Medicare for All Archives - Jane the Actuary

Originally published at Forbes.com on November 4, 2019.

Elizabeth Warren just released her proposal for funding the single-payer healthcare system she calls “Medicare for All” but which is far more generous than the existing Medicare system, promising all medically necessary/appropriate services/treatments not just with respect to traditional healthcare but also dental, hearing, vision, and long-term care, both in-home and institutional, all without any premiums or direct cost to recipients, and without any wait (”care when they need it”). (See Warren’s just-released proposal, in which she references the Medicare for All Act of 2019 as a guide for details, a summary of which is at sponsoring Representative Pramila Jayapal’s website.)

I’ve written previously on another platform that, however often supporters of a national healthcare system claim that this is “what every other country does,” this is in fact not the case, that even the most generous of Social Insurance-based healthcare systems top out at covering 85% of expenditures, with the remaining 15% coming from out of pocket costs or private health insurance, and that either directly through required cost-sharing or non-covered treatments, or indirectly as wait times lead those who can afford it, to supplement or replace the state-provided benefit. As an example, in Australia, which literally calls its state program “Medicare,” the public system covers 67% of healthcare spending.

And now, not only does Warren promise unheard-of generosity in benefits, but she promises that this can be done in a way that’s “free” for everyone but the wealthy. There’s a lot of smoke and mirrors here, including a substantial understatement of the actual cost of her plan ($20.5 trillion over 10 years rather than the $30 trillion that both Bernie Sanders and progressive supporters of the plan estimate), claims that she can hold administrative costs down to the figure Medicare reports for its existing program for the elderly, simply by fiat, and a tax on employers that’s meant to represent the equivalent of what they currently pay in their share of the premiums but becomes after a phase-in something more akin to a (very large) tax on headcount (and a lot more – which I griped about elsewhere), but her bottom line consists of substantial tax hikes on the wealthy and corporations.

And, in the same way as no other country imagines that all medical (and ancillary) care can be provided by the federal government with no limits, copays, or waits, it is also the case countries simply don’t fund their systems by means of “taxing the rich” but expect the same citizenry that benefits from the system, to pay for it, either as a part of an income tax system in which everyone pays at rates higher than in the United States, or through a payroll tax similar to our FICA tax, or both.

Of Bernie Sanders’ favorite countries, that is, Scandinavia: Denmark funds its system mainly through a national health tax of 8% of taxable income, and Norway and Sweden fund their systems through national and local taxes, according to the Commonwealth Fund’s International Health Care System Profiles.

The United Kingdom funds its system through both general tax revenues and a employee tax of 2.05% of pay up to GBP 45,032 in annual earnings, and 1% thereafter, plus an employer tax of 1.9% of earnings.

German employees and employers pay 7.3% of pay up to a EUR 53,100 per year cap, plus 1.275% each up to the cap for long-term care (which, incidentally, covers only a portion of those costs).

In France, employees pay between 0% and 6.5%, employers pay 13.5%, and the national government pays an additional amount from general tax revenues.

And to our north, again, Canada funds its system through general tax revenues, as well as up to a 4.3% employer payroll tax, varying by province, and, in Ontario, a premium of about 1% of pay, capped at $900 for income of $200,000.

(In each of these cases, this excludes the additional costs to individuals for out-of-pocket costs and private insurance.)

The fundamental premise of social insurance is one of “we’re all in this together.” These are programs in which everyone pays (with certain exceptions for the poor) and everyone benefits.

And consequently, to truly implement a system such as what Warren promises, in which it is the wealthy and corporations who bear the burden of providing health benefits for Americans, would not be placing us within the norm for healthcare-providing countries, but far outside it.

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.

“Medicare for All” is in the news again, with Kamala Harris’s statement yesterday that she backs the proposal, even to the point of eliminating private insurance altogether. And this topic always brings up comments along the lines of, “in every other civilized countries, the government provides healthcare for everyone.” So, because in my old job I worked not only with pensions but also with employee benefits, comparatively across countries, I wanted to dig out an article I wrote at Patheos a couple years ago which I think is still relevant. I called it “Your handy-dandy guide to health care outside the United States.”

