A Two-Tier Health Care System Could Be Just What the Doctor Ordered

Implementing a Medicare for All system would be challenging and may not have immediate results, but for the future's sake, it could be just what the doctor ordered.
By: and | August 19, 2019

Health care has dominated each of the 2019 Democratic Primary Debates.

The first question posed to the candidates on July 30th in Cleveland focused specifically on a “Medicare for All” plan. The New England Journal of Medicine states that more than two-thirds of Americans feel that reducing health care costs must be a top priority for the federal government.

Advertisement




Politicians from both sides of the aisle agree with the sentiments of these Americans, but how to approach this intractable issue is the crux of the matter.

There may be a compromise such that a Medicare for All Plan can coexist with the existing U.S. health care system.

Background of Medicare

Medicare was created in 1965 to help Americans aged 65 and older and those permanently disabled pay for medical coverage.

Les Williams, partner and chief revenue officer, Risk Cooperative

Coverage includes services like prescription drugs, hospital stays, and doctor visits. According to the Center for Medicare and Medicaid Services (CMS), in 2016 Medicare covered over 56 million Americans at a cost of around $678.7 billion.

Medicare is funded via payroll taxes from employees and employers, self-employed individuals, income taxes paid on social security benefits, and interest earned on two trust fund accounts held by the U.S. Treasury.

Medicare for All involves the idea of a single-payer system; in this case, the U.S. Federal Government footing the health care bill for all Americans regardless of age. This would eliminate the need for private insurance (like Canada’s system).

This stands in contrast to The Affordable Care Act (ACA), which simply helped more Americans access the health insurance marketplace that is still serviced by private insurers.

While there are several derivatives of what a Medicare for All Plan would look like, the common theme among the Democratic candidates’ plans involves the federal government’s regulation of health care prices.

Proponents of a Medicare for All universe opine that government would be allowed to better-manage prices for medical care and prescription drug prices, while opponents argue that Americans should have the option to choose which health care plans they want for their families or, in the case of companies, their employees.

These naysayers also feel that by having the federal government directly set health care prices, innovation in health care would be stifled.

What Businesses Think

Richard Master is the CEO of MCS Industries, the largest producer of picture frames, poster frames and framed mirrors in the U.S.

You can find their products at major retailers including Lowe’s, Target, Walmart, Amazon, The Home Depot, and more.  While approximately 75% of MCS’ 775 employees now work overseas, increasing health care costs have motivated Masters to support a Medicare for All National Plan.  He is chairman of The Business Initiative for Health Policy (BIHP), an independent, non-partisan, public education and advocacy group focused on adopting Medicare for All in the U.S.

By allowing the government to manage health care prices, Masters argues that companies can focus on their core businesses and avoid the financial burden of providing health care to workers.

According to a recent interview in the “Kaiser Health News,” Masters does not view Medicare for All through the lens of “health care is a right, not a privilege”, rather he feels this single-payer system makes economic sense for businesses which in turn would help employees.

The Business Alliance for a Healthy California supports Masters’ stance, the alliance stated that approximately 300 small businesses in California now back a single-payer system and the number continues to grow.

Advertisement




Dan Geiger, the co-director of The Alliance, stated that larger businesses (i.e. Fortune 500 firms) have shown trepidation in joining the single-payer movement mainly because they want multiple options involved with choosing among various health plans for their workforce.

They view it as an employee attraction/retention tool. The U.S. Chamber of Commerce agrees with the sentiments of these larger corporations.

In a letter to congress dated March 18, 2019, The Chamber argues that the federal government should take actions such as expanding the use of Health Savings Accounts to lower out-of-pocket costs, repealing the health insurance and medical device tax, expanding coverage options via mechanisms like Association Health Plans, and improving the existing ACA exchanges via funding cost-reduction initiatives.

If things are at a stalemate in the U.S., can we learn from other countries?

Health Care from an International Perspective

Japan’s non-profit health care system, called the National Health Insurance Model, is a highly successful program where the government is the single-payer of a single insurance plan while providers remain private.

In many countries, such as Japan, hospitals and physician groups are generally required to work on a non-profit basis. If a similar program were implemented in the U.S., there would be the risk of a decrease in health care personnel since U.S. providers have higher profit expectations than other countries.

In Japan all citizens are required to enroll, and they receive free screening for several diseases (including prenatal care), and the only contributions made to health care costs are those that fall outside of a certain scope of service (at which point the citizen contribution is capped at 30%).

Nara Rodrigues, client manager, RCM&D

The government has tremendous bargaining power in keeping health care costs low in this model, and the program is highly successful with Japan having the second longest life expectancy in the world. Health care costs are kept at a low 8.5% rate of the country’s GDP (lower than New Zealand, Germany, the UK, and several other OECD countries).

Despite the general success found in Japan, several countries that have some variation of a Medicare for All model usually deal with escalated inefficiencies, corruption, and low quality of care. It is also true that most countries with single-payer models experience higher waiting periods to see a doctor, as evidenced at The U.S. Department of Veterans Affair – an example of universal health care in our country.

The Best of Both Worlds

Implementation of another health care model will face challenges at many levels in the U.S.; politicians, pharmaceutical companies, doctors, hospitals, and citizens will offer strong opinions.  Why can’t we offer Medicare for All along with the existing privatized option to U.S. Employers?

Many companies in the U.S. segment their branding, Marriott owns The Ritz Carlton and The Courtyard Inn and prices them accordingly.  From an employer point of view why can’t the traditional U.S. Health care Model be viewed as a Ritz property, while Medicare for All is viewed as a Courtyard?

The opponents of Medicare for All feel that innovation will be stifled in this model given the government’s control of health care costs.

Advertisement




Maybe a solution is having Medicare for All participating employers pay a tax called the “Innovation Incentive” added on their current payroll taxes.

This fee could be deposited in a pool from which the research & development divisions at health care firms can draw from to pay doctors and scientists for the development of groundbreaking treatments.  Marketing this as the “Innovation Incentive” leaves a better impression than simply a “tax” that Medicare for All opponents detest.

It is imperative to price this at an affordable cost for small companies, like MCS Industries.

Options can bring out the best in business, so imagine a world where both health care models adopt best practices from one another creating a stronger overall health care system. It will take decades to see how a two-tier system unfolds in The U.S. once it is implemented, but it is an action worth taking for the health of our citizens.

It could be just what the doctor ordered. &

Patrick Wright, an insurance and risk management intern with the Risk Cooperative, contributed to this article.

Les Williams, CRM, is Co-Founder and Chief Revenue Officer of Risk Cooperative. He holds a B.S. in Mechanical Engineering from the University of Virginia and an MBA from Harvard Business School. Nara Rodrigues is a client manager at RCM&D, which she joined in 2017, bringing extensive experience in professional liability, executive package and cyber liability insurance.

More from Risk & Insurance

More from Risk & Insurance

Risk Matrix: Presented by Liberty Mutual Insurance

11 Crucial Trends That Are Impacting the Construction Industry Today

Increased hurricanes, opioids, women workers and more are just some of the latest trends driving construction risk.
By: | November 1, 2019




The R&I Editorial Team can be reached at [email protected]