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Making

Sense of “Medicare-for-All”
Matt Kukla, PhD

Senator Kamala Harris of California recently endorsed ending private health insurance in favor of a
“Medicare for all” government plan. Michael R. Bloomberg responded by saying the proposal would
“bankrupt us for a very long time.” One is and the other may become a 2020 presidential candidate.
What’s a voter to make of this?

Kamala and Michael both share a similar objective - to sustainably finance universal health coverage
– but disagree on their approach for getting there. The World Health Organization defines universal
health coverage (UHC) as “all people and communities can use the health services they need, of
sufficient quality to be effective, while also ensuring that the use of these services does not exposure
them to financial hardship.” Sustainable financing in this case refers to a country’s ability to achieve
UHC while controlling health care costs.

There are three health policy lessons they (and readers of this article) should consider for reaching
this objective. But before we get to those lessons, it is important to provide some background on
health financing – a major component of health care policy and of greatest relevance to this topic.

Health financing is the generation, pooling, and disbursement of money for health care. There are
dozens of policy decisions to be made when designing the three financing functions. While getting
these decisions “right” is a necessary condition for sustainably financing UHC, they are not alone
sufficient. There are several other components, such as health service delivery, which also play a
critical role.

Resource mobilization, the first financing function, is the process through which countries raise
money to pay for drugs and health services. Depending on whether the payer is a social health
insurer (e.g., Medicare, Medicaid), a private health insurer (e.g., Aetna), or simply the government
(e.g., the VA), these decisions might include:

• What kind of taxes should be applied?
• Who should be taxed?
• How much should each sub-group be taxed?
• Should the insured be charged premiums? If so, how much?
• Should different people be charged different premiums?
• What about deductibles, co-pays, and co-insurance?

The debate over Medicare-for-all (or single payer) falls squarely within the second function, pooling,
which is by far the most talked about of the three. Risk pooling is the act of bringing together
individuals and pre-paid resources in order to spread medical risk. The Economist wrote an
exceptional piece on the many pooling options available to a country here:
https://www.economist.com/united-states/2017/08/10/the-fix-for-american-health-care-can-be-
found-in-europe. In short, there are only so many ways to pool health care resources; with few
exceptions, industrialized countries have tried nearly every combination. For instance,

• Switzerland has regulated commercial insurance marketplaces, like Obamacare;
• Sweden has only one social health insurer, like Medicare or Medicaid, and nothing else -
essentially what Americans think of as a single payer;
• France has a mixed system, whereby its citizens all are covered under a social health insurer
(like “Medicare-for-all”) but are permitted to purchase supplemental benefits from
commercial insurers.

Risk pooling policy decisions will vary based on the chosen option; some pooling mechanisms are
more complex and challenging than others.

The disbursement of money, or purchasing, is the final health financing function. It addresses what
and how health care services (and drugs) are purchased from providers who deliver them. For each
payer, whether Medicare, Aetna, or the VA, there are a myriad number of questions to be answered.
Here are a few:

• What benefits should be covered?
• How best to contract with the most high-value providers?
• Should members have access to every provider all the time for every service?
• How to pay providers so as to incentivize them to deliver appropriate, high quality care?
• How much should they be paid?

The more payers or risk pools that exist in a health system, the harder it will be to sustainably
finance UHC. This is because the risk of fragmentation (lack of coordination) across each payer rises
exponentially. The system, if not carefully managed, can look less like an actual system and more like
a cluster of individual pieces. Designing policies correctly when multiple payers exist is an incredibly
complex process; the number of decisions is enormous, and it’s very easy to get the details wrong.

This is health financing in America. It’s thus easy to understand why so many Americans love the idea
of transforming their country’s health financing spider web into a simple, single payer. Plenty of
experts agree. But what, exactly, does “Medicare-for-all” actually mean? Kamala’s version sounds a
bit like Sweden. Other presidential candidates might want to keep private insurance, in which case
their version sounds more like France. Mind you, we’re only talking about the pooling function. What
about resource mobilization and purchasing? This gets us to -

Lesson #1: Absent details, it’s meaningless to predict whether “Medicare-for-all” is a more effective
solution for sustainably financing UHC - relative to the status quo. It’s like asking how much a new
house will cost to build without providing a blueprint, the land value, the size, or material inputs.

