Recent Democratic presidential candidate debates have focused on universal medical coverage and whether to move away from private health insurance and/or mix-up the medical provider bag and retain private insurance policies with a public option. Close to 20% of all our population is covered by Medicare. This system works very well without additional taxes because it is based on a fixed employer/employee contribution applicable to all and not subject to loopholes or avoidance.
These candidates are allowing slanted polling and loaded debate question to dictate the framework of their responses. Consider the following: There is universal support for current Medicare and far-reaching support for Medicare For All. But responses to survey/polling questions indicate that we do not want to give up our private plans. Hold on a minute! That’s not the right question nor answer. I have Medicare and a supplement plan and my coverage, doctors, hospital, etc. (i.e. “My Plan”) is no different than when I was working. Those of us who have Medicare utilize private physicians and health care facilities. A Single Payer System only addresses how the payment works (Insurance) not the actual medical providers (doctors, medical professionals, clinics and hospitals. Insurance plans may vary, but there is little price differential unless large deductibles and/or co-payments are required. Medicare for everyone would drive the costs of medical service down for both employees and employers.
Medical care in the U S is the most expensive in the world among developed nations. In 2016 we spent 18% ($3,337 billion) of gross domestic product compared to 9% in 1980. This compares to 11.5% average for the 11 highest income countries (Journal of the American Medical Association). Our expenditure per capita was $9,403, nearly double these nations. One reason for the higher cost is the extraordinary inefficiency of the current system. Compared with Canadian nurses, the U.S. spend an extra 18 hours per week on administrative tasks and clerical workers an additional 37 hours. Hospital administrative cost are 25%, about double that of Canada’s.
The facts demonstrate that competitive insurance companies providing lower pricing is ridiculous and simply false. According to the Kaiser Family Foundation, Medicare administrative costs are under 2%, while the insurance industry costs are estimated at 17% (which includes marketing and profits). Medicare spending increased by 4.3% annually from 1997 to 2009, compared to 6.5% year for private insurance.
The U.S. spends $1,443 per capita on pharmaceuticals. The average pharmaceutical spending of these 11 countries came to $749 per capita. We spent $329 billion on prescription drugs, approximately 10% of total medical costs. It is obvious that we are doing little to nothing to control prices. Maybe this is why insurance companies spend $280 million a year on lobbying. Our military pays approximately 80% less than Medicare for some prescription drugs because it can bargain and even fix prices. Unfortunately, federal law prohibits Medicare from advocating for our citizens and negotiating prescription drug prices. If this were allowed, Medicare Part D could save an average $11 billion per year. This doesn’t even address what potential savings would occur if the price gouging, price fixing and down-right criminality of the pharmaceutical development industry were properly regulated. By simply adopting some foreign and our military models, this cost could easily be reduced by 50%.
How should it be funded? Here’s where the Democrats could improve their proposals.
Expand the current Medicare model to cover everyone over 65. The FICA rate is 7.65% of payroll with Social Security representing 6.2% and Medicare, 1.45% (employer/employee each contributing these amounts). Simply adopt this universal, successful system and apply it to Medicare for All. Why create a new bureaucracy when the existing one works well? Both employee and employer contribute, thus providing buy-in, ownership and responsibility. While Social Security requires reforms for financial stability, there are very straight-forward changes which would solve the funding gap and even provide excess revenues. The current Social Security rate could be lowered approximately 1.5% for a total of 4.7% by following these simple steps: Eliminate the $128,400 annual cap from which deductions are taken; slightly increase the retirement age, stop wage (vs. prices) indexing annual increases; and reconsider some of the current Social Security payment exemptions.
Then add back this 1.5% savings into the Medicare payroll contribution for employees for a total contribution of 2.95%. This maintains the total employee FICA (7.65%) at the same previous rate. However, the employer’s Medicare would increase to somewhere around 4%. For a new total FICA rate of 8.7%, a net gain of 1.05%. Why? Because this Medicare for All formula will allow employers to either eliminate or substantially reduce their costly contributions for their current employee private insurance plan, resulting in significant savings. If employees/employers agree on additional coverage via a supplement/secondary plan for increased benefits, such could be provided at substantially reduced costs for both parties.
Ron Manfredi of Madera was formerly the Kerman city manager. He is a former four-term trustee on the State Center Community College board and is a municipal management consultant.