How much would Universal MEDICARE cost?

Great Debates
1

Estimates for the cost for a full-blown Single Payer health care system range from $1.38 trillion to $2.8 trillion. (Source: PolitiFact | How expensive would a single-payer system be? )

But what I’m interested in is the cost of extending Medicare, and only Medicare, as Medicare is today, to cover all Americans.

I say Medicare as it is today, because Medicare does not cover all of the medical expenses of the people it covers. There are gaps. Some of these gaps can be quite substantial. There’s even an entire portion of the private medical insurance industry devoted to providing Medicare supplemental insurance. It’s not so much a complete health-coverage plan as a kind of healthcare safety net.

So what I’m asking is, how much would it cost the Federal government to make Medicare, with all of its leaky coverage, apply to all Americans instead of just Americans over 65 and people on SSDI?

2

Part A only? A and B? Other?

3

All of it. A, B, C, D, and any other little picky-oony parts that do or don’t have a letter. Any parts that require payment from the covered person today would continue to require the same amount of payment from all covered persons.

4

Do the savings from eliminating (part of) the inefficiency of private insurance figure into it for you?

Optimistically, 60 percent on a per-person basis. More figures.

But there’s an interest in disagreement with that.

Yes, I know, we’re just different. Somehow.

5

One problem is that including “any other little picky-oony parts that do or don’t have a letter” includes Part F — commonly known as “Medigap” — which is the “supplemental insurance” you referred to earlier. While I realize that you covered this to some extent in the proviso about parts that require payment, it would make for a much cleaner discussion if you were more specific as to what you wanted to cover.

6

A very rough, problem-ridden estimate follows. I’m not sure this is relevant – it is pretty easy to model an estimate so that you arrive at pretty much any desired cost, including to reduce costs by moving away from emergency-room-only care to include a modicum of preventative coverage and incentives. But, this data might help someone perform their own quantitative analysis with different assumptions.

“Medicare spending grew 3.6% to $672.1 billion in 2016.” https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

“Total Medicare Beneficiaries” listed as 55,504,005 for 2015. https://www.kff.org/medicare/state-indicator/total-medicare-beneficiaries/?currentTimeframe=0&sortModel={“colId”:“Location”,“sort”:“asc”}

Implied 2015 Medicare spending: $672.1B / 1.036 = $648.7B.

Implied 2015 Medicare spending per beneficiary: $648.7B / 55.5M = $11,688.

Population estimate for the resident population of the United States on July 1, 2015: 321,039,839. https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=PEP_2017_PEPANNRES&prodType=table

Implied Medicare spending for every U.S. resident in 2015: $3.75 trillion.

This is higher than total healthcare expenditures in the U.S. by about 20%. (See the first citation for total expenditure data.) A straight extrapolation like this isn’t applicable, though, because Medicare covers the highest-cost groups. So let’s look at how much less the rest of the population costs and try to drop in that value.

Health expenditures by age and gender, 2012. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Age-and-Gender.html

Resident population by age. https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=PEP_2016_PEPAGESEX&prodType=table

I calculate from that data that per-person healthcare spending in 2012 was $5,736 for those under 65 and $18,958 for those 65 and over. Put another way, those under 65 spend 30.3% of what those 65 and over spend on healthcare. Let’s assume that this overall spending ratio also applies to those services covered by Medicare.

So, in 2015, there were 55.5M Medicare beneficiaries. With a total population of 321.0M, that leaves 265.5M people whose presumed Medicare spending per beneficiary would be 30.3% of actual beneficiaries, or $3,537, for a total of $939.1B. Add that to actual Medicare spending and you get a total price, for 2015, of:

$1.61 trillion

…

It might be a completely unrelated issue, but I think that the cost/benefit to society is more important than direct expenditures, and so I’d be interested in any discussion of how centralizing healthcare (even partially) would affect the velocity of this money. I honestly have no idea, but it seems like a modest-sized elephant in the room.

7

Ah, thank you. So, with your rough estimate, we get a total cost that is roughly two-and-one-half (2½) times what Medicare costs right now.

That’s nearly as high as Bernie Sanders’ (optimistic) estimated cost for his Single-Payer Health plan, which is $1.38 trillion per year on top of the Federal medical outlays already in place. (Though as the link in my OP points out, others have disputed his price tag.)

Darn. I was naively hoping it would be cheaper than this.

8

Unless I have missed something in the calculations, it would seem to me that you need to subtract a bit from that $1.6T. Things like expenditures for:

[ul]
[li]Medicaid - Federal & State[/li][li]Veterans Healthcare[/li][li]TriCare (Military Healthcare)[/li][li]Corporate & Employee Health Insurance Premiums[/li][li]Individual Insurance Premiums[/li][/ul]
(Estimates for those costs are left as an exercise for interested parties :D)

9

Is there a source for Medicare related costs? For example, what part of overall healthcare costs are for the things Medicare doesn’t pay such as prescription coverage, copays and the deductible, testing not covered under Medicare (for example, cholesterol blood tests more than once every 5 years).

This would need to be something like the premiums (for both the base service and any add-ons) plus recipient out-of-pocket costs.

I guess maybe I’m asking what part of overall healthcare spending is for Medicare recipients after the Medicare costs (the $672.1 billion) are stripped out? Or does the $672.1 billion include that?

10

It’s fascinating that the guy from the Heritage Foundation thinks that Medicare administrative costs are higher than private insurance costs, from which I guess one is supposed to extrapolate that universal community-rated health care of the kind that exists throughout the civilized world is going to be more expensive than private insurance! No surprise: the Heritage Foundation is also engaged in climate change denial and other right-wing causes for which they are paid activists.

