All the Democrats who are running for president are promising a version of free, universal health care, and it sounds terrific.
If the insurance is going to be better than what we have now — and cheaper — I’m all in.
You can see the appeal. Cut out a lot of middlemen. Cut out the health-insurance industry’s profits and costs. Free every family from a lot of risk.
But before we sign on the dotted line, I’ve got a few questions.
First, are we really sure we want to slash payments to doctors, nurses, other medical staff, hospitals and other organizations?
The Medicare-for-all crowd are saying that the new public organization will be paying “Medicare” rates for medical services.
Alas, according to a recent report in the journal Health Affairs, “the Medicare Payment Advisory Commission recently estimated that private insurers pay prices that are 50% higher than what Medicare pays.”
In other words, right now all of us with private insurance are basically subsidizing the people on Medicare and Medicaid. And under this new system, those subsidies vanish.
A move to Medicare rates means cutting payment rates by a third. How much of this is really “fat”? And how will reducing the incomes of doctors, say, increase the supply of doctors?
The problem of fraud
Second, what exactly are we going to do about, well, fraud?
I don’t mean to be gloomy, but Medicare-for-all is going to be Mardi Gras For All Fraudsters.
Critics of private health insurance point to its high administration costs as a sign of inefficiency. But those private-sector paper-shufflers may serve a purpose.
The federal government’s watchdog, the Government Accountability Office (GAO), reported recently that “improper payments” at Medicare are already running at more than $50 billion a year.
They might not all be fraud, the watchdog adds. Many of them have no paperwork, or the wrong paperwork, but maybe it’s no big deal.
Sure, why not?
The Centers for Medicare and Medicaid Services (CMS), which oversees the system, “has not conducted a fraud risk assessment for Medicare,” the GAO adds.
About 10% of Medicare’s fee-for-service payments are “improper payments,” the CMS itself acknowledges.
And that’s in a system that caters almost entirely to those over 65. I don’t want to be rude to America’s senior citizens, but I suspect most of them have passed the peak age for running a con.
Now we’re going to open the system to the young and middle-aged as well. And we’re going to quadruple the number of customers, from 60 million to 230 million. What could go wrong?
Even at the current rate, we’re looking at $200 billion in “improper payments,” right?
Third, if we’re opening the system to anyone who comes here, legally or illegally, aren’t we just giving an enormous incentive to everyone from, say, Tijuana to Tierra del Fuego to make a sometimes long and dangerous trek to America?
If some people will risk everything for the chance to pick lettuce or bus tables, think how many will do so for the chance to get prime health care for themselves and their families.
Maybe we could save them the trip and start opening clinics south of the border.
What about stockholders?
Fourth, and finally, can you tell me why we are apparently preparing to take about $600 billion from the stockholders in insurance companies without any compensation?
The current plans include no payments to investors, even if their business is essentially made illegal.
I know the current fashion in the Democratic Party is to consider all investors and all profits to be the work of the (secular!) devil. But the biggest investors in health-insurance giants such as UnitedHealth Group
are retail mutual funds, such as Vanguard funds, State Street’s SDPR exchange traded funds and BlackRock’s iShares. They should just be expropriated?
The major publicly traded health insurers are valued in total at about $600 billion, and account for about 2.5% of the value of the broad S&P 1500 Index.
Doesn’t this seem like the behavior of a dubious market with a questionable rule of law? And what sort of precedent does it set? Investors will certainly think twice about risking their capital if the stocks that win are likely to get seized.
Even the Fifth Amendment of the Constitution talks about paying “just compensation” when private citizens are deprived of their property in the public good. And this is usually the practice when state governments seize property by eminent domain.
It would be quite easy to buy them out, too. At current levels, $600 billion in Treasury bonds would cost the taxpayer about $16 billion a year in interest. Chicken feed. And that’s before taxes.
If you want my support, make your pitch.
Brett Arends is a MarketWatch columnist.