That’s correct. For example here’s an explanation of the actuarial value of Obamacare Plans from the Society of Actuaries.
Fun Fact: I started reading the Society of Actuaries magazine 30 years ago when I retired to better understand how much I was getting screwed.
intercst
Not really. Per the CMS, the net cost of health care programs for private insurance is about 10.3%, but the net cost of Medicare is about 5.8% (as of 2023 data):
https://www.cms.gov/files/zip/nhe-tables.zip
…a difference of about 4.4%. Since the total administrative cost of private health insurance was “only” about $150 billion in 2023, you’re only looking at about $65 billion in possible savings if you could get that segment of the market down to the Medicare administrative load level. And there’s no guarantee you could, because part of the reason why Medicare’s admin load is so low is that their fixed costs are spread over a much larger amount of coverage.
Meanwhile, just moving Medicaid reimbursement rates up to Medicare levels will cost you $250 billion, because Medicaid pays out about 30% less than Medicare. That completely eclipses all of the ostensible savings from reducing admin load - by 4x.
There just isn’t enough money being taken out of the system by private insurers to cover the costs of: i) increasing Medicare’s actuarial value (described above) from the current 82-84% to the 88-92% of workplace plans; ii) changing reimbursement rates to avoid gutting medical service providers’ compensation; and iii) covering all of the currently uninsured. That’s why every state that’s seriously tried to move to single-payer has failed. You have to either significantly increase taxes (which Emperor 1pg can do, but state legislatures cannot) or slash provider compensation. With “only” $65 billion in private insurer “vig” to take out of the system, there’s not nearly enough savings to make it work.
That 5.8% figure for Medicare includes the much higher admin expenses for Medicare Advantage plans (which are currently about half of Medicare beneficiaries). Traditional Medicare is 1.2% to 1.3%.
From the CMS report:
{{ The overall cost of administering benefits for traditional Medicare is relatively low. In 2021, administrative expenses for traditional Medicare (plus CMS administration and oversight of Part D) totaled $10.8 billion, or 1.3% of total program spending, according to the Medicare Trustees; this includes expenses for the contractors that process claims submitted by beneficiaries in traditional Medicare and their providers.
This estimate does not include insurers’ costs of administering private Medicare Advantage and Part D drug plans, which are considerably higher. Medicare’s actuaries estimate that insurers’ administrative expenses and profits for Part D plans were 8% of total net plan benefit payments in 2021. The actuaries have not provided a comparable estimate for Medicare Advantage plans, but according to KFF analysis, medical loss ratios (medical claims covered by insurers as a share of total premiums income) averaged 83% for Medicare Advantage plans in 2020, which means that administrative expenses, including profits, were 17% for Medicare Advantage plans. }}
Medicare Advantage only has to spend 85% of the money they get from Medicare on actual health care services. Though in some markets, competition may be requiring them to spend more than 85% on actual health care for their policyholders. That’s why MA is retreating from so many markets around the country. It’s all about maintaining a high skim rate.
intercst
Doesn’t affect the outcome. Even using a lower number, there’s still “only” about $150 billion in total private insurance administrative costs. About 3.1% of total health care expenditures. Barely a rounding error. Nowhere close enough to cover the costs of moving all the uninsured and Medicaid folks into Medicare, let alone bringing Medicare up to the level of coverage and reimbursement rates of private insurance.
Why would you have to do that? Maybe the solution is a sort of hybrid. Have people pay premiums (as they do with Medicare), and choose their plan accordingly. If you can afford the Medicare (for all) premiums, great. If not, opt for a Medicaid plan with a lower (or free) premium.
intercst is correct that there will be huge saving just cutting out the private administration and executive officers and shareholders that go with private insurance. And if you really want to get some premium insurance, as with all other nations that have socialized medicine, you can pay premiums to a private company to get that.
I don’t have solid numbers, and don’t even know if such is available, but intuitively keeping the population healthy is cheaper than waiting until they get really sick and then having to do extraordinary interventions to keep them alive (which, as we all know, will occur since few of us are willing to let people die for inability to pay for critical care).
Well, mostly because that’s not Medicare for all. It’s just Medicare for some - and primarily excluding lower-income folks from the “good” insurance. It seems implausible to me that any single-payer system that actually got adopted in the U.S. would be structured that way, especially if (as is commonly suggested) the primary source of funding for the M4A would be taxes rather than paying large premiums. And you lose a lot of the administrative cost savings when you start walking away from the “every person, every doctor” in the system model - Medicaid has an administrative load of 7.5% or so, which is much closer to private insurance (despite being a public program) than Medicare.