Regarding the OP, while it’s not clear exactly what you mean by “universal Medicare” or how that would function, it’s possible to provide a qualified, qualitative answer about universal health care plans in general. The costing details can be extremely complex and depend on a vast plethora of assumptions and accounting methods and implementation options, and this allows industry shills like our friend at Heritage writing for Forbes to manipulate the evidence and make counterfactual claims. But it’s not that hard to cut through the bullshit and get a high-level view of the facts.

Fact #1 is that, whatever evidence one tries to dredge up about administrative costs, it’s self-evidently true that universal public health plans are community rated and coverage is non-discretionary and therefore they have very simple administration where they simply pay each claim rather than having to support a vast army of personnel to process applications, set rates, and then scrutinize, argue, and adjudicate every single claim.

Fact #2 is that with a centrally managed or at least centrally regulated UHC system, medical costs are lower, not only because there is far less administration, but because costs can be negotiated by a regulatory authority. Private insurance has neither the ability nor any interest in controlling such costs, and in fact to some extent has the opposite incentive, since their margins are roughly proportional to overall costs. Mainly, though, it’s that they’re a contributor to costs and can’t do a damn thing about it.

How do we know these two facts are true, broadly and generally speaking? Simple. One, by looking at all the other first-world countries, especially those that are economically very similar to the US, like Canada. Here is a chart of per-capita health care costs. On a chart like this, whether it’s per-capita or as a percentage of GDP, US costs are just staggering compared to the rest of the world – per-capita, Americans pay two and half times the OECD average for health care – and medical outcomes are no better and sometimes worse, with tens of millions having no insurance at all.

The other simple thing that I’ve done is just talked to people who have relocated from Canada to the US, and who have experience with both health care systems. The message that I constantly hear is that, by and large, the health care they get in the US is just fine, but the insurance aspect of it is a huge. monumental, frustrating, time-wasting pain in the ass. Back home, they were accustomed to just go to a doctor or a hospital, get the care they need, present their health card, and go home. Now they are faced with a staggering burden of forms and paperwork, phone calls, claims denials, arguments, co-pays, deductibles, cost-sharing arrangements, etc. etc. Somebody has to pay for all that work, even though it has zero medical benefit. Someone should ask the insurance industry shill at the Heritage Foundation about that.

11

tracer - Not exactly Medicare for All, but one of your congressmen, Pete Stark has proposed AmeriCare, based on Medicare and would eventually end up with everyone on something very much like MediCare. Vox had a recent article about it.

The Lewin Group of healthcare policy researchers took a look at costs.

12

Indeed, our firm would save over $12,000 per employee per year. I’d be happy to pay a per employee tax of $5,000 or so to defray the cost of medicare.

13

This is going to be why the US shifts to some sort of MediCare for All - when corporations rush to get out of providing healthcare insurance.

14

Unless there is some underlying fear (that I don’t understand) on the part of employers that it will result in a significant loss of leverage, I have never gotten why employers wouldn’t be leading the way on a universal system.

15

They do what they can, but it only amounts to various insignificant half-measures. Possibly the biggest such initiative currently is the one at Amazon. The trouble is that to be really effective, there has to be a critical mass of broad availability, regulatory authority, and a viable funding model. What it means in practice is that the government has to be involved, even if only as a coordinator and regulator of third-party insurers. And in the US, the government can’t get involved to the necessary extent because of the lock that the massive insurance industry has on both public opinion and public policy. As long as much of the public believes that “socialized medicine” is going to ration their health care and kill them and their grandmothers, and as long as insurance lobbyists control the legislative agenda, nothing much is going to happen. If Medicare didn’t already exist, even that wouldn’t be possible in today’s climate.

16

There are various factors to keep in mind.

Will medicare for all be cheaper or more expensive than what we have now? It can go either way. I would hope single payer is cheaper due to economies of scale, efficiencies in administration and comparative effectiveness. Studies on medicare for all on both the state and federal level imply it’ll be cheaper than what we have now.

Also roughly 50-60% of all medical spending is currently done by the government (federal, state, county, city). Medicare and medicaid are the big ones but they also have the VA, CDC, ACA subsidies, etc.

Anyway, best case scenario lets say medical costs are 100%. 60% are paid by the government, the other 40% by private insurers and individuals.

Medicare for all is created. Medical care becomes cheaper, now it only costs 80% as much. Take the 60% already spent by the government and put that into medicare for all instead. Then you only need 20% in new tax revenue to fund the system. Since medical care is 18% of GDP, 20% of 18% means we need an additional 3.6% of GDP in taxation to fund medicare for all. However people will save on private spending, and most people will save money.

William Hsiao, who developed Vermont’s single payer plan (before they abandoned it) predicted medical costs would decline by 25% over a decade if the system was implemented. Sadly Vermont balked.

17

There is no reason to believe that providing compensation in a different form would mean less compensation. Currently compensation is money plus benefits. If you gave fewer benefits you would need to provide more money. No total savings.

18

Why does it become 20% cheaper? Where does the money come from?

19

Another factor to keep in mind -

Cite. And Medicare is going to run out of money even if we don’t extend it to everybody (cite).

And the idea that Medicare is much more efficiently administered is problematic at best (cite).

Regards,
Shodan

20

I don’t understand what point you are trying to make in response to what point I was trying to make.