In a recent interview, Sen. Brian Schatz (D-HI) laid out his plan to allow every American to buy into Medicaid if their state allows it. It could be a significant expansion of the program, at the least as a public option for Obamacare’s marketplace. At the most, it could set up a road that leads to Medicaid as the vehicle for single-payer health care.
But it also raises a bunch of questions, about both the plan’s ideological goals and its policy mechanics.
Is the policy an end goal in and of itself, a way to stabilize Obamacare and increase the options on the marketplace, or a transitional policy that would eventually be replaced by a universal single-payer program? Would states be able to design plans that are affordable for low-income people, or would people with higher incomes benefit the most?
Schatz’s plan, or something like it, could become a serious player in the Democratic health policy debate. Medicaid buy-ins have sprung up in Nevada and now the United States Senate.
So these questions are worth rummaging through. We asked seven health policy experts, in the middle and on the left and right, what they thought.
This is what they said, lightly edited and condensed for clarity.
Robert Frank, Cornell University
Anything you can do in this direction is a step forward. That's usually how we make progress.
There are still a lot of people out in the cold, and the private insurance approach to covering people is totally not the right way to do it. You have to ride herd over the insurance companies, whereas the incentives facing a government paying agency would be more or less where you want them to be.
It's not that private insurers are evil, but competition forces them to set the lowest prices they can to get you on their rolls — and once you’re on board, they take every step they can to cut their costs. So they repeatedly reject routine claims for services they ostensibly cover. The people who are vigilant and determined bitch and moan and eventually get paid, but many busy people just give up. This is the behavior the incentives mandate under our current system.
We spend way more per capita on health care than anyone else, and part of that is because we use private insurance, which has a heavy administrative cost burden — anywhere from 16 to 18 percent of the total cost — while Medicare's administrative burden is normally around 2 percent. That's a big saving other counties get that we don't. If we brought more of the insured onto a program like the one Schatz wants, the rates paid for procedures would be lower and the amount spent on care would be lower. The providers wouldn't be happy about that at first, but if all providers saw their reimbursements affected equally, it wouldn’t matter to them for long. We know from international data that doctors in countries who earn less are just as happy as American doctors are. The Schatz plan is a step in the right direction.
I'm no expert on political strategy. If you want to go from A to B, is going two-thirds of the way better than no change at all? Or should we demand going all the way at once? Sometimes by being angrier and more insistent you get what you want, and being cooperative and mild-mannered you get ignored. But if I were voting on the Schatz plan, I’d almost certainly be in favor.
Adam Gaffney, Harvard University
Though the Affordable Care Act has so far withstood the Trumpcare battering ram, 28 million remain uninsured in the United States, an entirely unacceptable state of affairs. Might a Medicaid-based "public option," as proposed by Sen. Brian Schatz (D-HI), be the answer?
Unfortunately, the bill would not rectify our nation's serious health care woes. While it could potentially expand coverage, its impact would probably be modest, or even marginal: After all, in 2013 the Congressional Budget Office scored a somewhat similar public option and found that it would have no significant impact on the number of the uninsured. Moreover, Schatz's bill would be optional for states and so would likely be declined by many, further limiting its impact. It is also probable that even with subsidies, some will find the premiums and deductibles of this plan unaffordable, as they have under the ACA.
Just as importantly, the bill would not solve the issues faced by Americans with insurance: narrow networks of doctors and hospitals, unaffordable drug prices, paltry access to dental and long-term care, and rising out-of-pocket costs (e.g., copayments and deductibles) that are squeezing household finances and creating an epidemic of "underinsurance" in America. And finally, it would not create the greater administrative efficiencies of a single-payer system, which by one estimate would be greater than $500 billion a year.
The only answer to those myriad issues is a universal single-payer "Medicare-for-all" system, which would ensure equitable access to comprehensive health for everyone in the nation. Medicare-for-all should thus remain the Democrats' central health care goal in the coming months and years.
Larry Levitt, Kaiser Family Foundation
I read this as basically a public option delivered through Medicaid, with provider payment rates upgraded to Medicare levels. It could offer people, including those eligible for premium tax credit and those who aren’t, an option with a lower premium than existing private insurance plans.
This appears to be aimed at two groups.
It gives people with incomes over 400 percent of the poverty level, who are now ineligible for premium subsidies, an option to buy into Medicaid for no more than 9.5 percent of their income. It essentially extends premium subsidies to middle-class people through Medicaid. The federal government would cover half of the excess cost, and states would have to kick in the rest if they pursue this option. That would certainly increase federal costs.
It also gives states the ability to use Medicaid to create a public option. That could give current exchange enrollees an option with lower premiums than current private insurance plans. So long as the premiums are set to be actuarially sound, that wouldn’t necessarily cost any more money. It could potentially save money for the federal government if the new Medicaid option is offered on the exchange and lowers the benchmark for premium tax credits.
Loren Adler, Brookings Institution
To me, the fundamental question here is whether you intend to create a level playing field or not. Assuming the former, this old CBO analysis of a public option should be pretty close to capturing [Schatz’s] proposal. The public option would be relatively cheaper than this suggests if it also got to piggyback on Medicaid’s drug rebates. Extending subsidies in the entire nongroup market plus this new option all the way up the income scale would plow back some of the savings, and likely cause notable employer coverage dropping.
If the goal is to create an uneven playing field favoring the Medicaid buy-in option, then you’re presumably adding a lot of cost and at least significantly weakening the private nongroup market, but I have a ton of questions/details that need to be answered before figuring out how that would play out.
Basically, this is either just another way to describe the standard public option proposal or a way to bias a single-payer option with higher subsidization. Either way, given how different it sounds like the carved-off “Medicaid buy-in option” is from Medicaid, it’s unclear why it should be called such. It sounds much closer to a Medicare buy-in, in fact, although still not quite.
Matt Bruenig, People’s Policy Project
Up to this point, the liberal establishment, including Barack Obama and [the] Center for American Progress, has only endorsed what I would call the Loser Public Option. Under the Loser Public Option, the government offers a public insurance choice only in difficult areas of the country that private insurers have effectively abandoned rather than taking on private insurers everywhere.
Schatz's proposal breaks from this consensus by potentially allowing Medicaid to compete against private insurers for patients in any individual health insurance market in the country. That is a significant improvement over current liberal thinking about the role of public options in our health care system.
With that said, it is important to note how small-bore Schatz's plan would ultimately be. Currently only 12.2 million people receive their health insurance through an individual exchange, and only 5.8 million of those people live in a state that expanded Medicaid as part of the Affordable Care Act. If the same states that refused to expand Medicaid under the ACA also refuse to expand Medicaid under Schatz's plan, then his new Medicaid public option would only enroll a modest number of people: some portion of the 5.8 million people in the states that are likely to expand Medicaid along with some portion of the uninsured in those same states.
To really supercharge this idea, Schatz should allow Medicaid or some other public alternative to compete in the employer-sponsored insurance market as well, in addition to the individual insurance market.
David Anderson, Duke University
I need to see the details. There are so many different ways this could spin.
What does the plan design look like? Is it a silver plan [70 percent actuarial value], or is it 97 percent? On costs, that’s gonna be tough. The number of states that can take on a significant new [Medicaid] obligation long term is not high.
Big questions: How do states pay for this, and how does the benefit design integrate into the ACA?
I think the big divide within the Democratic Party is not if we need to have everyone covered, but how to do so. How much disruption is plausibly tolerable in each iteration of reform?
Avik Roy, Foundation for Research on Equal Opportunity
It's completely unworkable, and would increase annual Medicaid spending by as much as $2 trillion over a 10-year period.
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