Medicare for All is Not Socialism; It’s Not Even Socialized Medicine!  

Medicare for All is Not Socialism;

It’s Not Even Socialized Medicine!  


Socialism is when the state owns the means of production. The British National Health Service is socialized medicine in that the state pays the doctors and nurses a salary (they are employees of the state and the state owns the hospitals); it works very well. Great Britain is not a socialist state, but it has chosen socialized medicine to deliver health care for its citizens. Cuba is a socialist state that likewise uses socialized medicine to deliver health care to its citizens. While its economy is a mess, its delivery of health care is excellent with very good health outcomes.


Medicare for All is quite simply a health insurance program where the doctors and hospitals are private, and the state reimburses them for their costs of care to you, just like Medicare already does for US seniors and the disabled. What gets eliminated are the insurance companies; this cuts out the middleman, who it is argued provides little value at unnecessarily high costs. What is not eliminated are profits for providers.


Canada has eliminated the insurance companies and pays private doctors and hospitals directly rather than through an intermediary; the Canadian provinces decide the rates of reimbursement. Does that mean its health system is socialized medicine? No, the doctors and hospitals are private.


Back in the 19th Century under the leadership of Otto Bismarck, Germany was among the first nations to have health coverage for all its citizens; it used private insurance to cover everyone, and it still uses private insurers, doctors and hospitals to deliver their care. The government sets the budget; the insurance companies set the reimbursement rates. Comparable systems offer universal coverage in the Netherlands and Switzerland. They all work well.


Drug companies make their profits in Canada’s single payer system, as do providers. Their reimbursement rates may be lower than the US, but so are their overheads since they have lower administrative costs. Drug companies and providers make profits in Germany, Switzerland and the Netherlands although their reimbursement rates are lower than the US as well. 


In the US, the VA (Veterans Administration) is socialized medicine for veterans in that the federal government employs the doctors and nurses.  Public hospitals like County-USC or San Francisco General are socialized medicine because the county owns the hospitals and employs the doctors. Vets can choose other coverage, but they have strong economic incentives to use the VA system since the government pays for their care in VA facilities. Public hospital patients can choose to use the private sector hospitals although the county won’t pay them.


What is so fearsome about socialism? It’s everywhere in the US economy, what else is socialism? The public schools where the school district owns the buildings and employs the teachers to teach your kids, Police and Fire Departments, the roads, the airports, the Port of Los Angeles, the Department of Water and Power, the US Postal Service, the Army, Navy and Air Force, the national parks, the public universities and colleges, the public health system, the courts, the legislature and the executive are all owned and operated by the federal, state, county or city governments and the employees are paid by the government with public taxes.


Do you want a free market Fire Department where you have to pay to have them put out the fire engulfing your house? Or the wildfires set off by high winds or a lightning strike? Do you want a free market Police Department where you have to pay before they come to stop a burglary in process at your house?  Do you want to pay as individuals for the dams and aqueducts and levees that prevent flooding and deliver water to your faucet, your bathroom? Does that investment in infrastructure make us a socialist nation? Not at all.  Do you want only the children of the rich to get educated? To go to college? To get advanced degrees? Do you want only the rich to get health care when they are sick?


While we have lots of private enterprise and private markets in this nation, it’s not a pure free market.  It’s subject to regulation for quality and safety and a certain amount of (but not enough) honesty. For certain industries it’s rife with extensive public subsidies for agriculture and energy and housing and health care as examples. We have public subsidies for rural lifestyles, for urban living, for parks and for public recreation. Like every other nation, we have a very mixed economy, with certain aspects of it public, and other aspects mostly private, and most aspects a mix of public and private.


So now the current question is what sort of health system do we want? Do we want a system where only the rich and well connected get good medical care when they are sick? I don’t think so. Do we want a good socialized medicine system like Great Britain where the doctors and nurses are public employees and the state owns the hospitals? It’s a good system in Britain, but in this country, I think the answer is no. Do we want a system where everyone gets private insurance and the state subsidizes those who cannot afford it like Germany, Switzerland or the Netherlands? I think the answer to that is yes, but it depends on reforming the behavior of private insurers and the costs of health care. Do we want a system where everyone gets public insurance for care from private doctors and hospitals like Canada and private insurance is eliminated? I think the answer to that would be yes, but it depends on coming up with an acceptable form of financing. Do we prefer a mixed system of public insurance like Medicare and Medicaid and private insurance through employers? I think the answer to that is yes as well, but it depends on coming up with an acceptable choice and form of coverage for the very large numbers of individuals who fall through the cracks – the self employed, workers in the gig economy, residents of states where politicians declined the opportunity to cover their poor citizens with Medicaid. While the Affordable Care Act helped many Americans get coverage, it still needs improvements to cover every American. I think that most voters would favor those improvements, and it's the least costly way to get to universal coverage. However, we still face a challenge of controlling costs in a mixed system.


