The most important issue facing the Democratic Party in this election campaign is healthcare reform. The US spends far more per capita on healthcare — on average, twice as much as other wealthy nations. Worse yet, among these nations, only the US lacks universal healthcare coverage with the total number of uninsured estimated to be about 30 million people.
With just about all of the Democratic candidates advocating some sort of universal coverage at a lower price, the devil is in the details!
Some want to keep our private insurance system and improve upon it.
Some want to convert to all public insurance.
The rest are advocating a combination of both.
The choice of which path to take is a source of major controversy with the moderates fearing that if the party nominates someone from what they feel is the crazy far-left (See: Sanders, Bernie and Warren, Elizabeth) advocating taking away all private health insurance, reelection will be delivered on a silver platter to Donald Trump.
Maybe we need to take a dispassionate look at both public and private insurance to sort this all out. As we will see, they are quite different!
Public insurance (such as Medicare in the US for those 65 and over) is the government acting as one giant insurance agency handling all claims and payments — hence the term single payer. This is provided as a service to its citizens with no profit motive. The estimated overhead costs for Medicare in the US is around 2-3%.
Private insurance in contrast is a for-profit business. Like any for-profit business, the primary reason for its existence is to make as much profit as possible for its shareholders. This by itself creates a conflict of interest with its policyholders in that there is an incentive to deny as many claims as possible to maximize profit. The estimated overhead costs vary among insurers but around 15% on average appears to be in the ballpark. Indeed, it was deemed necessary that the Affordable Care Act (Obamacare) include its so-called 80/20 Rule to limit private insurance overhead on the policies it offers to no more than 20%.
With the US standardizing on private health insurance and everybody else standardizing on public insurance (or heavily regulated private insurance), this alone would explain a lot of the difference in our per capita healthcare costs.
But there's more! The administrative costs of doctors and hospitals dealing with the labyrinth of individual private insurance companies can be astonishingly high! Moreover, a giant public insurer like Medicare in the US can better negotiate prices with healthcare givers giving better control over costs. But because of a sweetheart deal for Big Pharma, US Medicare cannot presently negotiate prescription drug prices. An improved version of Medicare can certainly address this problem.
This leads us to a very important conclusion: Because of the way each is inherently structured — public and private insurance cannot compete head to head!!
Let's put this another way. If I am selling a product for my livelihood, I have to include some profit in the selling price. But if my competition is selling the same product at their cost — I cannot compete against that!
So this pokes a giant hole in the plans that propose a mix of public and private insurance.
In effect, this is a political straddle being used by some of the candidates. To keep only private insurance will clearly be seen as not progressive by Democratic voters. But to take away all private insurance and convert it to public insurance is seen by many as too far crazy left. So the 'safe' moderate position is to keep private insurance for those who want it and offer a so-called public option to buy into Medicare for those who want that. But for reasons explained above, this would also effectively put private health insurance out of business.
It should be noted that when the Affordable Care Act (Obamacare) was first legislated, many wanted a public option to be included. But the private insurance industry fought this with all of their might knowing that there is no way they could compete with public insurance. So the public option for the ACA was killed. It is certain that the mixed plans with public and private insurance will meet the same fierce resistance from the private insurance industry as the plans that seek to eliminate private insurance outright.
So by process of elimination, the only straightforward way to both dramatically cut healthcare costs while providing for universal coverage (like the rest of the industrialized world) is a pure public insurance system. One can object that it may be politically toxic but if we are really serious about reforming American healthcare, this is our only effective choice. Presidential candidate Pete Buttigieg was right when he said at the most recent debate that whether a far-left or moderate plan was offered by the Democrats, it would be equally smeared by Republicans as being crazy socialist. But can the Republicans really make an issue of Democratic attempts to improve healthcare when their alternatives have been little more than taking away Obamacare with nothing to replace it? Not surprisingly, the number of uninsured is going up again.
But in the interest of completeness, I have to address at least some of the prominent objections.
Won't expanding public insurance to all require an increase in taxes? Yes, but if the savings in health insurance premiums more than offsets the added taxes, that's a net win for the taxpayer! If the other countries with public insurance have much lower healthcare costs than we do, this is more than ample proof that their system works! In fairness, other countries have their flaws and sometimes frustrations with their healthcare systems. Despite that, it's hard to imagine any other country that already has universal coverage wishing they could adopt the American system the way it is now.
What about those who are happy with their private insurance obtained through their employers? We would have to demonstrate to those people that the public plan would be at least as good as what they have - which in most cases we should be able to do.
That aside, there are many disadvantages to our peculiar linking of health insurance and those we work for. Here are some:
Lose your job, lose your health insurance. In addition, there are far too many Americans who hold on to jobs they may actually hate because they don't want to lose their health insurance.
Companies can change insurance companies from year to year. Your present doctors may not be available in the new insurance plan offered.
Health insurance from an employer is not really free. It's part of the total compensation package. If the employer no longer had to pay for health insurance, at least some of that money may be available as additional salary.
Health insurance also has to be built into the price of the product or service that an employer offers to the marketplace. For example, Ford estimates their total healthcare costs for 2020 will top $1 billion. Surely this has to put Ford along with other US manufacturers at a price disadvantage compared to cars assembled outside the US where there is public insurance. This in turn creates an additional incentive to move manufacturing away from the US — as if we need one.
Finally, it is interesting to note that more and more US companies are already bypassing private insurance for their employees, instead choosing to self-insure and use the insurers only as administrators.
Although private insurers appear to be little more than unnecessary middlemen in all of this, one can expect them to fight to the death to keep their share of the healthcare dollars they have been skimming from the top all of these years. Admittedly, making changes in the short run may well be impossible in the present political climate. But if we play the long game and if our new (hopefully) Democratic president uses the bully pulpit effectively to persuade the public, there is hope for someday in the future. Let's just hope it all happens in our lifetimes!
