President-elect Joe Biden has proposed adding a “Medicare-like” public option that would serve as an option for consumers to receive health insurance. Americans would also be able to choose their own private insurance and would now only spend a lower income rate to obtain it. Biden officials say the health care plan serves as a transitional piece of legislation that could pave the path to a Medicare-for-All (M4A) single payer system in the future.
According to Healthcare-Now!, a publicly funded, universal health care system would aid businesses by engendering a more dynamic economy, taming costs and freeing businesses that provide health insurance of the costs of administering benefits and subsidizing the nations’ health care. “Small businesses have rated the cost of health insurance as their top concern for a quarter century, and large businesses struggle with health care obligations that their international competitors do not have to worry about” said Taylor Lincoln, research director of Public Citizen’s Congress Watch division and author of the report, “If it weren’t for entrenched partisan alliances, business leaders would have demanded that Congress relieve them of health care burdens long ago”.
Publicly funded universal health care systems like the Canadian “single payer” system, where the government pays for all covered services- exist in nearly every developed country in the world.
A recent report by Josh Bivens of the Economic Policy Institute posits that fundamental health reform like Medicare-for-All would be a hugely ambitious policy undertaking with profound effects on the economy and the economic security of households in America. But despite oft-repeated claims of large-scale job losses, a national program that would guarantee health insurance for every American would not profoundly affect the total number of jobs in the U.S. economy. In fact, such reform could boost wages and jobs and lead to more efficient labor markets that better match jobs and workers. Specifically, it could:
1. Boost wages and salaries by allowing employers to redirect money they are spending on health care costs to their workers wages.
2. Increase job quality by ensuring that every job now comes bundled with a guarantee of health care — with the boost to job quality even greater among women workers who are less likely to have employer-sponsored health care.
3. Lessen the stress and economic shock of losing a job or moving between jobs by eliminating the loss of health care that now accompanies job losses and transitions.
4. Support self-employment, small business development and entrepreneurship (which is currently low in the U.S.) relative to other rich countries by eliminating the daunting loss of/cost of health care from start up costs.
5. Inject new dynamism and adaptability into the overall economy by reducing “job-lock” with workers going where their skills and preferences best fit the job, not just to workplaces (usually large ones) that have affordable health plans.
6.Produce a net increase in jobs as public spending boosts aggregate demand, with job losses in health insurance and billing administration being outweighed by job gains in the provision of health care, including the expansion of long term care.
Bivens provided data demonstrating that health spending in the U.S. is higher than in advanced peer countries and has risen faster over time and yet continues to buy worse health outcomes. The higher and faster growing spending of the United States is driven by faster growth of prices, not by growth in the volume of health care goods and services consumed. Further, international evidence shows that a key component of controlling cost growth is a strong public role in setting and negotiating the prices of health care goods and services.
All of this information begs the question, Is there a need for fundamental health reform? Let’s take a look at some macro information:
• Despite the significant gains in health care coverage spurred by the passage of the Affordable Care Act in 2010, today roughly 23 million Americans between the ages of 19 and 64 are uninsured and another 64 million are underinsured (Collins, Bhupal and Doty 2019).
• Some highly important health-related prices have begun rising rapidly in the very recent past. Insurance premiums, for example, rose 20% in 2019 (Bureau of Labor Statistics 2020a).
• Overall spending on prescription drugs rose more than 9% between the fourth quarter of 2018 and the fourth quarter of 2019, the largest year-over-year change since 2015 (Bivens table 2.4.5u).
• As of 2019 the U.S. spent $3.3 trillion annually on health care. This equaled 17% of US Gross Domestic Product, with average spending at about $10,000 per person. By contrast, Germany, France, Japan, Canada, the UK, Australia, Spain and Italy spent between 9-11 percent on health care, averaging $3,400 to $5700 per person. Yet on average health outcomes in all of these countries are superior to those in the United States. In all of these countries, the public sector is predominant in financing health care.
In summary a fundamental reform like Medicare for All would make coverage universal in the U.S. Implementing a unified single-payer system would reduce administrative costs and eliminate individuals’ and employers insurance premiums and out-of-pocket costs. If combined with public control of drug prices and a simplified global budgeting system, a sensible Medicare financing system would reduce health care costs while guaranteeing access to comprehensive care.
A future article will look at keeping the status quo and the economic implications thereof.