Don’t get me wrong. There are certainly trade-offs (incl. pros and cons) among the numerous
financing arrangements – resource mobilization, pooling, and purchasing. But overwhelmingly
evidence suggests that:

Lesson #2: Far more important than selecting the “perfect” financing model is ensuring that the
chosen policy be designed and implemented well.

Let’s assume that Congress passed Kamala’s “Medicare-for-all” legislation as a true single payer, like
Sweden, and designed the resource mobilization and pooling functions to perfection. However, they
mucked up the purchasing function. Under this scenario Medicare’s payments to providers might
incentivize them to avoid treating sick patients, deliver too many (or too few) services, duplicate
treatments because they aren’t coordinating care with each other, or perhaps discharge patients
before they have adequately recovered. Kamala’s version of Medicare might cover all Americans, but
in practice the sickest members wouldn’t be able to utilize needed services; certain members would
receive worse care than others; and those extra treatments would drive up costs, which in turn
would require Medicare to raise additional revenue through higher taxes or premiums. This would
not meet the definition of sustainably achieving UHC.

Beyond the design, it’s also critical that any policy be implemented well; otherwise, all you’ve got is
meaningless legislation on paper. Take, for instance, the ACA marketplaces. Competition is worse,
costs higher, and insurance coverage lower in states with policymakers who failed to implement the
ACA in good faith. This leads us to:

Lesson 3: Each country has its own, unique health policy context that must be considered when
designing health-financing legislation.

The political landscape, societal preferences and culture, constraints of the existing system, fiscal
capacity, and potential systemic shocks (e.g., to the economy) all impact what kind of policy decisions
should be made. Single payer might work very well in one country, while a mixed public-private
insurance system may be preferred in another. The United States can learn and apply lessons from
other countries, but for these reasons it must ultimately choose it’s own, unique path.

The takeaway from these three lessons is that there are numerous, viable pathways for sustainably
financing universal health insurance coverage in the United States. There is no single best model.
Rather, the success of any chosen route depends on all of the aforementioned factors.

Is Michael Bloomberg therefore correct when he says Medicare-for-all is too expensive? First, note
that terms like “expensive” or “too costly” are relative terms. United States allocates nearly 18% of its
economy to health care – far more than any industrialized economy – for worse coverage and
outcomes. Spending more on health care simply means spending less on other goods and services.
Second, the answer to Michael’s comment pertaining to Medicare-for-all is that it depends:

• What are the details of Kamala’s proposed legislation?
• Would Congress make sweeping revisions to her proposal?
• Could the legislation pass through Congress despite significant opposition from stakeholders?
• Once signed into law, would both political parties implement the legislation in good faith?
• Once passed, would Congress work together to evaluate and improve upon this legislation?
• What impact would the policy have on the U.S. economy, particularly if we eliminated all
commercial insurance?

If the last two years have taught us anything, it’s that there are rarely simple solutions to complex
problems. Medicare-for-all is just a concept - a bumper sticker slogan that symbolizes change. It is not a
detailed policy platform.

Most candidates in upcoming 2020 U.S. presidential election share a similar health policy objective -
to sustainably finance universal health coverage. That should unanimously be applauded by voters.
They simply disagree on their approach for getting there. Senator Harris is making a high risk, high
reward play at overhauling the U.S.’s entire health financing system; Michael Bloomberg prefers a
more conservative and incremental approach, albeit one that over the past century has proven more
effective at passing through the U.S. legislative process.





Matt Kukla, Ph.D., has over ten years of experience working with government agencies and private
health insurers, both within the U.S. and globally, to improve health system performance. A health
economist by training, Matt’s work focuses on designing and evaluating health financing policies
(government) and strategies (private insurers). He synthesizes best practices and distills complex,
quantitative evidence in ways that help stakeholders make strategic decisions around health
insurance markets, payment systems, and product design. Matt also employs analytics to evaluate
and forecast the effect of such decisions on health insurance coverage, cost
containment/expenditures, and health service quality.