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Covid-19 is wreaking terrible destruction. Over 110,000 deaths, output down some 40 percent, 43 million unemployed, millions of businesses going bankrupt, and entire industries decimated. Ironically, this includes healthcare.
Yes, there’s a huge demand for docs and nurses to treat the plague’s victims. But the rest of the healthcare system has been locked down, leading to massive layoffs. In fact, job losses in healthcare are second only to the restaurant industry. Moreover, tens of millions of the industry’s customers, with more to come, are losing employer-provided coverage and thus, the means to buy what the healthcare industry sells. By year’s end, one in five Americans will likely be uninsured, putting the teetering sector in the ICU.
There’s little political appetite for bailing out a system that delivers so little to so few for so much. Instead, the demand for universal healthcare will increase dramatically. Over half of Americans already support such reform. The question is, thus, not whether or when, but what reform is best.
Further segmenting our balkanized healthcare system is no answer. As it is, we have Medicaid for the poor, two systems (traditional and Part C) of Medicare for retirees, employer-provided coverage in large firms, subsidized Obamacare for the otherwise uninsured (with incomes above the poverty line), private insurance, and the ER-dependent uninsured. Each of these systems has major financial and structural problems.
If our healthcare system were, on balance, delivering superior outcomes, it might be tolerable. It’s not. Our system’s convoluted components collectively provide substandard care on virtually every metric. Worse, they do so at an astronomical price — twice the share of GDP spent, on average, by other advanced countries. Our healthcare system is both awful and awfully expensive for two reasons. We do a terrible job purchasing care and we fail miserably in adopting data-driven best practices, including team care.
Senator Sander’s traditional Medicare for All is one solution — the government pays for all the healthcare we want. This cuts out the middleman. But with no gatekeeper — no one to say, “Sorry, you can’t see ten specialists for your tennis elbow” — we’ll all overuse the system. This will lead to rationing — e.g., the six month waits for knee surgery reported by Canadians.
The best option is Competitive Medicare for All (CMA). Under CMA, each American would enroll, annually, with the healthcare provider of their choice. CMA would include all forms of healthcare, including home healthcare, assisted living, and nursing-home care. Health Maintenance Organizations (HMOs) would operate throughout the country, be required to accept any and all participants, and be paid by Uncle Sam on a per participant, not a per-procedure or per office visit basis. Most important, the HMO’s payment would be adjusted for our pre-existing conditions. Hence, if I’m a diabetic, HMOs will not just be required, but be delighted to take me on because they will be fully compensated for my extra cost.
HMOs will receive a reasonable profit margin per participant providing them the incentive to compete on quality alone. If they under provide care, they’ll lose their customers. If they overprovide or overpay for care, they’ll lose their shirts. In short, CMA properly aligns all incentives. The result would be 50 or more intensely competing HMOs (think Kaiser Permanente or Cleveland Clinic) to choose from no matter where we live. Each of the HMOs would hire their own doctors, own their own hospitals, buy their own equipment, pay for their own medications. This is the basic system that’s delivering far better care at half the cost in most developed countries.
The government would establish an annual CMA formulary the services each provider must offer. In setting the formulary, congress would, at long last, gain control of its annual healthcare outlays. Through time, as CMAs systematically eliminates waste, exorbitant administrative costs, mismanagement of chronic conditions, and price gouging by drug companies and other providers, the US share of GDP spent on healthcare will drop from 18 percent now to roughly 12 percent.
A new American healthcare system will arise from the Covid-19 ashes. The question is whether it will continue to provide mediocre care at an exorbitant price or marvelous, innovative, coordinated care at a reasonable price. Competitive Medicare for All is just what the doctor ordered.
Laurence Kotlikoff is a Boston University economist, author of The Healthcare Fix, and President of Economic Security Planning, Inc.