Single-Payer Update/Employer Update
Single-Player Update/Employer Update
The Employer-Sponsored System vs. Medicare-for-All
In a previous update, I suggested that the debate over Medicare-for-All is arguably a referendum on the employer-sponsored system. Here is what I said:
- In my opinion, employer-sponsored plans are the “elephant in the room” when talking about Medicare-for-All. What I mean is, while proponents of Medicare-for-All are on record saying that they want to “eliminate private insurance,” no one really knows what that means. On its face, it means that 160 million people will be required to adapt to an entirely new system of health coverage. And as well all know, when it comes to health insurance – or really most things – people do NOT like change.
- Analysis: Even if people were open to change, they would need to understand what the change will mean for them, and we all have yet to really understand what Medicare-for-All means when it comes to (1) the type of health coverage – and “access” to care – people will have, (2) the amount of taxes people will have to pay, and (3) how Medicare-for-All will impact the economy as a whole (e.g., if the economy takes a big nose-dive, most people will likely care more about their 401(k) retirement savings and their jobs than caring about no premiums, no deductibles, and full-service coverage of their health care). I think you know me well-enough by now to know that I do NOT like to over-state things. And, I am definitely NOT an absolutist. But, the following dawned on me last week: This whole debate over Medicare-for-All is primarily a referendum on employer-sponsored health insurance. What I mean is, if Medicare-for-All – in its purest form – is enacted, employer plans are GONE. Which means that if Medicare-for-All is going to ever happen, a majority of the 160 million Americans who are currently covered under an employer plan are going to want a change. Look, I am NOT saying that people who are currently covered by an employer plan are NOT wanting change. The employer-sponsored system has many flaws. But, an argument can be made that even among those people who want to somehow change their employer health coverage, they will likely be hesitant to take the plunge into a government-run system. Look, I am also NOT saying that a majority of people who are currently covered by an employer plan will NEVER be willing to take the plunge. What I am trying to say is that it is going to be REALLY, REALLY hard trying to convince people that a government-run system is better for them (1) from a health coverage perspective (because “access” may change), (2) from a financial perspective (because their taxes will change), and (3) from an economic perspective (because their job and/or retirement savings may change). We have also seen this movie before. That is, past Congresses and prior Administrations have tried to dismantle the employer-sponsored system in one way, shape, or form. Take changing the tax preference for employer-sponsored plans (i.e., the exclusion) as an example. The exclusion has been under attack ever since 1986. It wasn’t until the ACA where a limit (albeit indirect) was placed on the exclusion through the Cadillac Tax. BUT, the Cadillac Tax has yet to go into effect, and while I thought differently as recently as a year ago, I do NOT believe that we will EVER see the Cadillac Tax – or some other “cap on the exclusion” – become law. Why? Politically, it has proven time-and-time again to be waaayyyy too difficult. To me, the fight over limiting the exclusion is small-potatoes compared to a wholesale change to the employer-sponsored system. And if Congress is/was UNable to effectuate a change to the tax preference due to significant political pressure from employers and labor unions (and also individual employees), how are proponents of Medicare-for-All going to convince a majority in Congress – and a majority of the American public who are currently covered by an employer plan – to replace the employer-sponsored plan and go with an untested government-run program that people have yet to fully understand from an economic, financial, and health coverage perspective?
- As noted above, objectively speaking, if a Medicare-for-All program is put into place – in its purest form – people with employer plans would have to give up their employer plan. Don’t take my word for it. Recent summaries by various news outlets like The Hill, Axios, and POLITICO explain that Sen. Sanders’ (I-VT) most recent Medicare-for-All proposal would eliminate the employer-sponsored system. Critics of Medicare-for-All have been quick to argue that this would mean that 160 million people would lose their health plan. They further argue that Americans like their employer plan, and all-heck-will-break-loose if they are forced to give up a plan that they like (in exchange for a government-run, single-payer system). This has prompted organizations like Kaiser, news outlets like Axios, and policy analysts like me and others to ask: Are the critics of Medicare-for-All correct?
