Will Medicare for All, With a 10-Year $52 Trillion Price Tag, ‘Fix’ Health Care?

November 13, 2019 Updated: November 20, 2019

Commentary

Sen. Elizabeth Warren’s Medicare for All proposal, with its recently released price tag and proposed way to pay for it, has generated much debate.

While there are a number of excellent points made by critics of the plan, their arguments are mostly about costs and who pays the bill. If that remains the major focus of the debate, we’re at risk of “missing the forest for the trees.”

The cost, quality, and access challenges faced by health care provision in the United States won’t be met by focusing on what we pay and who pays. They’ll only be met by focusing on what we’re buying.

We spend too much to purchase care of variable quality while millions are left with poor or no access to the care they need. If we could spend $1.2 trillion per year less (out of a current annual $3.5 trillion) while, at the same time, improving quality and covering the uninsured or underinsured, would we not pursue such a goal?

In such a scenario, Medicare could remain solvent, private insurance could remain freely available at more reasonable premium rates, and outcomes could improve. This is not a plan that would ration care. Rather, it would be a plan to deliver the right care, and only the right care that scientific and medical evidence call for.

The three major determinants of how much we spend on health care are price, volume, and overhead. Price includes the prices we pay for individual goods and services. Volume includes how many services and goods are delivered. Overhead includes the amount we pay for administration (and in the case of private insurance, includes profit) that doesn’t directly pay for goods or services for patients.

Prices for virtually all goods and services (prescription drugs, hospital stays, physician income) are significantly higher in the United States than anywhere else. There are efforts focused on controlling some of these prices—prescription drugs being a case in point—but for reasons that could be the subject of another editorial, these can only nibble at the edges and do so with the risk of serious negative and unintended consequences.

Overhead resides within the regulators, payers, and providers. Much research in this area suggests that reducing some of the unnecessary overhead could result in $350 billion in savings. Note that some argue Medicare is more efficient than private insurance when administration costs expressed as a percent of total cost is the comparison.

This leads to the mistaken assumption that Medicare for All could, in part, be paid for by efficiency. But, when compared on a dollar administration cost per capita basis, Medicare is less efficient.

Volume is where we have a huge opportunity. Several decades of research on U.S. health care delivery (much of it by the Dartmouth group led by Dr. Jack Wennberg) has demonstrated enormous variability in health care practice across the country. This variability largely results from lack of evidence-based decision making.

Every day, health professionals make multiple decisions. Do I order this test? Do I write this prescription? Do I refer this patient to a specialist? What do I do next with these test results? Research has shown that up to 50 percent of these decisions and the diagnoses and care that result aren’t based on the best available scientific and clinical evidence. In other words, there’s a huge gap between what we know, what science and evidence have made available, and what we do.

The estimated annual cost of this gap between what we know and what we do is a conservative $750 billion.

If we don’t appreciate the cost and erosion of quality this variability in practice is causing and address this fundamental flaw in our health care delivery “system,” there will not be enough future trillions of dollars or any restructuring of how we pay (like “Medicare for All”) that can “fix” U.S. health care.

It’s time to focus our efforts on attacking the real reason why U.S. health care is on such a dangerous course.

Dr. Harry Jacobson was vice chancellor for health affairs at Vanderbilt University and the CEO of Vanderbilt University Medical Center. He is a co-author of the 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.

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