Understanding the Healthcare Debate

Many Americans feel like healthcare has become an interminable part of the national political debate. They’re not wrong; every decade since the 1940s has seen several major healthcare proposals put forward or signed into law [1]. But despite its persistence in U.S. politics, healthcare policy is still poorly understood. A recent poll by the Kaiser Family Foundation found that 69% of respondents misunderstood some key aspects of the “Medicare for All” proposals that have been put forward by several 2020 Democratic presidential candidates [2]. As voters prepare to cast their ballots in November, a firm understanding of the current level of American healthcare costs, the reasons they are so high, and the policy proposals to address them will reveal several reasons that a single-payer system is the best way to expand coverage and lower costs for those who need it most.

To put the current state of healthcare simply, we’re getting a bad deal. According to OECD data, the average American spent $10,500 on healthcare in 2018, topping the list of the 45 major economies included in the study [3]. This is more than twice the amount spent by people in countries like Canada, the U.K., or Australia. And while half of Americans think that the higher costs we experience are simply the price we pay for having a higher-quality healthcare system [4], the United Nations ranked the quality of U.S. healthcare 28th, well below each of the three countries mentioned above [5]. It’s true that American healthcare is cutting-edge for high-end surgeries; that’s why rich patients fly from all over the world to get surgery here. But the average quality of care for regular patients in the U.S. is far below that of comparable countries. On top of the high prices we pay for lower-quality care, some of our most vulnerable remain uninsured, having to face the ballooning costs of healthcare on their own. A 2018 report found that 15% of those that live at or below the poverty line are uninsured in states that implemented the Medicaid expansion included in the Affordable Care Act (ACA). That number rises to 36% in states that did not implement the Medicaid expansion [6]. There may also be equity implications to the distribution of healthcare coverage: in 2015, 12% of all Blacks and 17% of Hispanics did not have insurance, compared to 8% of Whites [7].

Why is healthcare so much more expensive here than in other countries? First, the healthcare industry’s powerful lobbying arm has blocked any legislation that bars it from setting drug prices as high as the market will bear. For example, the Pharmaceutical Research & Manufacturers of America trade group spent $52 million in the first quarter of last year alone lobbying against the Affordable Prescriptions for Patients Act, which would have made it easier to prosecute drug companies trying to quash generic alternatives to brand-name drugs [8]. Second, the consolidation and corporatization of hospitals and other medical providers can lead to a lack of competition or even a monopoly, allowing them to further increase prices [9]. Third, administrative costs in the U.S., which make up 30% of all health care costs, are more than twice those of countries like Canada [10]. About half of this discrepancy  comes from the unusual complexity of the American billing system. These three factors have led insurance providers to pass on the increasing costs to consumers in the form of higher premiums, copays, and deductibles.

The last piece of the puzzle is to have a correct understanding of the policy proposals that are on the table. First, it is important to note that currently, no prominent U.S. politician advocates for a completely government-run healthcare system. Often referred to as “socialized medicine,” a government-run system would make all doctors and hospital workers direct employees of the government, similar to the model followed by the National Health Service in the U.K. [11] or by the Veterans Health Administration here in the U.S. [12]. By contrast, all of the proposals put forward by 2020 Democrats have to do with government provision of health insurance, rather than actual medical care. The graphics on the next page describe some key terms and features of the various plans.

With a common vocabulary under our belts, it is now possible to pass judgment on each of the proposed plans. Assuming affordable access to healthcare is a basic right (which could be the topic of an entire piece by itself), then we should put in place a plan that provides the highest amount of coverage, while keeping costs reasonable for all Americans. A single-payer system is the one that does this most effectively. 

As the above overview above of the current state of healthcare in the United States shows, maintaining the status quo isn’t an option. While the ACA (also known as Obamacare) made substantial improvements to healthcare coverage [18], 1 in 10 nonelderly people remain uninsured, and costs for everyday Americans are still incredibly high [19]. Neither is the Republicans’ plan to repeal and replace the ACA viable. For one thing, there has been a lack of consensus on what exactly to replace the ACA with, which led to the eventual failure of several Repeal and Replace plans in Congress during President Trump’s first term. The overall popularity of Obamacare means that most Republicans don’t advocate a complete elimination of ACA programs like the Obamacare marketplace; instead, they want to remove the “individual mandate” and loosen requirements for insurance providers to cover high-risk individuals. These measures would result in lower costs for some, but they don’t address the root of high healthcare costs and they lead to higher premiums for high-risk individuals [13]. 

A public option may seem like the ideal choice, as it allows people to enroll in Medicaid, while leaving the option open for others to remain in their current plans. However, this approach has a major downside—it cannot contain costs as well as a single-payer plan could. For one thing, it would only add to the administrative complexity of the healthcare system, one of the major sources of high healthcare costs in the U.S. A single-payer system would dramatically decrease the administrative cost, since the current system of dozens of insurance providers would be simplified down to just one. Additionally, there is a high probability that Medicare would become a “dumping ground” for high-risk patients (known as an “adverse selection problem”). Without a large number of low-risk enrollees to spread the risk, a public-option Medicaid program would eventually either go bankrupt or be forced to adopt the practices of private insurance providers, leading us back to where we are today [16]. A single-payer system would have the advantage of spending less on marketing costs, C-suite salaries, and profits, while also spreading risk to remain financially viable. Lastly, a single-payer insurance provider would have the leverage to negotiate down prices for drugs and procedures, something a public-option program could not do as effectively [17].

