Medicare-for-all Assessing Value And Cost At The Individual Level

This is the final article in this series comparing U.S. healthcare reforms and focuses on basic value at the consumer household level. Discussion will include how much people are paying for their health care and their health insurance in relation to actual value. Value is determined based on affordability and access to appropriate care for all residents. This article, like the others review healthcare from an individual consumer perspective not an insurance company or medical institution one.

Cost of Health Insurance

According to the 2019 Kaiser Employer Health Survey, the average cost sharing for a single employee is 18% of the cost of their group insurance, so using the $6,896 national cost per employee, this necessitates a $1,241 contribution. (Kaiser Family Foundation.org, 2019) Even though you have no family members you would still have to pay $100 per month just for the medical insurance plan. The cost sharing for employees with family members is MUCH steeper at 30% of family premiums for group medical insurance, which could be as much as $20,000 so their share is $6,000 on average. As a former insurance broker, I can tell you many employers don’t provide any premium payment assistance for family coverage, which means those workers could be on the hook for the full 20 K. This is $1,667 per month, which is the equivalent of a mortgage, except lots of people would not be able to afford a house payment after coughing up money for their medical insurance. In a generous spirit, the US government does allow employees to pay for these eye-popping costs with pre-tax dollars, which mean that wage earners with higher incomes are actually getting more of a subsidy for their medical insurance cost.

In 2018, 11.8 million people were enrolled in the insurance exchanges through the Accountability and Affordable Care Act (ACA-aka Obamacare). (CMS’ final report shows 11.8 million consumers enroll in 2018 Exchange coverage nationwide, 2018)These programs are for people who don’t have access to employer provided medical insurance or whose employer plans do not meet the minimum standards for cost and coverage under the ACA. The average out of pocket cost for an enrolled individual with family members was $1,415 after tax credits subsidies. The ACA was designed to provide affordable medical insurance for low-income and middle-class residents by paying them to obtain insurance, using federal tax credits. Essentially, this is deeply discounted insurance, because insurance companies which participate agree to accept the tax credit as a premium contribution. The main difference here is the cost sharing for family coverage is not as great under the ACA exchanges as under private sector insurance plans. However, there is a wide variety of prices in the insurance exchanges, based on the state, age of the enrollee, family status, and coverage selected. This figure was used to identify the most affordable ACA offering, which was the bronze plan. If a family wants the silver plan, the cost would increase by approximately 20%. Silver plans have lower cost sharing for services than bronze plans for participants.

Out of Pocket Costs Hitting US Consumers

Premiums or upfront contributions for the cost of medical insurance are only one aspect of healthcare costs born at the household level. Upfront expenses include co-payments for treatments, which can be quite steep, costing thousands of dollars for a single surgery.

Finally, the number one costly item for US healthcare consumers are prescription drugs, which many residents must pay completely out of pocket, while others have co-payments for generic drugs and name brand drugs. US consumers are currently spending $10,045 per capita for prescription medications, again an amount almost equal to a mortgage. According to AARP, the average retail cost for prescription medications for seniors was $30,519 in 2017.  And this picture gets bleaker, 500,000 people in the US spend over $50,000 a year on their medications, which is the average annual income of an employee! Adjusted for inflation, drug costs are nine times higher than they were in 1960.

Medicare for All Analysis

Medicare for all is on the lips of half the population today, but it is important to note that Medicare is in fact not a free healthcare program.  The Medicare program requires a substantial payment from the government to stay solvent, which is paid for by payroll taxes, of which 1.45% comes from employer’s payroll taxes and employees pay. This isn’t enough money to pay for all program expenses, so the federal government also allocates other funds as required. Medicare is the second largest expenditure for the US government at 14% of total budget. Personally, I don’t have a problem with the government spending the bulk of its funds on programs benefiting the people, but we do have an obligation to make sure these programs are reasonably sustainable. Only Social Security expenditures exceed Medicare consuming a whopping 38% of the federal budget. Medicare costs are increasing and the taxes to pay for them will also. It is difficult to see how it can remain solvent without a payroll tax increase in the near future.