- Analysis: To answer the above question, organizations like Kaiser are dissecting certain aspects of the employer-sponsored system, highlighting its flaws. One area that Kaiser has identified as a problem is the amount of money low-income workers spend on premiums and out-of-pocket costs for their coverage under an employer plan. Kaiser found that low-income workers spend between 13% and 15% of their income on health care costs under their employer plan (again, premiums and out-pocket expenses). Kaiser suggests that this “affordability” issue is “fueling interest in proposals like Medicare-for-All and options for employers and/or workers to buy into Medicare.” To give you some perspective, the drafters of the ACA felt that at least when it comes to paying premiums, 9.5% of a worker’s income was too much. In other words, when we were drafting the ACA – and in particular, the employer mandate penalty tax – we considered the “affordability” of an employer plan, and we arbitrarily (with some influence from outside stakeholders) said that if a worker is directing 9.5% or more of their income to pay for their employer plan, this plan is “unaffordable,” and the employer must either increase the employer contribution level (to make the plan “affordable” such that the worker is paying less than 9.5% of their income) or pay a penalty tax (if the worker purchases an “individual” market Exchange plan and accesses a premium subsidy). We also added out-of-pocket spending limits as a way to keep things “affordable,” although I recognize that the ACA’s out-of-pocket maximums are really high, and for low-income workers, out-of-pocket costs are going to represent a larger chunk of their household income, which is why I – and others – believe that Kaiser is finding such a high percentage of spending for low-income workers relative to middle- and high-income workers. All of this seems to go to the heart of the fundamental question of whether we should have a private-based system (where some constituencies like low-income workers may be “losers”) or whether we should have a government-run system (which will make these low-income workers “winners” while creating a whole new constituency of “losers”). Depending on your ideology, you may say, Chris, I want to protect low-income workers, so I support a government-run system that will protect them, and the “losers” under this new system are likely to be corporations and high-net worth people who I do NOT have any sympathy for. Or, you may be saying, Chris, I don’t like “losers,” especially when they are low-income workers, but I feel that a government-run system will create too much disruption and it will have a detrimental impact on the economy (just look at the recent swings in health care stocks, and for right-or-wrong, there are A TON jobs in the health care-sector). Is there a middle ground here? Could we have a private-based system, and develop some sort of partnership between the government and employers when it comes to keeping the cost of health care low for low-income workers? Here, the government can provide low-income workers with some sort of “cost-sharing” subsidy in partnership with employers who would also kick money into covering out-of-pocket costs. You could run the government subsidies/employer contributions through some sort of funding vehicle like a Health Reimbursement Arrangement (HRA) or an HSA. The problem with this idea is that it would cost A TON, and reducing spending and/or increasing taxes to pay for the government subsidies would result in a HUGE fight in Congress (because Democrats and Republicans can never agree on spending reductions and/or tax increases). And, even if you could get employers on board with coming up with employer dollars to help pay for out-of-pocket expenses, how do you get them to remain committed? Do you tax them if they do NOT set aside a “cost-sharing” subsidy that would be paired with the government subsidy? Another “employer mandate”-like penalty tax? Maybe. While a new tax is certainly NOT ideal for employers, if forced to choose between (1) ending the employer-sponsored system (in exchange for a government-run system) or (2) agreeing to another tax to help low-income workers, I would venture to guess that employers would choose the latter, albeit begrudgingly. I have said it before and I will say it again: The employer-sponsored system is NOT perfect. BUT, are the flaws so great that most Americans with an employer plan will be willing to give up their plan for a government-run system? It is difficult for me to believe that the answer is YES to this question. So if I am correct, is there still a way to help low-income workers better afford their health coverage? I feel that there is a way to get to YES on this question.
- Axios recently highlighted comments from Larry Levitt, Senior VP of Health Reform at Kaiser, noting that employers often times change the types of health plans they offer their employees and/or change insurance carriers under-writing their employer plan. Axios added its own comments, stating that according to BLS annual statistics, 66 million people quit their jobs or they were laid off/terminated from employment, which translates into roughly 2 million people losing their employer plan every year. To me, highlighting these facts indirectly gets to the following question: Are critics of Medicare-for-All over-stating how bad it would be if people lose their employer plan because, after all, millions of people experience a coverage loss – or change – of their employer plan each year?
