April 07, 2020
In the post-ACA environment, with 28 million people uninsured prior to the pandemic and estimates of an additional 3.5 million newly uninsured during the pandemic (Urban Institute, 2020), some policymakers advocate a public option to supplement private coverage, others want a single-payer, “Medicare-for-All,” which would eliminate private coverage. Advocates claim either approach will better control costs, primarily by limiting growth in provider payments to a percentage of Medicare rates and claiming to reduce administrative costs. Most would also eliminate premiums and out-of-pocket payments in exchange for taxes (including payroll, income, and unearned income). Lacking many details, proposals generally do not address potential access problems as providers react to lower payments, some proposals would eliminate value-based payments and alternative delivery models and instead expand fee-for-service, and few specify taxing levels enough to fully pay for implementation. Additionally, it is unclear what would happen to Medicare Advantage or whether supplemental coverage would be permitted under most proposals. Taking a third approach, others propose to extend Medicare eligibility below age 65, down to age 50 in some proposals. Some would limit eligibility to those without access to other group coverage and most would require individuals to pay for coverage if they are not eligible for ACA subsidies.
Proposals that merely address coverage without delivery transformation are unlikely to control costs and may jeopardize improvements in performance and quality.
With respect to expansion of Medicare below age 65, while it may help some older Americans who do not have other group coverage option afford coverage and may be an attractive alternative. To avoid adverse selection effects in employer plans, any extension of eligibility below age 65 should be limited to people without access to ACA-qualified employer coverage.
The following are additional concerns and questions that should be answered before adopting any proposal:
- What requirements and incentives will there be for providers to improve quality, performance, and what other accountability standards are part of the proposal?
- With increased government control of health care spending and a diminished or nonexistent role for private payers, who will drive innovation and positive disruption to improve health care delivery and performance?
- What is the net impact on health care spending from all sources (taxes, premiums, out-of-pocket expenses), what is the net impact by payer type (private, federal, state and local), what are the distributional effects of proposed changes in financing (income, age, health status, geography)? Does the stated increase in tax rates (if stated) fully fund the proposal?
- What are the assumptions for cost control? How realistic are they (i.e., that government will hold the line on payment rate increases, that administrative costs will decrease significantly)? What is the risk of higher taxes if costs controls are insufficient?
- What are the impacts on provider payment rates and the mix of payments by payer type?
- How will changes in provider payment rates and the mix of payers affect access to care? The health care workforce pipeline? What about the potential for provider strikes over rates? Has the proposal factored these effects in?
- What is the impact of either Medicare expansion or Medicare for All on the financial solvency of the current Medicare program?
Why It Matters
- Increasing inefficient, traditional FFS Medicare or a Medicare-like public option will undermine efforts toward transformative payment and delivery reform, including shared risk, total cost of care and population health models.
- It could also aggravate the current fiscal situation of Medicare as the Part A Trust Fund is projected to begin depleting its reserves in 2026, which could increase pressure to raise taxes, including Medicare payroll taxes.
- Conversely, reducing the role for private plans, especially employer plans, reduces the impetus for innovation and positive disruption to increase the effectiveness and efficiency of care and improve the consumer experience.
- Coverage through the public option or Medicare expansion is likely to provide less value than current employer-sponsored coverage and depending on how it is structured, could lead to adverse selection against employer plans.