He’s not correct. Whatever savings there are won’t be huge in this context. Again, in 2023 the net cost of private insurance - the administrative load - was “only” about $150 billion. Which represents about 3.1% of health care spending in the U.S. for that year. If you could get that down to Medicare levels, it’s about $130 billion (which is insanely unlikely, but let’s go with it).
It’s not nearly enough to cover the added expense that would need to be borne if you were going to give everyone access to Medicare. Just adding in the 18 million uninsured (@$8K per person you get about $140 billion in costs, and (again) moving the Medicaid population into Medicare is about $250 billion. So $390 billion in increased costs to the program, compared with $130 billion in savings. Makes for a decent sized shortfall, even before you consider the even larger cost problem of how to address the massive disparity in reimbursement rates between Medicare and private insurers.
@1poorguy there is a law that emergency rooms must treat patients with critical situations, yes. But there is no law that any doctor or hospital must treat the chronic illnesses, such as heart disease, diabetes or cancer. These are the leading causes of death in the U.S. in 2023.
Heart disease: 680,981.
Cancer: 613,352
Accidents (unintentional injuries): 222,698
Stroke (cerebrovascular diseases): 162,639
Chronic lower respiratory diseases: 145,357
Alzheimer’s disease: 114,034
Diabetes: 95,190
Nephritis, nephrotic syndrome, and nephrosis: 55,253
Chronic liver disease and cirrhosis: 52,222
COVID-19: 49,932
For every person who dies there are many more who live with these diseases as chronically ill patients who need ongoing medication and treatment, often for years or decades. Definitely Alzheimer’s disease, cancer, heart disease, kidney disease (dialysis). But even accidents and strokes (if they aren’t immediately fatal) can lead to long recoveries and disability.
@albaby1 is right. The system, as it stands now, does NOT take care of everyone. Many people die early from untreated illnesses – that’s the point of the OP.
Every state has Medicaid but ten states have not expanded Medicaid to include adults with incomes up to 138% of the federal poverty level under the Affordable Care Act: Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming.
When the ACA was started some pundits said that there would be overall savings from previously untreated people becoming healthier. WRONG! Many people who didn’t have health insurance before suddenly began getting care and the cost went up, way up.
The same thing would happen with Medicare for all. As @albaby1 said, many uninsured and underinsured people would suddenly have access to care for their chronic illnesses. (Which now includes drugs for obesity which has been defined as an illness.)
The cost would be very high. Very, very high. And many of the people who need chronic care the most can’t afford high premiums. And raising taxes to cover the increased costs would be a political non-starter.
Wendy
That’s right. Medicaid is administered by a lot of for-profit entities in the states (especially the Red ones) which increases costs. There’s real savings to be had by eliminating the for-profit “skim,scam and fraud”.
intercst
Disagree. 1poorMIL is on Medicaid. It’s doing well for her. I wish I qualified, as it is as good (and cheaper) than what I have.
The whole point is to get everyone care. The wealthy will always be able to afford the best, even without assistance. Short of a Marxist utopia (which would never work), it’s unrealistic to assume everyone can get the best. But we shouldn’t tolerate people having none. We don’t do it with food (e.g. SNAP).
You may recall I admitted it would not be free. Saving $130B is saving $130B. That’s nothing to sneeze at. If we can direct that into more useful activities (like actually getting people care), that’s clearly a better use of the monies. Otherwise, it is effectively wasted (i.e. I consider CEO bonuses “a waste” when discussing this topic).
Eliminating Medicare Advantage plans will help enormously also. I recently viewed a deep dive, and those things are a travesty. They victimize subscribers and taxpayers alike. They should be outlawed yesterday. The savings from that will also be gigantic (it’s really a scam, just a government sanctioned one). Probably not an added $260B, but still a significant sum.
Other countries can do it. So can we. I may not think much of most Americans, but there is nothing another country can do that we cannot. When we move together, it is a sight to behold. Right now we’re letting petty, usually fake, news and memes divide us into bickering factions. There are some who have the Goofus/Gallant thing going on. Many years ago, I was one of them. But I think the vast majority want everyone to have healthcare, the various aspects of the ACA polled extremely well (when not labeled “Obamacare”). Even if they don’t know the numbers, they intuitively know it’s a better outcome.
They know they need healthcare, so there’s that small knowledge tidbit.