The original article referenced a 2012 OECD table on public vs. private healthcare spending. Here’s that table, updated to 2015, from the OECD publication, “Health at a Glance“:

Now, to be honest, I’m not certain what’s going on with the differention between “government schemes” and “compulsory health insurance” for the United States, this is the first year that they’ve split these categories out this way, and the U.S.-specific report doesn’t explain further. It is not, however, the case that the 23% refers to exchange-purchased or Obamacare plans, because in the old 2012 chart, pre-Obamacare, the numbers were split in much the same way. My guess is that this may be treating Medicare as its own independent program.

There are also countries showing very small percentages of “voluntary health insurance” where this doesn’t seem right relative to my understanding and I’m wondering if some of this is classified as “out of pocket.”

But here are some other noteworthy countries (text cribbed from my prior article and updated):

The U.K.

Yeah, 20% non-public spending isn’t huge, but it’s not nothing: middle-management and higher-level employees are provided private health insurance by their employers. Not for them the NHS horror stories! They have access to private clinics and treatments, and “upgraded” spots at public hospitals, whenever NHS is insufficient, has too long a wait list, doesn’t cover a treatment, or is just generally icky.

Switzerland

They’re actually the most Obamacare-ish country: a standardized basic level of private insurance is mandatory, with subsidies for the poor. No practice of employer provision — you just buy it on your own. The catch? They’re the second-highest-spending country, and are struggling with growing costs.

Germany

Health insurance is managed through regional quasi-public entities, which set (very low) reimbursement rates. How low? When we lived there, there was a protest march by doctors upset at their low pay. But hey — medical school was free. It’s paid for by a payroll tax. But if you make over a given income level (I think about 50K-ish), you have the option to opt out of the payroll tax and buy your own insurance, with the stipulation that you’re then obliged to continue buying private insurance, rather than switching back and forth. In addition to potentially cheaper coverage, private insurance gives you such benefits as top-tier doctors and the ability to select a private, rather than three-bed room at the hospital.

France

Employer-provided health insurance is customary (and I think not just for management but in general); it picks up the not-trivial copays. In addition, the reimbursement levels provided by the national health insurance are low enough that providers often have a surcharge which the private insurance covers. This system of surcharges at the “good doctors” and private clinics, paid for by private health insurance, is, it seems to me, fairly common, say, in Italy, as well.

Canada

Historically, insurance was not permitted to pay for any service that the national healthcare system covered, so that you couldn’t use it to get coverage at a private provider to skip waiting lists. It seems to me that I read recently that this has changed. In any case, what private health insurance does do is cover everything that the national healthcare system doesn’t: prescription drugs primarily, and upgrades from ward to semi-private or private rooms, and various sorts of therapists and other providers that aren’t covered otherwise. In addition, private insurance covers out-of-country treatment, and policies specify either all out-of-country treatment or only in cases of emergencies.

Australia

Again, single payer, but with a policy of encouraging upper-income folk to buy private insurance — it doesn’t allow you to opt out of payroll tax contributions, but does give you a modest rebate.

Korea

Yeah, they’ve got a large percentage of private spending; it seems to me that this is because the State healthcare provision has a lot of holes, copays, etc., which private insurance, routinely a part of employee benefits, covers.

Mexico

Strictly speaking, there’s comprehensive medical coverage. But in practice, well, it’s like being obliged to use Cook County hospital for everything. Again, salaried employees expect to have insurance provided by their employer, to get them access to private, first-world hospitals. Same with Brazil, which is a huge health insurance market for white collar employees, and I think even blue collar employees at large employers, in order to escape the poor quality and wait times of the “free” national healthcare system.

One more, also not on the table — Singapore

Singapore’s system gets frequent mention by supporters of “market-based” systems, because one component is a “savings account” similar to the HSA savings accounts that accompany high-deductible plans in the U.S. See this older post, for instance. The reality is that “universal” coverage has a lot of copays and employer-provided insurance fills these gaps.

So there you have it: a world tour of health insurance.

Image:
http://www.dodlive.mil/2017/10/03/usns-comfort-how-the-hospital-ship-helps-during-disasters/(U.S. Air Force photo by Staff Sgt. Courtney Richardson)

Tag: Medicare for All

Fun fact: the rest of the world does not have “Medicare for All”