When asked about a specific issue that candidates for the 2020 election need to address, Senator Warren has often said “I have a plan for that.” She is a passionate supporter of Medicare-for-All (M4A) and much of the data she cites on her website about the healthcare system are correct. However, there are many criticisms of her plan to fund M4A. Politically, it is likely that moderate Democrats will not support her plan for funding. Republicans will smear her plan as socialism, as opponents of universal healthcare have for the last century.
The main difficulty with her approach is not her passion or the data she presents. It is more basic than that. When you set out to solve a problem you not only have to define what the problem is, but how you will solve it. Warren and the supporters of M4A correctly identify the problem, but have not correctly shown how to solve it, largely because their math is wrong. This results in the erroneous conclusion that quality universal healthcare will cost substantially more.
There are four major components of a pragmatic healthcare solution:
- Healthcare must serve all Americans, i.e. it must be universal. Today 29 million Americans are uninsured and another 40 million are under-insured. The under-insured behave much like the uninsured in that they stay away from doctors, then show up in the ER when they get sick. Therefore, a quarter of Americans either have no insurance or have inadequate insurance. We are the only advanced economy without universal healthcare, which is a national outrage. On this we agree with Senator Warren.
- While the US does not provide healthcare for everyone, we have by far the highest per capita healthcare costs in the world. On this we agree with Senator Warren. Any pragmatic approach should reduce those costs.
- We must massively reduce bureaucracy. Over the last 10 years we have increased the number of billers in our country from 70,000 to 170,000. For example, Japan’s per capita cost for medical billing is approximately $54.00. We spend almost 5 times that.
- Fourth, when compared with other nations our national life expectancy is declining (c.f. The Commonwealth Fund, the UN Group, the OECD), Americans life expectancy is up to 7 years less than other advanced nations. This must change.
Warren’s M4A would provide universal coverage and it might improve outcomes, however it does not reduce cost and might actually increase bureaucracy for hospitals. On the campaign trail, both Senator Warren and Senator Sanders say that their plans will reduce or eliminate health care costs for the middle class. They will eliminate private health insurance companies and take on the high cost of drugs. Working to reduce the cost of drugs is an important issue, however these costs are only 10% of our nation’s healthcare costs. Senator Warren almost never talks about hospital costs, which are the largest segment of healthcare, at 32% or $1 trillion per year.
The M4A bills in the house and the Senate would establish federal control of hospital operating budgets based on the global budgeting experiment conducted in the six public hospitals in Maryland. The bills would require that the DHS would decide an operating budget for all 5,000 American hospitals each year. DHS would have the right to control the staffing levels of nurses and doctors at all hospitals. The bills would also control physician income by eliminating insurance companies at a time when we are facing a growing shortage of physicians.
When developing a plan for universal healthcare, there have been two theoretical starting points. The Beveridge report, written in 1942, provided free health care to all in Great Britain, with payment coming from general taxation rather than medical fees or health insurance. The British National Health Service (NHS) was established in 1946 on this basic principle. While not the same as the NHS, M4A has many similarities.
The second starting point is the Bismarck model in Germany, part of the unification of Germany in the 19th Century by Chancellor Otto von Bismarck. This model was used to create the world’s first universal health care system. Today in Germany, medical insurance is mandatory through employers, with income-based premiums that average approximately 15% of employee income. The premiums are paid by employers through payroll withholding to non-profit insurance companies, called sickness funds, that are chosen by employees. It is interesting to note that none of the candidates in American politics have considered this plan as a starting point for universal coverage. Nevertheless, we feel that this is a more appropriate model for healthcare, in part because it would not require an increase in taxation, and would result in decreased costs for employers.
We are convinced that the M4A plan is a mistake, the result of sloppy attention to detail on costs, a plan that projects that quality universal healthcare will cost more than the present system. Warren and Sanders want to impose M4A on everyone, which is surely a political error because it eliminates choice in healthcare that surveys suggest that Americans do not want to give up.
In our book, Healing American Healthcare, we make the case for a pragmatic approach to universal healthcare, that would provide high quality healthcare for all, while reducing overall costs by $1 trillion per year. The book discusses the high costs of pharmaceuticals, hospitals and health insurance, and the impact of bureaucracy on doctors and patients. Our plan would reduce costs, improve quality, and increase competition.
Together, we have worked directly in healthcare for more than 75 years, and we believe that this experience has given us insight that has eluded many healthcare economists and pundits. Please check out our book if you have not already done so. We would be very interested to get your thoughts and feedback. Please contact us at email@example.com .
Michael Hutchinson, MD