Medicare for All – A Single Payer Health Care System for California and the Nation
Medicare was established back in 1965 under the Johnson Administration. It’s a program for seniors (65 and older) and for many of the nation’s disabled. It has advantages such as freedom of choice of providers and regulated rates and disadvantages such as uncovered costs and services and shaky financing.
It consists of four parts: Part A covers hospitals; Part B covers doctors; Part D covers prescription drugs and Part C (Medicare Advantage) is a private insurance option consolidating Parts A, B and D. Medicare covers some but very limited nursing home care and some but again limited home health care. Most nursing home and long term care costs are covered by Medicaid, not by Medicare.
Medicare reimbursement rates are established by the federal government. For hospitals, rates are based on a provider’s reasonable and necessary costs. For physicians, rates are based on their usual and customary costs. For prescription drugs, reimbursement rates are negotiated between the Part D health plan and the drug companies.
Medicare is based on freedom of choice of providers; basically you choose among the hospitals and doctors participating in Medicare. Most doctors participate in Medicare; some do not. Many doctors accept assignment, which means they agree to the Medicare billing schedule; some do not, particularly in affluent areas. This allows them to charge you the patient as much as they wish and you agree. Virtually all hospitals participate in Medicare.
Medicare is primarily a fee for service program with weak controls on excessive or inappropriate utilization. Medicare Advantage is only as good as the health plan you select, and there are both excellent and poorly performing plans. Insurers participate in the program in three important ways: prescription drug coverage, Medicare Advantage and Medicare supplement plans.
Medicare patients have a great deal of exposure to out of pocket costs. These are those sometimes hefty copayments and co-insurance that your doctor, hospital or pharmacist charges you whenever you seek care. There is a donut hole of uncovered costs in the Part D prescription drug coverage, Many seniors buy Medicare Supplement policies from private insurers that protect them from out of pocket costs. About 20% of seniors are not protected from high copays and co-insurance.
Medicare Part A is financed by federal payroll taxes from employees and employers. Part B and Part D are financed by federal taxes and by subscriber premiums. Part A is typically referred to as the Medicare Trust Fund that is in some danger of spending all its revenues, if not reformed. Its financial difficulties are two fold: 1) fewer workers per retiree and more baby boomer retirees, and 2) health costs that exceed the growth in the overall economy.
Medicaid (MediCal in California) covers the poor. This includes seniors, the disabled, parents, children and other adults whose incomes are below certain thresholds.
These are comprehensive benefits, including all long term care, mental health care, dental and vision care There are nominal copays on some services, no coinsurance and no deductibles. The undocumented are only eligible for emergency and maternity care.
Medi-Cal coverage is mostly delivered via public and private HMO’s who compete for subscribers in each county. The private HMO’s include: Blue Cross, Blue Shield, Kaiser, Health Net and Molina. The public HMOs include: LA Care, CalOptima, Inland Empire Health Plan, San Francisco Health Plan and many others set up by county governments.
Behavioral health coverage is delivered by county specialty plans for mental health and substance abuse conditions. Thus a patient suffering from schizophrenia, opioid addiction and heart disease may have to navigate care and coverage through three different health plans.
Fee for service reimbursement rates for hospitals are negotiated with a state agency; they are roughly equivalent to Medicare. Fee for service reimbursement rates for all other providers are set by the state. Reimbursement rates in the managed care plans are negotiated between the providers and the plans. Some providers choose not to participate in the Medi-Cal program, citing low reimbursements; however plans must assure adequate access to a sufficient range of providers. Provider shortages are most acute in rural regions where there are insufficient providers for all types of patients.
Financing includes a federal match and a state match paid by federal and state taxpayers. The state match includes state matching funds, county matching funds and fees/taxes paid by hospitals and plans.
Single payer as envisaged in the California legislation (SB 562) proposed by Senator Kevin DeLeon is a mix of the Medicare and Medicaid (MediCal) models. It would have comprehensive benefits like MediCal. It would have low or no copays like MediCal. It would cover full scope services for all California residents regardless of immigration status – a feature not present in either Medicare or MediCal. It would eliminate all insurance and all HMO’s – comparable to both Medicare and Medicaid at their inception, but features not now present in either Medicare or Medicaid. The state would set reimbursement rates for providers; while this is typical of Medicare and Medicaid, both rely on contracting to some degree. It would be financed by taxes as both public programs already are.
So what’s the problem; it’s two fold. The first is financing. California would need to raise about $200 billion in new taxes – an amount equal to all current California taxes and it would need the agreement of the federal government to incorporate Medicare, Medicaid, Covered California and large self insured employers – an agreement from the Trump Administration and the Republican Congress that is highly unlikely. The second is political; it’s opposed by the employers, insurers, and most providers and their potent state lobbying associations. It would need a vote of the people via a ballot initiative, and past efforts have only received about 25% voter support due to the level of new taxes required.
What needs to be done to make it politically possible? The powerful coalition supporting it needs to include employers and unions and consumers that pay for private coverage at exorbitant rates. The financing needs to occur at the federal level, which controls and is the source of most current spending on health care, including the big tax expenditure for employment-based care. The discussions of controlling costs and improving outcomes and quality need to get real – a fee for service system with weak controls on unnecessary utilization is not viable and is just as bad as the high deductible weak payer system that already plagues us. We need new models of paying for care that put the health system’s spending on a trajectory that improves effectiveness of care, efficiency of care and reduces costs and prices of care. Other nations already do it and have much better health outcomes at far less cost. Let’s get real.
Prepared by: Lucien Wulsin
Dated: October 4, 2018