- Analysis: Why are organizations like Kaiser and Axios dissecting the employer-sponsored system this way? My answer: They are trying to add their thoughts to the overall debate over the employer-sponsored system vs. Medicare-for-All. Please note, I am NOT suggesting that there is anything wrong with this type of scrutiny. To the contrary, I believe it is healthy for the overall debate over the best way to deliver health care to all Americans. But, I would like to dissect some of this scrutiny, and provide you with some things to think about. As an employee benefits attorney and a policy analyst in this space, I can tell you this: Employers are not huge fans of offering health benefits to their employees. Why? Providing health benefits is super-expensive. And, employers are either annoyed with the fact that they have to pay extra money for an insurance company to assume the health risk of their employees, or the employers have to hire a lot of HR employees and employee benefit consultants to help manage their employees’ health risks under a self-insured plan. Soooo, if you were to ask most CEOs, I believe most of them would tell you that they would rather NOT sponsor an employer plan. But as an employee benefits attorney and policy analyst in this space, I can tell you this: CEOs and their companies are willing to deal with these annoyances and the high-expenses because they know they NEED to offer health benefits (1) to attract and retain talented workers and (2) to keep their employees healthy, happy, and productive. You have heard me say this before: The #1 reason why employers offer health benefits is NOT because they like it, but because they know that in order to compete in a global, national, or even a local marketplace, they MUST offer quality and comprehensive health benefits to attract and retain the best talent, and to also make sure their employees remain productive. It is true that a majority of employers change their plan designs or their insurance carriers each year. But employers do this because providing health benefits is so darn expensive, and the employer is trying to find some way to keep costs low. In the self-insured context, this often times results in employers switching up their plan designs like only offering high-deductible health plans (HDHPs), or offering more value-based insurance designs, or offering a “narrow network” plan that provides access to an integrated health system, or moving away from HDHPs because out-of-pocket costs are becoming unsustainable for their workforce. Fully-insured employers usually change carriers because their existing carrier just jacked-up their rates, or the employer – through a broker – is able to find a carrier that will quote them a better premium rates. The bottom-line is that there are lots of reason for changing plan designs and insurance carriers. BUT, this type of change – at least in my opinion – has NO bearing on whether an existing worker with an employer plan is going to be okay with switching over to a Medicare-for-All-type plan. Why? Because the changes in plan designs and insurance carriers still results in a worker being covered by a health plan. Yes, some of the benefits covered and some of the cost-sharing may change year-to-year, and while this is certainly annoying to any employee (I would certainly get annoyed, and have), I think it is a pretty big leap to suggest that because employers change the health coverage for their employees each year, workers will generally be okay with moving from their private insurance plan to a government-run program. You will likely get some employees to say yes, I don’t like this churn, I would prefer a stable, government-run program. But, I would find it hard to believe that a majority of the American public would feel this way. I have been wrong before though. With respect to people quitting their job or getting laid off/terminated, COBRA continuation coverage is required by law for these people. While COBRA is no picnic financially, the person quitting their job or getting laid off/terminated KEEPS their current health plan. Yes, after the COBRA period is exhausted, the person will lose their health coverage. BUT, they have viable options available to them. For example, they can get another job, and thus, another employer plan. They can purchase an “individual” market plan, and if they are not earning wages, they can purchased a subsidized Exchange plan or enroll in Medicaid. So again, it is not as if these people don’t have coverage options. Would they prefer to be enrolled in a more stable, government-run program? Some of them would. But is this type of coverage disruption enough to convince people that the disruption of Medicare-for-All is not as bad as critics are making it out to be? Probably not. But again, I have been wrong before.
Why Am I Talking So Much About Medicare-for-All, and Do I Think It Will Ever Happen?
- When I give presentations, I am often times asked, Chris, why are you talking so much about Medicare-for-All, and do you think it will ever happen?
