Medicaid for All: A Way Out of Our Healthcare Impasse?

The Problem

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Our healthcare system is a catastrophe of national scale: Exorbitant and ever-increasing costs; poor health outcomes; complex, opaque, and dehumanizing individual experience; and mind-numbing clinician bureaucracy that makes the erstwhile Soviet Union look like a lean startup.

Today’s Solutions

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Many efforts have been proposed, with mixed results. Let us evaluate the four main ones:

• High-deductible health plans: With friends like these, who needs enemies? High-deductible health plans have been a disaster. They have exposed individuals to serious health jeopardy, have complicated an insanely complicated payment journey with even greater complication (the management of a bank account), and introduced additional government regulations about what is or is not covered with HSA cards. HDHPs have, of course, failed to reduce our ever-increasing healthcare costs.
• Medicare for all: This idea raises its head every five or so years. It has three main archetypes:
• o?? A mandatory single payer Medicare system for everyone: This approach would have Medicare cover everyone from birth to death. This would work if Medicare worked. Unfortunately, it does not. Our per capita costs are significantly higher than other single-payer systems around the world (when comparing similar age groups). The payment rubric remains fee-for-service, which pays for micro-tasks and not outcomes. Clinician bureaucracy is mind-numbing. Lastly, we may be the only country in the world that has managed to complicate a single-payer program: There is traditional Medicare, Medicare Advantage, Medicare Part D, and Medicare Supplement programs. Beneficiaries are sometimes on the hook for bankruptcy-creating payments. It is a system without checks and balances. Extending it to the entire society will bankrupt our nation.
• o?? An optional single-payer Medicare system for everyone: This approach will potentially bring a public option to people. It may help in some pockets where managed care competition is low. However, as the previous paragraph shows, the Medicare system is broken. This instrument’s impact, while positive, will be limited.
• o?? A Medicare expansion for people 55 years or older: Similar to the previous option, this approach will help middle-aged professionals. However, it suffers from the exorbitant costs of the underlying program.
• Value-based care: True value-based care—where care delivery entities take delegated risk and are accountable for outcomes—is both good and necessary. The care delivery industry has successfully thwarted value-based care from taking hold. Today’s value-based care is theater based on the fee-for-service system. Medicaid-for-all may accelerate the move to value-based care.
• Direct provider contracting: This is another good move where employers—and sometimes, government agencies—contract directly with care delivery entities. Once this trend is merged with value-based care, we can get to claims-free care delivery systems. I have analyzed this trend in past issues of First Principles.

Medicaid

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Medicaid—and its associated Children’s Health Insurance Program (CHIP)—is the health benefits program for low-income individuals and families. It is jointly funded by the Federal and state governments.

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While Medicaid programs vary by state (more on that later), the central promise of Medicaid is simple: Healthcare services to poor people without any cost sharing. (Some states have token cost sharing that does not affect our analysis.)

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How is Medicaid different from Medicare (which I have lambasted as a potential solution)? There are three main differences:

• Lower costs: The average Medicaid spend is around $9,000/beneficiary/year, as opposed to the average Medicare spend of $16,000/beneficiary/year. The comparison is not completely apples-to-apples, because Medicare beneficiaries are older and need more healthcare. Even then, it is meaningful. As healthcare experts know, Medicaid payments are lower and the program does not cover several high-end treatments. This frugality is exactly what our nation—on its path to bankruptcy because of the medical-industrial complex—needs. If you are a multi-millionaire, you can and will pay for the leading edge treatment out of your own pocket. To take a clothing analogy, Medicaid will provide Amazon Essentials level clothes. If you are wealthy enough to get your suits custom-tailored on Savile Row, knock yourself out. We are not going to destroy our nation because custom $10,000 suits are available. BTW, this is a major vector of how the industry is bringing our nation to ruin.
• No beneficiary cost sharing: With rare and minimal exceptions, Medicaid does not have beneficiary cost sharing. Traditional Medicare has 20% cost share, in addition to the $16k/beneficiary/year cost. This cost sharing frequently forces seniors to skip necessary care.
• Simpler design: Medicaid, even in a managed Medicaid format (i.e., managed by managed care organizations), has a simpler benefit design, because of the absence of beneficiary cost sharing. Medicaid networks are typically smaller than Medicare or commercial networks because the payment rates are lower. But significant research—as well as my direct experience in this area over two decades—has shown that the networks are adequate and are sometimes more comprehensive than many “narrow network” commercial products.

How Medicaid for All Could Work

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Program simplification:

• While the promise of Medicaid is the same throughout the nation, and the Federal government pays half of the medical cost and most of the program cost, programs vary substantially across states. This political move creates unnecessary complexity. Imagine if Marriott hotels, IHOP restaurants, or LA Fitness gyms worked substantially differently across states? We need much greater congruence across states. For us to achieve this congruence, CMS (Centers for Medicare and Medicaid Services) needs to implement the program at a national level, as opposed to the state level.
• Removal of beneficiary cost sharing: As I mentioned, there is token cost sharing in some states, mainly because of the mistaken belief that poor people are scamming the system. If we truly want to reduce the theft of taxpayer dollars, we should look at wealthy people ??. The cost sharing does not contribute any meaningful amount to the Medicaid budget and creates an additional burden for the most vulnerable people in society.

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Eligibility:

• Individuals and families not eligible for Medicaid: They can join by paying the current Medicaid premium—that would be around $9,000/year today. There would be no medical underwriting or variability by age or pre-existing conditions.
• Employees in employer-sponsored insurance: An employer can opt out completely from paying for employee benefits by moving the entire workforce to Medicaid, at the current premium ($9k/beneficiary/year in our illustration). This premium is lower than the $24k/employee/year that employers are spending today. I want to clarify that the $24k is per employee, not per member. Even then, the Medicaid premium is lower, for zero cost sharing benefit. The requirement that only the entire workforce can be moved will prevent employers from cherry-picking, say, employees with late-stage cancer or preemie babies.
• Medicaid, Medicare, and military healthcare beneficiaries: No change from today

This change will free our citizens and employers from one of the biggest shackles of modern America: A benefit system tied to employment, and the related extortion at the hands of the medical-industrial complex. If an employer believes that they have it better than Medicaid, they have no obligation to move their employees to Medicaid.

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I welcome your thoughts and suggestions about improving our healthcare system.