Should Medicare for All replace private insurance?
The question is central to health reform debates among Democratic presidential candidates, but it presents a fundamental contradiction. If Medicare for All were to eliminate private coverage, it wouldn’t truly be Medicare as we know it, which has made room for private insurers from the start.
Medicare could have been designed as a pure single payer with comprehensive coverage for all health-care needs, but that approach would have risked alienating several important constituencies, including the insurance industry. Before the program was enacted, private insurers enjoyed a sizable market through which they sold coverage of some sort to about half the nation’s elderly.
Although Medicare eliminated that market, it created a profitable new one. Insurers were able to sell policies that filled important coverage gaps, such as for vision and dental care, and that reduced or eliminated sizable co-payments and deductibles. Today, that coverage is known as “Medicare supplement” or “Medigap.” When the program launched, more than 80 percent of beneficiaries who had previously maintained private coverage purchased it. Medicare also gave some insurers the chance to earn additional revenue by administering claims.
The role of private insurance companies in Medicare has continued to grow over time. They now provide coverage to almost a third of beneficiaries through an alternative to the traditional program known as Medicare Advantage, and they play the central role in providing coverage for prescription drugs. Plans offered through Medicare now account for almost a quarter of industry revenue.
With this combination of public and private elements, Medicare has not only survived for more than half a century but become a mainstay of the entire health-care system. It is also extremely popular. In a 2014 Kaiser Family Foundation poll, 77 percent viewed it as a very important government program, and 76 percent saw it as important to them personally. Its hybrid structure helps generate broad support across the political spectrum, appealing to Democrats with its government foundation and to Republicans with its element of private sector choice.
Of course, the program faces its share of challenges, especially concerning costs. However, in this regard, it is largely a victim of its own success. Americans are living longer and therefore enjoying more years of Medicare eligibility in large part because the program has given them access to ever more sophisticated care. It also provides essential funding for the introduction of new forms of care, which are increasingly expensive, and for the training of new physicians who provide it. It would not be an overstatement to say that without Medicare, much of health care as we know it in the United States would not exist.
As Medicare for All proponents are quick to note, Medicare’s private component remains controversial. Private insurers generate higher overhead costs than the program’s traditional, government-run coverage and are accused of trying to avoid sicker potential customers. Moreover, cost increases for private insurance tend to outpace those for Medicare. However, regulatory oversight of Medicare’s private component has helped to mitigate some of those concerns, and stronger oversight could fill remaining regulatory gaps without eliminating it.
The premise behind Medicare for All should be simple. Take a successful program with a limited range of beneficiaries and extend it to everyone. Perhaps a pure single-payer plan could improve on Medicare’s decades-long success, but it would be misleading call such a plan “Medicare.” It would be something quite different. To bring Medicare for All to fruition, there is no need to mess with success.