would be difficult, given the vagueness of key parts of the proposals being discussed and the wide-ranging possible effects.
Legislators writing the bills acknowledge that people in the health insurance industry would lose their jobs. Proposals in the House and Senate would set aside large funds to help cushion the blow to displaced workers, offering them training, benefits, and income supports.
The health insurance industry is now composed of a mix of for-profit and nonprofit companies of various sizes. About 155 million Americans get private health coverage through an employer, but the reach of the industry extends into publicly funded insurance programs.
Simply talk of Medicare for all makes investors jittery. Shares of the large publicly held insurance companies, including Cigna, Humana and UnitedHealth, fell when Rep. Pramila Jayapal, D-Wash., introduced her bill in late February, but have largely rebounded.
The effective takeover of the health insurance industry in the United States would mean a huge hit to the companies’ stocks, although the companies, which have additional lines of business, would most likely survive.
While the bills would give relief to insurance industry workers, they would provide no such compensation for investors. Not surprisingly, the insurance industry and many other health care industries vociferously oppose these plans and plan to spend heavily in fighting them.
Many supporters of this approach see elimination of private insurance as a key feature, not a bug, meant to improve the program’s efficiency and equity by streamlining the health care system and weakening profit motives. With a single insurer covering every patient, hospitals and doctors could spend less time and money complying with differing policies, negotiating contracts, and filing forms to get paid.
“It’s worth it,” said Adam Gaffney, president of Physicians for a National Health Program, which supports single-payer health care and helped design Jayapal’s bill. “Because we are not going to get to true universal health care without the greater efficiency of a single-payer system.”
This idea — once at the edge of Democratic politics — has moved to the mainstream of the debate among the party’s numerous presidential contenders. Sanders, I-Vt., ran on the idea in his 2016 campaign, and now five 2020 Democratic aspirants have co-sponsored one of the two Medicare-for-all bills.
Sens. Cory Booker of New Jersey, Kirsten Gillibrand of New York, Kamala Harris of California, and Elizabeth Warren of Massachusetts co-sponsored Sanders’ bill in the last Congress. Rep. Tulsi Gabbard of Hawaii is a co-sponsor on this year’s House Medicare for All Act.
The concept, in broad strokes, appeals to many Democratic voters. But overall support diminishes by a third or more when people are told that the plan would involve eliminating private insurance, raising taxes, or requiring waits to obtain medical care, according to surveys from the Kaiser Family Foundation.
But 107 Democratic House members are now co-sponsoring a Medicare for all bill written by Jayapal. Sanders, whose update of his bill is expected in the next few weeks, argues that only a single-payer approach would resolve problems he sees as inherent in private insurance. Both proposals are clear that a single, government-run insurer would replace the private sector, but they are less detailed about exactly how the government program would pay for medical care.
Their plans would include nearly every doctor and hospital in the United States and provide generous benefits, including dental care and hearing aids, and would not require patients to pay any out-of-pocket cost to see a doctor. The federal government, of course, would have to cover those benefits, and would need to raise taxes to pay for them.
Gerald Friedman, a labor economist at the University of Massachusetts Amherst, who was close to Sanders’ 2016 campaign, estimated then that it could reduce the nation’s health care spending by $6 trillion over a decade, while the left-leaning Urban Institute said it might increase the overall bill by nearly $7 trillion.
Both Sanders and Jayapal said the switch to a government insurer would mean no loss in access to health care that private insurance provides.
“There is a reason why the United States is the only major country on earth that allows private insurance companies to profit off of health care,” Sanders said in an interview. “The function of private health insurance is not to provide quality care to all, it is to make as much money as possible for the private insurance companies, working with the drug companies.”
Believers in markets argue that consumer choice and competition among private health plans improve the quality of care. Others laud private industry’s relative nimbleness compared with Medicare, which can be bureaucratic and prone to political influence.