Medicare For All?

Proponents of a single-payer system for health insurance have a knee-jerk reaction when challenged–mindlessly reciting the mantra, Medicare For All! The problem is that even though Medicare is one of the most popular government programs–a sacred cow politically–its expansion to cover all Americans would never work.

Backers fail to take basic actuarial science into account. Just do the math!

We pay Medicare premiums the moment we start working, and keep paying for 40-plus years before drawing a benefit. Those who die before 65 never draw a benefit.

This is a good thing, because it means we can finance health care at an affordable rate for our so-called “Golden Years”–when we are most likely to incur massive medical expenses. It's the same theory behind Social Security–having the worker and employer set aside a relatively modest sum annually to partially finance our retirements.

However, if we were to open up the Medicare program for all Americans of any age, that would blow the actuarial calculations out the window, since we are not paying a premium level anywhere near what's required to finance medical care for our 20s, 30s, 40s or 50s.

Some might flippantly say, fine, just adjust the rates upward so that the damned actuaries can sleep at night! But I don't believe most people have a clue how much health insurance really costs.

Of course, the 47 million or so without coverage have a pretty good idea, and most realize they cannot afford it.

However, those who have insurance through their jobs lack any idea what is paid on their behalf. They don't understand it can cost well over $10,000 per employee to offer decent coverage. The worker might pay a small portion, but some with strong unions don't pay any premiums at all!

If we offer everyone bare-bones coverage with huge deductibles, co-payments and exclusions, we might be able to contain the cost, but the price we'd have to pay would be far higher than what's deducted for Medicare.

All those lucky enough to have coverage will scream bloody murder if reform means premiums will soar. Try to campaign on that reality if you are a member of Congress and see how far you get!

Covering everyone would certainly remove a lot of the cost-shifting that goes on today, lifting a burden on those who are insured and those who insure them. But such savings would not be nearly enough to make a significant difference in terms of total cost.

And even if we did adopt Medicare For All, remember that Medicare leaves huge gaps in coverage–particularly on prescription drugs. Most pay extra for MediGap policies.

This is the conundrum facing the Obama administration and Congress. Getting everyone covered affordably appears to be a paradox, as every “solution” comes with fatal flaws.

So the Democrats agonize over what form of political suicide to choose–whether to tax health benefits, for example, and thereby “punish” voters who have coverage to finance costs for the uninsured. That's a step Candidate Obama swore he wouldn't take, and a distinction that helped sink John McCain's campaign.

Meanwhile, the Republicans sit on the sidelines, tossing bricks at every reform option, leaving the burden and political liabilities squarely with the Democrats. Will that backfire on the Republicans during next year's midterm congressional elections? Only if the Democrats deliver a plan the public can live with.

I don't envy them their task.

Sam Friedman is Editor in Chief of National Underwriter. To respond to his column, e-mail sfriedman@nuco.com, go to his blog at www.NUSamSoapbox.com, or follow him on Twitter at http://twitter.com/NUSam.