By Ed Dolan

The Democratic Party is at risk of falling into a trap on health care — a trap called “Medicare for All.” But at the Democrats’ October 15 debate for presidential candidates, Pete Buttigieg offered a plan that could allow a timely escape.

Buttigieg began by characterizing his plan, Medicare for All Who Want It (M4AWW), as one that “trusts you to make the right decision for your health care and for your family. Unlike the purist form of Medicare for All promoted by Warren and Bernie Sanders, Buttigieg maintained that his plan could be “delivered without an increase on the middle-class taxes.”

Warren replied, “So, let’s be clear. Whenever someone hears the term Medicare for All Who Want It, understand what that really means. It’s Medicare for all who can afford it,” clearly implying that M4AWW would leave some Americans still unable to afford the health care they need.

This attack on the Buttigieg plan misses the mark. Contrary to Warren’s claim, the approach taken by Buttigieg — and shared by several related reform proposals — would not, regardless of their income, leave out “the family whose child has been diagnosed with cancer” or “the person who’s just gotten an MS diagnosis.” It would instead protect everyone from ruinous medical bills, but do so in a way that avoids, as Buttigieg puts it, blowing a “giant multi-trillion-dollar hole” in the federal budget.

All this is easily understood by anyone who takes the time to see how Medicare for All Who Want It, and related proposals, actually work. Here are some of the plan’s key points.

The Public Option

The centerpiece of Medicare for All Who Want It is a public option. Anyone who lacks coverage, or is unhappy with their current coverage, could sign up for a Medicare-like public plan. Subsidies for both premiums and out-of-pocket costs would keep the public option affordable. Enrollment would be automatic for anyone whose low income made them eligible for free coverage. However, people who were automatically enrolled could opt out later if they find private coverage that they prefer.

A public option should appeal both to advocates of a single-payer health care system and those who favor market-oriented reform. If single-payer advocates truly believe government-provided coverage is best, they should be confident that everyone, or nearly everyone, will eventually opt for it, as nearly everyone does in the U.K. On the other hand, those who trust the market can welcome the public option as a disciplinary device that will sharpen the competitive offerings of private insurers.

Medicare for All Who Want It takes a neutral stance regarding the future of public and private coverage. This “let the best plan win” attitude is reflected in the introduction that the Buttigieg campaign has put out:

Unlike many other proposals, you can choose whether to join a public alternative, so if you like your private insurance you can keep it. If corporate insurers are unable or unwilling to lower costs or offer plans that are dramatically better than what’s available today, competition from this public insurance alternative will naturally lead to Medicare for All.

The key to making this work will be to implement M4AWW in a way that is biased neither toward the public nor the private option. Many observers see the coexistence of traditional Medicare with Medicare Advantage as a model. Over the past ten years, the share of Medicare beneficiaries who have opted for Medicare Advantage has increased steadily, from 23 percent to 34 percent. Although originally a Republican idea, over time it has grown in popularity among Democrats. Medicare Advantage is not perfect, but commonsense reforms with bipartisan appeal could improve it. Presumably, lessons learned from Medicare Advantage would be applied during the process of turning M4AWW from a campaign position into actual legislation.

Affordability

One of the key objectives of both Democratic and Republican proposals for health care reform is to safeguard every individual and family from catastrophic medical expenses. As Buttigieg puts it, “Going to the doctor can be worrying enough without the added concern of whether a biopsy will lead to a bankruptcy.”

Under M4AWW, Medicaid would remain the principal source of coverage for people with low incomes. Two changes would broaden Medicaid coverage. First, people who do not currently have coverage and who live in states that have not expanded Medicaid under the Affordable Care Act (ACA) would be automatically enrolled. Second, states would no longer be allowed to impose work requirements.

For people above the Medicaid cutoff but below Medicare age, M4AWW would use the same basic tools to ensure affordability as does the ACA. Under M4AWW, premium supports would be structured so that no one would have to pay more than 8.5 percent of their income, while people with the lowest incomes would pay no premiums. At the same time, the plan would restore and expand the ACA’s system of cost-sharing reductions in order to ease the burden of deductibles and other out-of-pocket expenses for low-and middle-income beneficiaries. Affordability would be further enhanced by basing the public option on “gold” rather than “silver” ACA coverage.

Finally, M4AWW would improve the affordability of traditional Medicare by capping out-of-pocket costs, which are now potentially unlimited when expensive drugs or long hospital stays are involved. The Medicare out-of-pocket caps would be income-adjusted, with a lower cap for low-income seniors.

