Healthcare Policy Recommendations

Solving the challenge of healthcare in the US is central to our future for several reasons. First, as we demonstrate in our Fiscal Policy Research, if we cannot control the cost of healthcare in the US, we will not be able to control our fiscal future. Secondly, if we cannot control the cost of healthcare, we will not be able to expand access to all Americans at an affordable price, thereby subjecting millions of Americans to an unsustainable level of human suffering. Finally, if we cannot control healthcare costs and expand access at an affordable price, we will lock millions of Americans into an endless cycle of poverty without escape. The harsh reality is that by failing to provide affordable access to the Americans who cannot afford it on their own, we will jeopardize the future of all Americans.

While the US is far behind other major countries in the management of healthcare, the good news is that we do not have to rediscover the wheel: we can simply examine and choose the best practices of several countries that set an example. As a result, the primary question is not about the ultimate outcome, but rather the least disruptive process of getting there.

All relevant solutions involve three things: the elimination of for-profit insurance as a method of healthcare administration, the negotiation of drug prices to the world average, and the reduction through bargaining of provider compensation.  

Having said that, let us turn to how we get there. There is an often repeated belief in the US that Americans who receive healthcare from their employer are “happy with their healthcare.” We don’t believe this is the case. We don’t believe that anyone is happy paying 80% more than is necessary. We don’t believe any small or even medium-sized company likes the cost of providing healthcare to their employees. We don’t believe that anyone who loses their job and therefore loses their insurance “likes their insurance.”  Nonetheless, this does not need to be argued theoretically. Rather, it can be borne out or not in practice as we reform the overall system. We think that the most reasonable approach is the following:

Merge Medicare and Medicaid. We will refer to the merged program as New Medicare.

Make New Medicare available, but not mandatory, to all Americans.

Charge each participant based on ability to pay, meaning based on a combined income and net worth test. New Medicare would be free to the poorest Americans, as Medicaid is today, while the wealthiest Americans would pay for coverage without subsidy.

Americans who are employed and receive their insurance at work would be eligible to choose New Medicare over their employer plan, in which case their employer would make a contribution to their premium payment. Employers who self-insure could continue to do so if they like or switch to New Medicare for less expensive administration.

Medicare would be authorized to negotiate drug prices and provider compensation. Doctors would be prohibited from discriminating against patients covered by New Medicare.

There are several potential outcomes of this approach:

New Medicare administers healthcare at less than 40% of the cost of private insurance companies, comparable to other government-administered programs. The more Americans who opt for New Medicare, the more Americans will benefit from this saving.

As the single largest buyer of healthcare, New Medicare will be able to negotiate prices of drugs and providers down to world levels. It is possible that providers will continue to overcharge private insurance payers, but we don’t believe that consumers or employer sponsors will tolerate overpaying for long as New Medicare becomes increasingly available at a lower price. This will prove to be particularly true of employers who self-insure their employee pool. Why would they continue to pay more to for-profit administrators when they could pay less to New Medicare and achieve the same outcome for their employees?