- Analysis: To the first question, I say: Discussions of Medicare-for-All and a government-run program are NOT new. We had them back during the Clinton health care reform exercise, and also during the development of the ACA. But what makes things different this time is that (1) the political winds are blowing in the direction of the Democrats, which is the political party that is THE proponent for Medicare-for-All and a government-run system and (2) because we have a Presidential election coming up, where the majority of the now 19 Candidates for the Democratic Presidential nomination are already on record supporting Medicare-for-All and/or the various “shades” of single-payer, plus we have a much larger bloc of progressive policymakers in the House of Representatives. That all translates into this: For the remainder of 2019 – and throughout the first 11 months of 2020 – we are going to hear full-throated support for Medicare-for-All and/or the various “shades” of single-payer. And, if the Democratic Presidential Nominee happens to be one of the candidates that is already on record supporting Medicare-for-All and/or the various “shades” of single-payer, it is likely that they will continue to turn-the-volume-up on why our nation needs a government-run health care system. Some may say that once we are in the “General” Presidential election cycle, the Democratic Nominee will likely soften their support for a government-run system and run-to-the-middle so as to pick up Independents who do not want to vote for President Trump again. BUT, there is no guarantee of that the Nominee will run-to-the-middle, and I would not at all be surprised if the nominee puts the pedal-to-the-metal on Medicare-for-All to continue to energize the Democratic base (and by the way, not peddle-to-the-meddle like my brain somehow made me say last time). The bottom-line: Fasten-your-seat-belts because this ride is NOT slowing down…it is poised to speed up. Also to the question about talking about Medicare-for-All, I knew it would not be too long until we saw organizations dissecting the employer-sponsored system, and trying to put employer plans on trial (all in an effort to stymie the perception that the employer-sponsored system is sacrosanct, and that everyone loves private insurance). I anticipate that – in time – we will see studies and surveys released by left-leaning think-tanks attempting to discredit the employer-sponsored system. Admittedly though, I did not expect more main-stream organizations like the Kaiser Family Foundation to start highlighting some of the flaws of the current system (although Kaiser’s report is not as political as I expect we will see from other stakeholders). Again, I have no problems with Kaiser shining a light on some of the flaws of the employer-sponsored system. And that is because I think we need a healthy debate on the type of health care system we as a nation should rally behind (be it the employer-sponsored system or Medicare-for-All), in addition to trying to figure out how to help those constituencies who end up being “losers” under the health care system we ultimately choose.
Do I Ever Think Medicare-for-All Is Going to Happen?
- My response: Even if one of the Democratic Presidential Candidates who are already on record supporting Medicare-for-All wins in Nov. 2020, I still find it hard to believe that we will see Medicare-for-All enacted by 2023. I just think that we live in a capitalist society, where the majority of Americans will balk at the impact Medicare-for-All will have on jobs, taxes, and our economy. And, even though a Medicare-for-All system may reduce health care costs for the vast majority of Americans, I still think that the majority of Americans care more about jobs, taxes, and our economy. Again, I could be wrong. From a political (i.e., a “lobbying”) perspective, I also find it difficult to believe that – by 2023 – we would have Medicare-for-All. The health care industry has so many sectors with VERY deep pockets. The relentless lobbying alone would – at least in my opinion – NEVER allow us to get to a pure Medicare-for-All system. Now, I am saying 2023 for a reason. And that reason is this: I would not be surprised if by 2030 (or later in that decade), we have a bit of a come-to-Jesus-moment where we as a nation have to figure out how we will need to change our spending habits. At the top-of-the-list is our health care spending. I am NOT saying that this must-have conversation will lead to Medicare-for-All, but I wouldn’t be surprised if by 2040, we are that much closer to Medicare-for-All (if not already there). It feels to me that we are in the 3rd inning of this debate over Medicare-for-All. The Clinton exercise being a long 1st inning. Another long 2nd inning during the ACA. This upcoming election cycle being the 3rd inning. Depending on the outcome of the 2020 elections will determine how long the 4th inning of the debate over Medicare-for-All will last. Culminating in some late inning activity a decade or so from now, with an ultimate determination of the outcome of the game by 2040. Last comment: If we have a Democrat in the White House – along with a Democratic House and Senate – after 2020, I could very well see a steady march toward Medicare-for-All, where we could be placed on a path where Medicare-for-All may end up being inevitable. What I mean is this: Even with Democrats controlling all of Washington, DC, I still would find it hard to believe that we will see Medicare-for-All. BUT, it is very likely that we see a Medicare-Buy-In program, a “public option” in the “individual” market, and quite possibly a Medicaid-Buy-In program in some States. Under each of these programs, it is likely that the reimbursement rates to providers – while probably being higher than current Medicare and/or Medicaid rates – will certainly be less than what private insurance currently pays. In this case, providers will continue to cost-shift onto a now smaller private insurance sector of the market, which will likely increase costs even further for employer plans where employers will ultimately reach a breaking-point, and the last vestiges of supporters of the employer-based system will be forced to give-in to some broader form of a government-run program. I can email you all a bottle of whiskey if you hit “reply all”