As far as cost, everyone’s got their hand in the pot in a big money grab: highly paid doctors, hospital billing, pharma and medical device companies, and insurers.
As far as paying, US is a wealthy country.
Heck, we just approved a trillion dollar stock comp plan.
Where to get the money?
Besides trimming some savings from the big money grab above, and everyone pitching in (moneywise and lifestylewise), just look at the right tail of the chart of income distribution.
Almost no other countries have ever done it.
Oh, yes - lots of countries have single-payer. But very few countries have converted from a mostly private-payer system to a single payer system once the former got really established and expensive. Because it is much, much harder to do that. By all indications, health care system choices are path dependent. Even if there exists a better option today, because our entire system and so many people and institutions have been based on and come to rely on the current arrangements, it may not be possible to change.
The main obstacle is medical provider compensation. If you could make all the medical providers reduce their reimbursement rates down to Medicare levels, this becomes an easier problem to solve. However, that’s almost certainly impossible. Not only would they resist it politically, but virtually every hospital and medical practice that has a non-trivial amount of private insurance patients has come to rely on those higher reimbursement rates as part of their business plan.
Krugman covers this topic well:
And this is not a resource problem.
The US is a wealthy country.
This is a resource allocation problem.
Certain stakeholders are ok with the current allocation, just not the “patient stakeholder,” also known as the customer.
“It’s not about the money, it’s about who the money benefits.”
It is very much a resource problem. Americans today need more health care than the country can afford. The various proposed systems (private, public, single-payer, etc) essentially only determine who gets screwed, the poor or taxpayers.
The only solution is to reduce the need for health care. Americans have to reduce the frequency of chronic diseases.
Look at the trends. Longer life, more chronic diseases, more expensive treatments available to keep those with chronic diseases alive. There comes a point where the frequency of chronic diseases is so high that health care is unaffordable. We are at that point.
Matt Stoller has written about the above.
Beyond having workforces who buy health care, every state has a Medicaid program, meaning that each state has direct authority over a large health insurance and pharmaceutical benefit for its poor and lower middle class residents. As I noted, Ohio, Kentucky, and New York have replaced their corporate pharmacy middlemen with public systems, saving money and helping patients and pharmacists. Oregon recently banned corporate ownership of medical practices, and Arkansas passed a law to break up insurers. California even contracted with a nonprofit manufacturer to produce its own $11 insulin pen.
That simply isn’t factual.
Even in cases where we are healthier, we still pay more. Simply being healthier isn’t sufficient.
Take breast cancer. Australia and New Zealand have the highest rates of breast cancer in the world.
It is still more expensive to treat breast cancer in the United States:
The US has plenty of resources, meaning capital and labor, that can be allocated in a better way to improve our (patient) ROI in health care.
Of course demand is a part of it, as is supply and pricing transparency and competitive market structure and regulations and many things.
Of course Americans can adopt healthier behaviors, but to say that is the only solution is a very incomplete view of what we know to be a multivariate problem.
I’m quite certain we all know how income and wealth is distributed and allocated in the US and health care is a big part of that allocation.
We also know healthier living is not the only part of the solution.
This article appears to support ML and Hawkwin:
Healthy Americans are paying the costs of unhealthy Americans. It’s the nature of insurance. People in Iowa have higher home insurance rates because folks in Florida insist on living in places that flood.
The US health care system can certainly be made better. That’s not my argument. I am saying that no universal health care system is sustainable under current conditions of aging populations, increasing obesity, and rising rates of chronic diseases. There aren’t many OECD countries that isn’t facing a healthcare funding crisis.
Folks mentioned Australia as a positive example. Ironically they may be looking at the US system to solve their health funding problems. Mounting costs, inequality and a US-style user pays model? The future of Australian healthcare | SBS Insight
Same with the EU, which is why there is recognition of the need to prevent chronic disease rather than just treating them:
Across the EU, more than 50% of total healthcare spending already goes toward treating chronic conditions.
A crux is to let people who are dying have a far more natural death. The last couple of months of hospital care are mostly nasty, upsetting, and insanely expensive. Most of the problem is social attitudinal.
Both my parents died in peace surrounded by love at home. I had to bust Dad out of the hospital (arduous and included some legal threats and yelling on my part), and that allowed him and Mom a last sunset beach walk. Two decades later Mom was weakening in all systems but refused anything but talking enjoying last evenings over fine favorite Oregon and Caliornia wines in her own home.
I preach it to all my old friends.