Critics argue that Medicare for All would eliminate competition and lead to lower-quality care. In general, competition between firms ensures that they have an incentive to provide high-quality goods at low prices. Clearly consumers shouldn’t care about the quality of paper-shuffling going on at the insurance company, and the previous paragraph has already shown why Medicare for All can achieve lower costs than any competitive system could. But in addition to low costs, consumers might also care about the choice of plans they have to choose from. However, a single-payer system covers everything for everyone, rendering choice among plans unnecessary. Further, Medicare for All would actually increase competition and quality among medical care providers by allowing patients to shop between all hospitals based on quality and wait times, not just those that accept their insurance plans. Thus, providers would have financial incentives to provide efficient, high-quality care to patients.

In the end, our choice of preferred healthcare policy hinges on two things: our principles and the most practical way to achieve them. The election this November will be an opportunity to elect a competent individual to act on our principles and make healthcare available and affordable for the largest number of Americans. It is important that we keep in mind the current state of healthcare, why it is the way it is, and the nuances between the plans for how to deal with it as we collectively make this consequential decision.

Comparison of Various Policy Proposals
Policy ProposalRepeal and ReplacePublic OptionSingle-payer
AKAN/AMedicare for All Who Want ItMedicare for All
Prominent SupportersDonald TrumpMany RepublicansJoe Biden, Pete ButtigiegMany DemocratsBernie Sanders, Elizabeth Warren [15]
Eliminates Obamacare completelyNoNoYes
Private health insurance still existsYesYesNo
Individual mandateNoYesYes
Insurance must cover high-risk individualsNoYesYes
Pay premiums, copays, and deductiblesYesYesNo (Funded through taxes)
Lower costsComplicatedYesYes
Providers can choose whether to accept MedicareYesYesNo
Reduces administrative complexityNoNoYes

Key Terms in the Healthcare Debate
Repeal and ReplaceThe umbrella term for a variety of Republican-sponsored plans that would aim to “repeal” the ACA and “replace” it shortly thereafter with an improved healthcare bill.
Public OptionUsually considered the pragmatic liberal approach to improving healthcare, this proposal aims at giving all Americans the option to “buy in” to Medicare.
Single-payerA single-payer system in the U.S. would abolish private health insurance providers and cover all U.S. citizens under Medicare, thus making the government the only “payer.”
Individual mandateObamacare (ACA) measure that requires most people to have health insurance of some kind or pay a fine.
High-risk individualsPeople who are more likely to need medical care, such as the elderly or those with pre-existing medical conditions. The ACA prevents insurers from denying coverage to many high-risk individuals.
MedicareThe current program that primarily covers Americans older than 65. Works as a government-run health insurance provider by paying doctors and hospitals according to prices pre-determined by the government [14].
PremiumsThe regular (usually monthly) payments people must pay to keep their insurance plans active.
“Buy in”In a public option, people pay a health insurance premium to the government instead of a private insurance provider.

Sources:

  1. https://www.pbs.org/healthcarecrisis/history.htm
  2. https://www.kff.org/health-reform/poll-finding/kff-health-tracking-poll-june-2019/
  3. https://stats.oecd.org/Index.aspx?DataSetCode=SHA
  4. https://www.vox.com/2014/7/21/5922835/half-of-americans-think-expensive-medical-care-is-better-theyre-wrong
  5. http://www.thelancet.com/pdfs/journals/lancet/PIIS0140-6736(16)31467-2.pdf
  6. https://www.census.gov/library/publications/2019/demo/p60-267.html
  7. https://qz.com/1022831/why-doesnt-the-united-states-have-universal-health-care/
  8. https://www.opensecrets.org/news/2019/06/efforts-to-reduce-drug-prices-stall-amid-pharmaceutical-lobbying/
  9. https://www.pgpf.org/blog/2019/03/why-are-americans-paying-more-for-healthcare
  10. https://www.thebalance.com/causes-of-rising-healthcare-costs-4064878
  11. https://en.wikipedia.org/wiki/National_Health_Service_(England)
  12. https://en.wikipedia.org/wiki/Veterans_Health_Administration#Primary_care
  13. https://www.thebalance.com/congressional-plans-to-repeal-and-replace-obamacare-4160599
  14. https://www.nytimes.com/2019/02/19/upshot/medicare-for-all-health-terms-sanders.html
  15. https://newrepublic.com/article/155756/elizabeth-warren-retreats-medicare
  16. https://pnhp.org/news/paul-starr-and-steffie-woolhandler-on-the-public-option/
  17. https://podcasts.apple.com/us/podcast/healthcare-dissected-pt-2-medicare-for-who/id1480634141?i=1000457099948
  18. https://www.nytimes.com/interactive/2016/10/31/upshot/up-uninsured-2016.html
  19. https://www.kff.org/other/state-indicator/nonelderly-0-64/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
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Helaman Sanchez

HELAMAN SANCHEZ is a senior from Detroit, Michigan. He studies Economics and Political Science, and his passions include economic justice and the history of race. Helaman loves music, so he tries to practice guitar every day and aspires to have a band in his basement one day. He also enjoys reading, hiking with his wife and their Golden Retriever, and listening to podcasts on 2x speed. Proud of his nerdiness, Helaman is exactly the kind of person who would create a spreadsheet to analyze his career options. He will work at a social impact consulting firm after graduating and is considering the eventual pursuit of an MBA or MPP.

Helaman Sanchez

HELAMAN SANCHEZ is a senior from Detroit, Michigan. He studies Economics and Political Science, and his passions include economic justice and the history of race. Helaman loves music, so he tries to practice guitar every day and aspires to have a band in his basement one day. He also enjoys reading, hiking with his wife and their Golden Retriever, and listening to podcasts on 2x speed. Proud of his nerdiness, Helaman is exactly the kind of person who would create a spreadsheet to analyze his career options. He will work at a social impact consulting firm after graduating and is considering the eventual pursuit of an MBA or MPP.

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