By skyforbes 
In order to get Medicare-for-All, or something like it, enacted at the federal level progressives would need to build a consensus in the House, Senate, and Oval Office. That will take time. What follows is a proposal for an affordable universal healthcare system that a progressive state could begin building today.
A State-Based Proposal
As things stand today in early 2019, assuming a progressive Democrat wins the White House in 2020, their party may have a difficult time winning a fifty-seat majority in the Senate. Even if they win the presidency and a majority in both chambers, as they did in 2008–2010 when the Affordable Care Act (ACA) was passed, interest groups will likely prevail over lawmakers to water down Medicare-for-All, just as they did during the ACA debate.
Therefore, I believe meaningful universal healthcare reform needs to happen at the state level first, where a group of committed, progressive, state legislators could push an ambitious proposal through.
Why Medicaid?
First, I need to address the elephant in the room. Aren’t all progressives in good standing supposed to be rallying behind the Medicare-for-All banner? Why propose a reform centered on Medicaid? Well, changing Medicare is risky. Despite it’s complicated structure, Medicare generally works well for seniors and enjoys wide popularity. I worry that any plan to expand Medicare could end up angering a large and vocal group of frequent voters, bringing reform efforts to a screeching halt.
Therefore, I propose to leave Medicare alone and focus on improving the affordability of quality care for the rest of the population. That’s what leads me to expanding the other big (and increasingly popular) government healthcare program, Medicaid. And since Medicaid is a state-administered program, it is better suited for experimentation and expansion at the state level.
What About Employer Health Insurance?
Turns out there’s a second elephant in the room, employer insurance. Almost half of Americans are covered under employer plans. Most people like their plans, so I don’t propose significant changes to this market either. However, you will see how the plan I propose will have positive affects on the current and future cost of employer-provided insurance.
Policy Overview
If you don’t read any further, these are the main policy points I’m proposing:
- All-payer rate setting
- Combine Medicaid and ACA programs
- A Medicaid public option
- Subsidy parody with employer insurance
- Mandatory enrollment
One Price
There’s no getting around the fact that we pay too much for our healthcare. There are many explanations for why we pay twice what people in comparable countries pay but there are no good explanations.
It boils down to the fact that we have a free-market based healthcare system. In our free-market system, providers set prices and consumers — who can’t see prices up front, and therefore do not really have a choice — just pay, and pay, and pay.
With Medicare and Medicaid, the federal government negotiates a price for every service. In the rest of the system, prices are negotiated by insurance companies or sometimes not at all. Each provider (hospital, doctor, drug company, or lab) charges a different price to each payer (the government, insurance companies, and individuals). Figuring out this matrix of prices for every interaction in the system adds tremendous administrative overhead for the providers and justifies the existence of many middlemen. It also contributes to a lack of transparency and opportunities to game the system via quotas, kickbacks, and other essentially corrupt practices.
In our current system, generally speaking, Medicaid pays the lowest price, then Medicare, then employer insurance plans, then insurance companies offering plans to individuals. For those without insurance, or who use an “out of network” provider the price is usually the highest.
All-Payer Rate Setting
The solution to this sounds simple but is in fact the most controversial and contentious reform we could make. We must enact what’s called “all-payer rate setting” for all healthcare providers in the system. Just as the name implies, all-payer rate setting means all payers (government, insurance companies, and individuals) pay the same price for any service, drug or treatment.
All-payer has been tried before. It’s how several countries manage healthcare costs including France, Germany, Japan, and the Netherlands. Its also been tried here in the US in a few limited implementations at the state level, most notably in Maryland, where for the last 40 years it has had success in lowering hospital costs.
Even if the rates negotiated in such a system do not significantly reduce our health care costs, an all-payer system would still be worth implementing because it would improve the healthcare experience for providers and customers alike. That said, if we ever want to bring our costs in-line with comparable countries, significant price reductions will be required. In my view, the price levels should be set no higher than what Medicare pays, about 20% less than private insurance.
No More Networks
Currently, insurers negotiate with a limited set of providers and if you go to a provider outside of the insurer’s network, you pay a premium. Since all payers pay the same prices in my proposed system, there is no point in limiting your choices to a specific provider network.
Resistance
Many doctors will hate this. Some will choose to practice in another state. Some rural hospitals will claim that they cannot afford to keep their doors open. Insurance and drug companies will unleash a torrent of lobbying and fear inducing advertising. Politicians will say it is un-American to set prices. It is socialist, communist, immoral. I just want you to be prepared.
Additionally, rate setting could face legal challenges. This is particularly a risk with regards to drug prices. Ultimately, a state negotiating for lower prices must be willing to exclude any drug or provider from all plans offered within its jurisdiction. Any such exclusions will cause some level of public resistance.
The Medicaid Marketplace
To say that our current healthcare system is complicated, is a massive understatement. In addition to the opaque and arcane payment system I just discussed, the actual structure of the different health insurance programs in the system are confusing to consumers and would benefit from simplification.
