Medicare for All Won’t Fix What’s Wrong With Health Care

August 21, 2020 Updated: August 23, 2020

Commentary

Polls show that the majority of Americans support the concept of Medicare for All. However, when they learn about just a few of the details, enthusiasm begins to wane.

The promoters of Medicare for All believe that such a program will improve health care for all Americans. Unfortunately, they’re badly mistaken and here’s why.

Today, we face three major problems in U.S. health care: access to care is uneven, the quality of care is often below what it should and could be, and what we spend on health care for each individual is more than twice as much as the rest of the modern world spends on each of their citizens.

In other words, we spend too much of our financial resources to purchase care of variable quality while millions are left without the necessary access they need and deserve.

Before we jump to the conclusion that Medicare for All will fix these issues, we need to understand their root causes. When we do, we find that the problems we have won’t be fixed by changing who pays for health care in this country, but rather by changing what we are paying for.

When we understand why we pay more than twice per capita, we will understand why quality suffers, find how to save hundreds of billions of dollars, and find the resources to provide access for all.

We also will find we can do this without dismantling our current free-market system.

Reducing Costs

What we pay for health care is the sum of the prices of the goods and services (the prices of drugs, physician services, hospital stays, and so on), overhead costs embedded in the system (such as malpractice costs, insurance company administration costs, and costs of compliance with extensive regulations such as HIPAA), and the volume of services and goods consumed (the numbers of physician visits, hospitalizations, surgical procedures, diagnostic tests, prescriptions, and so on).

When we examine this list of components, it becomes clear that there are multiple opportunities to address the excess spend. However, the most important strategic question is, what do we focus on in order to end up with the most savings while also improving quality and access?

Historically, the focus of attacks on health care spending has been on prices. Who hasn’t heard the popular, widespread outcry for reducing the prices of prescription drugs? Indeed, over the past several decades, both private and government insurance programs have been reducing what they pay for individual goods and services.

That strategy hasn’t worked, so other payment strategies have been developed over the last couple of decades. These include such things as pay for performance, the establishment of accountable care organizations (ACOs), shared savings models, and bundled payments. In the aggregate, these are called value-based purchasing strategies and, as of yet, they haven’t moved the needle on cost or quality, and I’m skeptical that as currently structured they will.

Both excessive overhead costs and volume are the two places where we have real opportunity. The United States has been estimated to spend about 10 percent more of our health care dollar on overhead. That equals about $350 billion. Imagine what we could do with that if we actually took excess overhead out of the system? That sum alone is more than enough to provide health care insurance for all uninsured.

The proponents of Medicare for All argue that Medicare is more efficient and has less overhead. Maybe when expressed as a percentage of Medicare program spend, but expressed as per capita (or per enrollee) overhead, Medicare is less efficient than private insurance. That should be no surprise when one looks at the overhead of many other government programs.

Variability

The biggest (by far) opportunity for savings and for simultaneously improving quality is in right-sizing the volume of goods and services delivered. The obvious clue that this is the case can be found in the mounds of excellent data that document huge variability in how health care services and goods are delivered in the United States.

Much of this data (largely derived from Medicare) has been collected and published by Dr. Jack Wennberg and his colleagues and mentees at The Dartmouth Institute.

Just to cite some examples: If you live in Hattiesburg, Mississippi, you’re twice as likely to have back surgery than someone living in Lexington, Kentucky; if you’re a woman with early-stage breast cancer in Grand Forks, North Dakota, your chances of having a mastectomy as opposed to a lumpectomy are seven times higher than someone living in San Francisco; if you live in Portland, Oregon, Medicare spends about $7,700 a year on your health care, but if you live in Miami, Medicare spends $13,100 a year on your care.

This variability in health care delivery isn’t explained by differences in disease burden, cost of living, or better outcomes in one place or another.

There are three major causes of this variability: lack of evidence-based decision making, supply-driven demand, and consumer preference. The leading cause by far is a lack of evidence-based decision making. Every day, health care professionals have to make numerous decisions. Do I order this test? Do I write this prescription? Do I refer this patient to a specialist? What do the results of this test mean? Research has shown that up to 50 percent of these decisions and the diagnoses and care that result from these decisions aren’t based on the available best scientific and clinical evidence.

Some estimates of the annual cost savings of getting these decisions more evidence-based are as high as $750 billion. According to the Kern Center for the Science of Health Care Delivery at the Mayo Clinic, “American health care cries out for the discipline of health care delivery science because as a whole U.S. health care is disintegrated, uncoordinated, and expensive.”

If we are to “fix” health care in our country, we have to fix what we do in the delivery of care—we have to attack variability and its causes. Medicare for All may be a good campaign slogan, but it will get us nowhere in addressing what is really wrong with U.S. health care.

Harry R. Jacobson, M.D. Ph.D., is the former CEO of the Vanderbilt University Medical Center. Currently, as a principal in a private equity group, he’s involved as an investor in innovative health care companies. He has founded or co-founded eight such companies. He’s co-author of the 2016 book “Begin Again Now: The Path to Fixing Health Care.”

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.