Secondly, Medicare participants do contribute to the cost of their care, through monthly premiums and co-payments for services. For the fortunate enrollees who can afford good supplemental insurance plans, those co-payments are paid by private insurance companies. However, 19% of Medicare enrollees pay all of their co-payments out of pocket and another 33% of enrollees are enrolled on Medicare Advantage HMO type plans. Low income Medicare recipients are called dual eligible, meaning they are covered by Medicaid and Medicare and these represent 22% of all enrollees. That leaves only 26% of Medicare enrollees who have purchased private supplemental insurance.

This tables shows the healthcare cost factors for US households, both private sector and Medicare, and public and government spending.

Medicare for All Assessment Criteria

US healthcare expenses per person	Private insurance/non-Medicare sector	Cost for Medicare enrollees	Net Impact on non-Medicare household
Insurance premiums	6,896	2,018
Co-payments for services	2,200	5,806
Household totals	9,096	7,824	-1,272
Government cost	6,748	10,986	4,238
Estimated additional gov cost for non-Medicare enrollees			2,966 per capita

Notes

All figures are annual calculations, as true to per capita as possible.

The US government spend for private sector healthcare includes tax subsidies and comes from the GOA.

Medicare premiums are for Parts B and D as Part A is offered at no charge. Medicare supplements are not included because the price range was too great and only about half of Medicare enrollees have them. Instead the cost sharing figure for all Medicare enrollees was used.

The co-payment number is based on the private sector mean.

In conclusion it is important that we all have realistic data and expectations regarding the adoption of any national healthcare program. Based on my calculations, a 3% payroll tax, which would be born by employees and their employers would be enough to pay for the program. The US could for example adopt a national healthcare model like Australia where only hospital coverage and basic care is provided. Access to specialty care in Australia is subject to supplemental payments. However, there are many different ways to pay for national healthcare programs and examples include a VAT tax like Canada uses or a combination of income taxes and fees, like France uses. France has a tax on pharmaceutical companies to help pay for its national healthcare program, which could work in the US.

It is also vital to consider unintended consequences of pouring a lot more government money into a health system that is rife with abuses. A national healthcare program would have to curb abuses such as overcharging, eliminating incentives for unnecessary procedures, and focusing on primary health, not just geared toward making money. Reimbursements for services must be adequate, but it is to be expected that certain sectors, like insurance, pharmaceutical, medical suppliers, and some providers would be earning less.  Of concern is the fact Congress seems unable to control its spending, so this could really blow things up fiscally.  I suggest we appoint citizen representatives with knowledge of the healthcare industry for 4-year terms, with blinded voting, to avoid excessive pressures from the lobbying terrorists. Oh, and let’s overturn Citizens United and get back to the original voice of democracy in the USA.

And this is the healthpolicymaven signing off encouraging you NOT to sign blank medical release forms when you agree to procedures, to specify that for which you consent and that for which you decline.

This article was written by independent healthcare analyst and journalist, Roberta E. Winter and is not subject to any corporate approval. She is the author of a guidebook to the US healthcare system which focused on assessing quality. (Winter, 2013)

Works Cited

CMS’ final report shows 11.8 million consumers enroll in 2018 Exchange coverage nationwide. (2018, April 3). Retrieved October 27, 2019, from Centers for Medicare and Medicaid: https://www.cms.gov/newsroom/press-releases/cms-final-report-shows-118-million-consumers-enroll-2018-exchange-coverage-nationwide

Kaiser Family Foundation.org. (2019, September 25). Employer Health Benefits Survey. Retrieved October 27, 2019, from Kaiser Family Foundation State Health Facts: https://www.kff.org/report-section/ehbs-2019-summary-of-findings/

Winter, R. E. (2013, July). Unraveling US Healthcare-A Personal Guide. In R. E. Winter, Unraveling US Healthcare-A Personal Guide (p. 216). Rowman & Littlefield. Retrieved October 27, 2019, from https://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972