Why ‘Medicare-for-All’ Is A Terrible Idea

By David Hogberg

Thursday, July 30, 2015

As Wednesday was Medicare’s 50th anniversary, many on the left are celebrating by pushing a single-payer system they dub “Medicare-for-All.” Former Labor Secretary Robert Reich got an early start by publishing a piece the other day in Newsweek (yes, it still exists), claiming that, “Medicare isn’t the problem. It’s the solution.” The answer, he says, “isn’t to shrink Medicare. It’s to grow it—allowing anyone at any age to join.”

The article is a mix of misleading “facts” and incoherency, so let’s have some fun with it, starting with Reich’s silliest argument:

    Medicare’s administrative costs are in the range of 3 percent. That’s well below the 5 to 10 percent costs borne by large companies that self-insure. It’s even further below the administrative costs of companies in the small-group market (amounting to 25 to 27 percent of premiums).

Comparing government administrative costs with private sector ones is usually an apple-to-oranges comparison, and Michael Cannon of the Cato Institute has a great criticism of the argument that Medicare is more efficient because it has lower administrative costs here.

To make this simple, let’s apply that logic to other areas of the government. It’s quite possible that Amtrak has lower administrative costs than Georgia Southwestern, and the Post Office’s Priority Mail Service has lower administrative costs than Federal Express. I’ll wait for Reich to argue that freight rail and overnight delivery would be more efficient if run by the government, but I won’t hold my breath waiting.

Next, Reich argues that, “Medicare continues to be blamed for America’s present and future budget problems. That’s baloney.”

Was it just my imagination, or did the recent Medicare Trustees Report say that the “present value” unfunded liability of Medicare over the next 75 years is about $41 trillion? A little closer in time, the Congressional Budget Office numbers show that, net of interest payments, 1 in 5 dollars of the federal budget will be spent on Medicare by 2029. By 2041 it will be almost 1 in 4 dollars. Reich doesn’t address any of this “baloney.”

No argument for Medicare-for-All is complete without an erroneous comparison of the U.S. health care system to the rest of the world:

    Americans spend more on health care per person than any other advanced nation and get less for our money. […] The typical American lives 78.1 years—less than the average 80.1 years in other advanced nations. And we have the highest rate of infant mortality of all advanced nations.

Using life expectancy and infant mortality to measure the performance of a health care system is like using batting average and on-base percentage to judge football. Life expectancy is influenced by many factors such as per-capita wealth, sanitation, diet, and so forth that a health care system has little, if any, control over. Not only is infant mortality influenced by those same factors, it is measured inconsistently across nations. For example, in Canada, Germany, and Austria, a baby born weighing less than 500 grams is not counted as a live birth as it is in the U.S. That, obviously, makes their infant mortality statistics look much better than ours.

Reich next examines why our health care system has so many deaths due to medical errors:

    One big reason is we keep patient records on computers that can’t share the data. Patient records are continuously re-written and then re-entered into different computers. That leads to lots of mistakes.

Funny that he doesn’t say what Medicare can do to solve this. Since 2009, Medicare has had an Electronic Health Record (EHR) Meaningful Use incentive program through which physicians can receive $44,000 to switch to EHRs. It’s working out pretty much as you might expect. A poll from early last year found that 70 percent of physicians say EHRs have not been worth the cost. Despite the subsidies from Medicare and from a similar program in Medicaid, problems abound:

    Some physicians say it’s not nearly enough to cover the increasing costs of implementation, training, annual licensing fees, hardware and associated services. But the most dramatic unanticipated costs were associated with the need to increase staff, coupled with a loss in physician productivity.

‘We used to see 32 patients a day with one tech, and now we struggle to see 24 patients a day with four techs. And we provide worse care,’ said one survey respondent.

Finally, Reich complains that health care “costs continue to rise because doctors and hospitals still spend too much money on unnecessary tests, drugs and procedures.” Hospital and physicians order costly MRIs and then do back surgery. Physical therapy would be just as effective, but it “doesn’t generate much revenue.” If you seek treatment for diabetes, asthma or a heart condition in the hospital, Reich says: “20 percent of the time you’re back within a month.”

It would be far less costly if a nurse visited you at home to make sure you were taking your medications, a common practice in other advanced nations. But nurses don’t do home visits to Americans with acute conditions because hospitals aren’t paid for them.

Gee, is it possible that Medicare has something to do with this? Maybe, just maybe, as medicine evolves and providers find better and more efficient ways to treat patients, a sluggish bureaucracy like Medicare isn’t particularly good at updating what it pays for.

And what is Reich’s solution to this? As he states at the beginning of the article, “Medicare offers a way to reduce these underlying costs—if Washington would let it.”

I can see it now: You are slapping your forehead, exclaiming, “If Washington would let it! Why didn’t I think of that?!”

Well, Washington won’t let Medicare make such changes because it is filled with groups such as hospital and physician associations that have a vested interest in keeping a cash cow like Medicare largely the way it is. Those vested interests don’t care for the competition that would arise if Medicare started changing what it paid for.

That problem would only be exacerbated if Congress opened up Medicare to everyone. Treatment under Medicare wouldn’t necessarily be determined by what was best for the patient but by who had sufficient political power to influence Congress on Medicare policy.

As I argue in my new book, Medicare’s Victims, it is often the sickest patients who suffer the most under Medicare because they are the most likely to lack political power. Consider the Medicare patients who, as Reich complains, have to return to the hospital 20 percent of the time. There are probably too few of them to have much impact on Congressional elections, one of the most important ways of influencing Congress. Additionally, many of them may be quite ill and thus in no condition to be organizing, protesting, getting media coverage and other things that can get the attention of Congress to change Medicare policy.

Those with political power would get good care, while those without such power—often the sickest—would lose out. That would be the nightmare result if Reich’s dream ever became a reality.