The Simple Math of Medicare for All

Yesterday I had a discussion with a friend about Medicare.  I commented how superior my husband's new Medicare coverage was to my own employer-provided plan.  I then suggested that we needed to find ways to cover everyone, not just those over 65, with Medicare.  She responded appropriately, "but how would we pay for it?"  

Okay, so I'm a few years late with this post.  It could have come in the midst of the debate over "Obamacare", as his critics dubbed it.  But this has been simmering, bubbling up in my skull, since then.  I wanted to take the simplest possible look at government-provided health care:
  • How many Americans already get their health care from government?
  • What is the average cost of that to government?
  • What obvious savings are possible to increase the size of the pool?
  • How much more would it cost to increase the pool, providing basic coverage to all who want it?
This comes with the assumption that such coverage would be better than and less expensive than private insurance.  Some of that is explained in my previous post, Privatizing Medicare?  Already Done. 

I didn't want to complicate this simple arithmetic with the other issues that many espouse to reform the system:  overturning fee-for-service, supporting preventive care, making doctors public employees or other more complex factors.  I just chose to look at the simplest of the data about our current system.

Who Government already Covers

47.7 million Americans are covered by Medicare
53.6 million Americans are covered by Medicaid
5.5 million children are covered by CHIP
17 million people work for government (national, state and local).
          The average family size in the US is 3.14 people.  Since government plans typically cover whole families, that means 53.4 million Americans are covered by private employer-provided insurance policies paid for by government.
2.3 million prisoners are covered by prison-provided health care
1.5 million Americans are active duty military
1.5 million Americans are in the military reserve forces and receive medical benefits
7.8 million military veterans receive federal  medical benefits

Total Americans already covered by government-provided health benefits:  173.3 million

Total U.S. Population:  312.8 million

Clearly, government already provides health coverage for well over half of Americans.

Cost of Government-provided Health Care

Interestingly, Americans likely to have the most complex health needs are already covered by government.  The elderly, prisoners, soldiers and the very poor all suffer a disproportionate share of maladies.  Those left -- the other 140 million -- include the healthiest Americans.

Costs by program:

Program
Cost per Person
Individual Contribution
Medicare
$10,600
(25% of all expenditures are for end-of-life care)
$1200
Medicaid
$5,535
Varies by state
Children's Health Insurance Program (CHIP)
$1,455
Varies by state
Government Employee Plans
$9,072
(e.g. Oregon state workers)
0% - 30% of plan costs
Prisoners
$5,800

Soldiers and Veterans
$5,645
$230 per person for veterans

Some Obvious Places to Save

Medicare
There are two Medicare costs, both created by the 2003 health care bill signed by President Bush, that could be eliminated, substantially reducing per person costs:
  • Medicare Advantage:  Overpayments for these government transfers to private insurance companies cost an extra $1000 per person.
  • Prescription Drug Subsidies: These cost $62 billion per year or $1300 per Medicare beneficiary.
Eliminating both of these overly generous and unnecessary subsidies would save $2300 per person per year.  Medicare beneficiaries could still choose to purchase these benefits on their own from private insurance companies.  Actual Medicare costs per person with these savings and with the costs for end-of-life care subtracted (these are unique costs for the elderly not borne by other programs): $5350 per person

Prisoners 
The U.S. incarcerates more citizens than any other nation, including China.  Our rates of incarceration have increased astronomically since 1970, the beginning of the War on Drugs and especially in the 1980s as sentencing laws became stricter in the states.

The costs of keeping all of these prisoners certainly includes their health care but total savings, if we simply cut the numbers of prisoners in half (to 1990 levels) would be $24 billion.

What Would it Cost to Cover Everyone?

There are 50 million uninsured Americans.  There are just under 90 million covered under private insurance plans, either through their employers or paid directly to insurance companies.  Most of these plans carry high deductibles and high out-of-pocket expenses.

The average private employer pays $5000 per covered employee or $12,000 for family coverage (2005 data).  As of 2006, only 55% of private sector workers had employer-provided plans.  

Offering coverage similar to Medicaid or Medicare might cost the same as those programs, about $5500 per year.  On the other hand, it might cost less if the population left to cover were younger and healthier, as it most likely is.  But let's use the $5500 figure for the adults and the CHIP cost of about $1500 for children (26% of population).

Cost to insure 139 million additional people: 
  • $550 billion for the adults
  • $52 billion for the children
  • Total cost:  $602 billion per year WITH NO OTHER COST-SAVING MEASURES
Where the money could come from:
  • $101 billion = savings identified above
  • $325 billion = current employer contributions 
  • $167 billion = $100/month contribution from each of the 139 million people
These three simple things would nearly cover the entire additional cost.  But I think employers (businesses) are unnecessarily burdened for health care costs.  I would cut their contributions severely, to perhaps $100 billion.  So we need to "find" $234 billion and everyone in the country would have adequate coverage, not dependent on employers and not prohibitively expensive.  Of course, some might choose to maintain their private insurance instead, an option they certainly could have.  Most I suspect would not.

My choice would be to make corrections to the tax code to fill the need.  You might prefer another solution.  In any case though, it's hard to argue that we can't cover everyone.  We clearly can.

Summary
  1. 55% of Americans already have government-provided health benefits.
  2. $5500 is the typical per-person cost of that care, EXCEPT when the government contracts with private insurance companies (as for government employees and Medicare Advantage), which makes coverage much more expensive.
  3. Both Medicare and our criminal justice systems could offer up substantial savings and we are overpaying for medical coverage for the 17 million government employees.