The American Left has long dreamed of adopting a Canadian-style single-payer system, but with little success. The chief obstacle is that most non-elderly Americans are enrolled in employer-sponsored health insurance, and they’re anxious about the prospect of seeing their existing health-insurance arrangements unravel. And so those drawn to single-payer have instead called for incremental steps in that direction. As originally conceived, Obamacare included a “public option” that would, in essence, give the non-elderly access to a Medicare-like insurance benefit, but wouldn’t require them to take it. Over time, though, the expectation was that the public option would displace private insurance. Though public option proved a bridge too far for centrist Democrats in the early Obama years, it’s been making a comeback, for a number of reasons.
First of all, as more Democrats embrace the idea of Medicare-for-all, a process that’s accelerated since the Bernie Sanders insurgency and the election of Donald Trump, the idea of a public option is no longer the leftward edge of the debate. In short order, I suspect it will become Democratic orthodoxy.
One early indication is a new plan (“Medicare Extra for All”) from the Center for American Progress, a think tank long considered a central part of Hillary Clinton’s government-in-exile, and which continues to play an important role in Democratic policymaking. Already, it’s being touted by progressives as a more realistic alternative to Sanders’s ambitious single-payer plan (which, it must be said, is not saying much). I asked Chris Pope, a senior fellow at the Manhattan Institute and a regular contributor to National Review, to share his thoughts on Medicare Extra, which you’ll find below.
The “Medicare Extra for All” proposal is a repackaged version of the congressional Democrats’ 2009’s “public option” proposal. It imagines that large savings can be generated by extending Medicare’s price controls for hospital care, beyond the elderly and disabled, to the purchase of hospital care for other patients. Individuals and employers would be allowed to buy into the system, to take advantage of these discounted rates.
Yet, the monopoly power which has inflated prices for hospital care provided to privately funded patients is a deliberate product of policy, intended to sustain the solvency of hospitals in counties across the United States, which would be unviable in a competitive market. American health care is expensive primarily because its hospital system is bloated. Hospital care has large economies of scale, and costs per patient to a large extent depend on the amount of patients over which the costs of capital and highly skilled labor can be spread. The United States has four times as many hospitals per capita as the United Kingdom (Medicare supports 4,700 participating hospitals; the National Health Service only 200), and this does much to account for the disparity in cost.
The savings the proposal counts on would only therefore be achievable if its advocates were willing to accept the immediate collapse of a large section of the nation’s hospitals. It is certainly a good idea to reform hospital subsidies to strengthen competition and gradually reduce excess capacity. But the unrealistic belief that one could simply slash hospital revenues by suddenly enacting comprehensive price controls, demonstrates an unwillingness to view trade-offs as they really are, and would likely result in political disappointments which will have to be blamed on lobbyists, campaign-finance laws, or some other similar scapegoat — as was the case in 2009. More likely, as in state-level single-payer proposals, the advocates of this initiative would seek to maintain the existing system of hospitals, bloated by public subsidy, and be disappointed by the astronomic expense of their proposals to increase the generosity of benefits eligible for taxpayer assistance.
My takeaway is that while the politics of Medicare Extra might be appealing (at least from an intra-Democratic coalition perspective, or until we start talking about paying for the program), the political economy of the proposal is muddled. Limiting the pricing power of medical providers isn’t just a technical or administrative challenge. The power of America’s hospitals ultimately derives from two sources: First, they are large employers, which gives them lobbying muscle. Second, medical providers are intrinsically more appealing to voters than the various entities — private insurers, the federal government — that try to restrain them, even when providers act in egregiously self-dealing behavior. If holding down provider payments were a snap, any number of utopian health-system reforms, whether from the right or the left, would be within our grasp.