So we have two challenges: controlling rising medical costs and financing universal coverage. Rising health costs can be controlled through public regulatory rate setting. Rising costs can be controlled through something referred to as managed competition, using contracting and competitive market forces among insurers and provider networks to slow the rise in costs. Rising public costs could also be controlled by taking away public health coverage; that has some fans in Congress and the Trump Administration.


Medicare uses regulatory rate setting to set hospital and physician rates of reimbursement; this works reasonably well. It also uses managed competition in Part C where seniors can choose a private insurer to deliver their care and in Part D where private insurers cover pharmaceutical services. These work reasonably well except for some well highlighted pharmaceutical products where there is no competition – i.e. new blockbuster drugs and those drugs without generic market competition due to drug patent laws and sometimes the abuse of those laws by Big Pharma.


MediCal uses managed competition where subscribers can choose from one or more health plans depending on their county. It works reasonably well as long as providers participate, and some do not due to the opportunity for higher reimbursements in other markets.


Private insurance also uses contracts and managed competition where employers and many employees can choose among competing health plans and provider networks. This works reasonably well in highly competitive markets in Southern California; it works very poorly in the non-competitive markets of rural California and poorly as well in markets dominated by local provider oligopolies in the Bay Area and Sacramento.


In my view, contracting has greater flexibility and is nimbler and can be more effective in truly competitive markets, but rate regulation (while more static and slower to react) will be needed in areas and regions and for some market segments where competition does not work well. It’s not a question of are you by philosophy a free market capitalist or a socialist; it’s a question of what works in practice given the diversity of our state and indeed of our nation. Offering a public option such as a Medicare or Medicaid buy in could work, but only to the extent that it’s backed up by deploying the reimbursement rates already set by Medicare or Medicaid. We do need strong purchasing powers, not weak purchasers to bring health inflation under control.


Financing can be private (premiums and out of pocket) or it can be public (taxes). Right now it’s split about half and half in our country. Medicare is supported by taxes and premiums and out of pocket. Medicaid is supported by taxes. Employment based coverage is supported by employer and employee contributions in the forms of premiums and out of pocket and significant public subsidies (tax expenditures). Covered California’s individual coverage is paid for by premiums and taxes. Coverage for self-employed individuals is supported by their premiums and public tax expenditures. Only those who are uninsured or individually insured but not eligible for Covered California’s premium assistance have truly private financing.


Those favoring Medicare for All would seek to replace the private spending by public taxes. That is a very expensive proposition, requiring roughly $200 billion in new taxes – the size of all state General Fund and Special Fund taxes -- in California. Those who want to build to universal coverage from the existing base of public and private coverage have a much lighter but not insignificant financing obstacle that I estimate is about $6 billion to cover the 3 million uninsured Californians. The improvements needed are: 1) to improve Covered California’s premium assistance programs for moderate and middle income individuals without an offer of private employment based coverage and 2) to expand Medicaid for those ineligible due to immigration status. I would also urge that individuals without any coverage pay for part of their coverage through a health insurance tax linked to their incomes and ability to pay and be auto enrolled in coverage. It is also possible to increase private coverage through private financing by extending the ACA’s employer mandate to employers of less than 50 employees as Hawaii does already and/or with a mix of tax credits added in to induce low wage employers to offer and employees to accept coverage. That’s a tough political undertaking.


None of this is socialism, which envisages the wholesale replacement of the private sector by the public sector so that most individuals work for the state or for state enterprises like Cuba or North Korea. It is rather an expansion of social welfare programs within a private market economy. It will not be easy, but it has to be done without name-calling and fear mongering and lies and distortions, by people who are acting in good faith and in the common interest. So let’s do it.


Prepared by: Lucien Wulsin

Dated: 3/13/19

Reflections on Argentina – Part Three