Currently, Medicaid consists of several programs including Medicaid for low income adults and parents, CHIP (Medicaid for kids), and long term care for the poor. The ACA added more programs to the mix including Medicaid expansion for those with income up to 133% of the federal poverty line, bronze, silver, gold and platinum private insurance plans, some subsidized and some not.
All of these programs are hard to understand for most healthcare consumers. Some are thought of as types of welfare, others as products to be purchased. I propose we expand the Medicaid brand to include all current Medicaid and ACA programs and administer those programs though a state’s online “Medicaid Marketplace”.
Medicaid Public Option
An important aspect of this new structure is that you would no longer have to “apply” for Medicaid. Everyone has a right to basic affordable healthcare. Medicaid is that basic affordable plan. Everyone pays for Medicaid via state sales and/or income taxes, even low income residents. In the proposed system, Medicaid would become a publicly administered health plan that is roughly equivalent to current ACA Silver private plans in terms of benefits. It would be sold via the Medicaid Marketplace and available to anyone under 65 (not Medicare eligible).
Once a year, you simply log on to the Medicaid Marketplace and provide information about your income and dependents. Based on that, the only question is determining whether your subsidy covers 100% of the plans costs or some lesser amount.
Medicaid Premiums, Deductibles, and Copays
In the proposed system, Medicaid is functionally equivalent to private insurance and will have the same kinds of out-of-pocket costs (i.e. premiums, deductibles, and copays.) Subsidies in the proposed system will apply to all out of pocket costs and would vary according to household income. So while an individual making $120,000 a year would pay monthly premiums, and be subject to typical deductibles and copays, an individual making $14,000 would likely pay no premium, have no deductible, and may only pay a small copay for each doctor visit.
Subsidy Parody
The current employer based insurance system encourages employers to provide insurance by giving them a significant subsidy in the form of a tax exemption for the money they spend on employee insurance. This subsidy costs the federal government $250 billion in lost tax revenue every year. Just for comparison, that’s five times the annual subsidies provided in the ACA Marketplaces. However, the ACA subsidies are indexed to financial need, so while some middle class people are deemed too wealthy to receive a subsidy in the ACA marketplaces, all companies receive a subsidy in the employer insurance market.
In the proposed plan, everyone who chooses Medicaid receives a subsidy that is at least as much as employers receive. That would translate to a minimum subsidy of about 30% for those who currently do not receive a subsidy in the ACA marketplace. And for those who do currently qualify for an ACA subsidy, those with lower incomes, their subsidies would be even higher.
Private Supplemental Insurance
Currently the ACA Marketplaces offer private insurance for sale to consumers. So what is the role for private insurance in this new system? The answer is supplemental insurance. These are plans that offer benefits above and beyond what is available in Medicaid. For example, you could purchase a plan that paid for private hospital rooms, dental, eye care, or other supplemental services like massage therapy that aren’t covered under the Medicaid plan. You (or your employer) could also purchase a supplemental plan that lowers your Medicaid deductible or eliminates copays.
Enrollment is Mandatory
Technically, every state resident would be required to enroll themselves and any dependents in Medicaid and renew annually. In practice, residents with employer insurance could opt-out of Medicaid as part of their employer insurance enrollment process. That said, in the proposed system, you have the right to choose Medicaid over employer insurance. Obviously, residents with other government insurance such as Medicare, TRICARE, or VA insurance could opt-out as well.
If a resident chooses not to enroll, they would be automatically enrolled by the first healthcare provider that bills them for services. The provider would get paid. The previously uninsured consumer would then be billed for any unpaid Medicaid premiums minus any subsidy for which they qualify. Any non-payment would be treated as unpaid state taxes.
Getting it Done
As I have said before, I believe that if we want to make significant improvements to our healthcare system, improvements that begin to bring it in line with comparable countries, we must first enact those improvements at the state level.
What Will it Cost the State?
The main new costs associated with this plan relate to the subsidy parody, which is a 30% state-funded subsidy for every Medicaid plan subscriber making over 133% of the poverty line. Also, the prices determined for all-payer rate setting would likely be higher than those currently set by Medicaid. This cost increase would accrue to the state budget.
Most other costs would be related to the reorganization of existing programs related to overseeing rate setting, reworking Medicaid and ACA enrollment and support.
These new costs are not insignificant, but nothing like those required for a single-payer Medicare-for-All style plan. If a state happened to have a tax code where wealthy individuals were currently being significantly under taxed (I’m looking at you Washington), these new costs could be paid for with a modest income or capital gains tax on high earners.
What Federal Action Would Be Required?
Fortunately, most of this can be done at the state level. However, since it involves significant changes in how Medicaid and the ACA are administered, it would would require the blessing of the Federal Government in the form of Medicaid and ACA waivers. State waivers for these programs are not unusual, but its unlikely that they would be granted by a Republican administration. So, this proposal while this proposal would not require congressional approval, it would require a Democrat in the White House in 2020.
Feel free to follow me on Twitter @ThatJoeFelice