Mayor Pete’s Medicare for All Who Want It plan as flawed as Medicare for All

Mayor Pete Buttigieg is in hot water with progressives. At last week’s Democratic presidential debate in Ohio, he attacked Senator Elizabeth Warren for refusing to say whether her preferred brand of health reform, Medicare for All, would require middle-class tax hikes.

Soon after, a year-old tweet from the South Bend, Indiana, mayor resurfaced, in which he pledged his support for Medicare for All. The opportunistic mayor now says he prefers “Medicare for All Who Want It,” wherein any American could buy into a government-sponsored health plan. Mayor Pete claims his plan will give every American access to affordable coverage without eliminating private insurance or raising taxes on the middle class.

But that’s not true. A public option would cripple the private insurance market and eventually push all Americans into a single, government-run insurance plan. It’s simply Medicare for All in slow motion.

Buttigieg’s plan is trying to capitalize on public opinion. Nearly three in four Americans say they support a public health insurance option.

Here’s how his plan would work. The uninsured would be automatically enrolled in a new government-sponsored insurance plan modeled after Medicare. So too would low-income people in the 14 states that haven’t expanded Medicaid to those with incomes below 138 percent of the poverty line, under the terms of the Affordable Care Act.

Everyone else could choose to opt-in to the public option, which would be sold on the same insurance exchanges as private insurance plans. Even those who are currently insured — whether on their own, or through their employers — could drop their coverage and enroll in the public option instead.

Public options like Buttigieg’s are cheaper than private insurance for two important reasons.

For starters, they can reimburse doctors and hospitals at rates similar to Medicare’s, which are incredibly low. Medicare pays hospitals 87 cents for every dollar they spend caring for the program’s beneficiaries. All told, Medicare underpaid hospitals by nearly $54 billion in 2017. That year, private insurers paid hospitals 241 percent of what Medicare would have for the same services.

At the same time, Medicare doesn’t need to cover its costs. If it spends more on claims than it takes in premiums, it can simply draw on the U.S. Treasury to cover the difference.

Private insurers can’t compete with these artificially low rates. They need to set premiums that cover their expenses and don’t have the negotiating leverage to underpay providers.

As a result, people would flock to the cheaper public option plans. One study found that 40 million people would enroll in a public option after just one year.

As more people enroll in these plans, doctors and hospitals would see their revenues decline. To balance their books, they’d have to charge private insurance more. Insurers would pass those increased costs onto beneficiaries in the form on higher premiums.

Once that happens, still more people would go for the public option. Employers would also drop their increasingly unaffordable health benefits — and send their employees into the individual market. Most of those workers would choose the public option.

And the cycle would repeat. Eventually, private insurance companies would lose too many customers to stay afloat — and would go out of business. Americans would have no choice but to enroll in the government-run healthcare plan.

Buttigieg all but admits that’s his goal. He’s made it clear that “If private insurers are not able to offer something dramatically better, this public plan will create a natural glide-path to Medicare for All.”

Clearly, Buttigieg is just paying lip service to the notion of protecting private insurance. Of course private insurers can’t provide something “better” than the public option, when “better” means “cheaper.”

Mayor Pete is promising Americans that he can create a public insurance option without eliminating private coverage. But he can’t. Medicare for All Who Want It is no different than Medicare for All.

Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is The False Promise of Single-Payer Health Care (Encounter). Follow her on Twitter @sallypipes.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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