The combination of premium subsidies, cost-sharing reductions, and Medicare reform would mean that low-income beneficiaries would have their health care costs covered in full, while those who could afford to do so would make reasonable contributions to the cost of their own care. In that regard, M4AWW closely resembles an approach to reform known as universal catastrophic coverage (UCC). It also resembles another UCC-like plan, the Medicare for America bill drafted by Democratic Reps. Rosa DeLauro of Connecticut and Jan Schakowsky of Illinois, and endorsed by presidential candidate Beto O’Rourke. In the committee rooms of Capitol Hill, it ought to be possible to reconcile the two proposals.

Of course, it is desirable that any health care plan should be affordable not only to families but also to the federal budget. In order to control the impact on the budget, M4AWW aims to reduce overall medical spending, even while expanding coverage. It helps that M4AWW, while fully protecting the very poor and very sick, would leave a substantial area in between where cost-sharing and market incentives would operate to help control costs.

Unfortunately, early descriptions of the plan are lacking in details regarding cost reduction strategies. There is some discussion of lowering costs through greater transparency and simplification of administration, but much more could be done. Hopefully, future versions of M4AWW will incorporate a much broader range of market-oriented cost-saving measures.

Employer-sponsored Health Insurance

About half of all Americans get their coverage through employer-sponsored health insurance (ESHI) — an arrangement almost unknown abroad. Although many beneficiaries say they are satisfied with their coverage, reformers see many problems. ESHI is highly inequitable, with workers in the top fifth of the income distribution getting benefits that average as much as nine times higher than those for workers in the lowest fifth. Job lock is another problem. Many people are afraid to seek better work with other employers or start their own businesses because they fear losing their coverage. Finally, thousands of small-employer plans also contribute to fragmentation of the health care system and raise administrative costs.

Although any plan that would force tens of millions of people to switch from their current plans to something new and unknown would run great political risks, something needs to be done about ESHI. The Buttigieg plan handles this problem by allowing workers and employers who are happy with what they have now to keep their plans, but offering a chance to switch to M4AAW’s public option for those who want it.

Under M4AWW, people who are offered coverage by their employer but don’t sign up because it’s too expensive will be able to enroll in the public option and receive the income-based subsidies that would help guarantee affordability. That would be an improvement over current rules, under which employees who are offered coverage but reject it in order to seek coverage on the ACA exchanges usually do not qualify for income-based premium subsidies and cost-sharing. Furthermore, M4AWW would essentially end job lock. The public option would provide a reliable backup for workers who changed jobs or move to self-employment.

M4AWW would be especially beneficial for low-wage employees. The latest data from the Kaiser Family Foundation show that the average premium for employer-sponsored family coverage now exceeds $20,000 per worker, with the employee paying an average of $6,015 of that. Since M4AWW includes a premium cap of 8.5 percent of income, it would offer a better deal to any family with income of less than $70,000 per year. That is well above the median annual wage of $47,000.

All things considered, although the Buttigieg plan would not end employer-based heath insurance outright, it is likely that it would gradually reduce the number of families who depended on it. In the process, it would significantly mitigate the problems of job lock, inequity, and fragmentation that plague ESHI today.

Giving Americans What They Want

In economic terms, Medicare for All Who Want It scores reasonably well. It would be affordable both for families and the federal budget. Properly implemented, it would leave adequate room for market-based mechanisms to improve efficiency and lower costs. But at this point, the politics of health care reform matter more than the economics.

What’s more, Buttigieg is right when he says that his plan is “what most Americans want.” The latest polling by the Kaiser Family Foundation finds that a slim majority of voters, when asked directly, say they favor Medicare for All, but it also finds that they lose their enthusiasm when they are provided details of Sanders’ version of that plan.

Tellingly, 55 percent of all voters, including 66 percent of those who say they favor Medicare for All, think, wrongly, that Sanders’ plan would let them keep their current insurance. If they are asked their opinion of a plan that would eliminate private insurance companies, 58 percent oppose. Fully 60 percent oppose Medicare for All if they are told it would replace the current versions of traditional Medicare and Medicare Advantage. In short, if we believe the polls, Medicare for All is a political dead end.

Pete Buttigieg seems to get this. He understands that 89 percent of voters say it is very important to cover all Americans, compared with just 38 percent who think it is very important to eliminate private insurance companies. Whether or not he ends up with the Democratic nomination, his approach to reform should not die with his candidacy. Whoever prevails in the primaries, and whatever they call their health care plan, they should offer something in the general election that more closely resembles Medicare For All Who Want It rather than Sanders-Warren-style Medicare for All.

Photo Credit: Lorie Shaull under CC by SA 2.0.