March 04, 2019

The price tag for this wholesale restructuring of coverage is likely to be higher than that of current and former Presidential candidate, Senator Bernie Sanders’ (I-VT) proposal that was estimated to cost $32 trillion over 10 years without including long-term care. To pay for it, Rep. Jayapal has suggested repealing the 2017 tax reform bill, adding a wealth tax on millionaires and billionaires and requiring “employer contributions”.

It also goes well beyond the much more modest proposal by Senator Debbie Stabenow (D-MI) and colleagues introduced in early February, which would permit those age 50 and over to buy into Medicare Advantage, the private Medicare plan program. Medicare Advantage plans have more incentives to control costs, improve quality, and focus on customer satisfaction than traditional Medicare.

The AMA, the AHA, the major insurance associations and others have banded together to oppose it. We were unable to find AARP’s (the major senior lobby) position on the issue.

Impact on Employers and Employees

Most employees covered by their employers like their plans and would likely be very unhappy if forced to join the new government-run plan. Expanding traditional Medicare and eliminating private coverage will remove a critical source of innovation and positive disruption in health care and replace it with an inflexible bureaucracy that does little to contain costs, manage care, reduce waste, and improve quality.
Employees, employers, and all taxpayers would likely be on the hook for the high cost of a program that could gut cost containment, preserve fee-for-service and end the move toward value-based payments and alternative delivery models. It is another proposal that expands access and coverage but does not address how health care is paid for and delivered, and would likely move Medicare backwards, jeopardizing the gains in accountable care and other advanced payment models. The proposal would likely lead to large increases in taxes, including payroll and income taxes to pay for its high costs.
Medicare chronically underfunds health care. Increasing Medicare’s share of hospital and physician revenues could lead to increased wait times for care, problems in accessing care, and other forms of rationing as providers adapt to lower reimbursement. They could also respond by increasing volume, and the amount of unnecessary care, as a way to make up for per unit payment shortfalls.
The Medicare Trustees say that the Medicare Trust Fund will exhaust its reserves by 2028, just 9 years away so it’s hard to imagine expanding upon an unsustainable model without fixing its finances first.
These are just a few of the impacts given the lack of details about the proposal. More analysis will be provided if more details become available.

Outlook

The bill is part of a larger debate by Democrats leading up to the 2020 election and will likely be one of many proposals. It has been referred to multiple House Committees including Rules, Budget, Energy & Commerce and Ways & Means. It’s unclear what its fate will be, but even if the House passes it, it would not pass the Republican-led Senate.

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