Health Reform

Where will funding for ‘Medicare for All’ come from?

Democratic Presidential candidates have a number of proposals on how to reform the health care system, including “Medicare for All” proposals. The goal of these reforms is to improve access, lower costs (both premiums and out-of-pocket) and improve quality. Achieving all these goals is not easy. Even access was improved and costs fell for patients, where will the funds for this come from?

Joe Paduda of Managed Care Matters argues that this would come from either higher taxes or lower payments to physicians, hospitals and other providers:

the average family with one member in poor health “pays” about $23,500 for healthcare thru direct payments, insurance premiums, what their employer pays for insurance, and taxes for Medicare, Medicaid, and other government healthcare programs.
The good news is about $5,000 of that would be stripped out; that’s my best guess at how much administrative expense would be eliminated if healthcare providers and payers didn’t have tens of thousands of people on payroll fighting each other.
Oh, those tens of thousands of people will lose their jobs.

Mr. Paduda makes an important point. Even if health reform/Medicare for all were implemented in an effective way, even if expanding Medicare would maintain the quality of care, even if fraud and abuse do not increase, even if access to care/provider waiting times do not increase dramatically, there will be losers to any reform effort.

There is no free lunch.


  1. I have a proposal for healthcare reform that is enactable, will reduce cost at the same time improve quality and access. It is funded through a federal VAT tax which would fund HSA accounts each eligible individual would use to purchase a healthplan. The benefits would be defined by the HHS department and the HSA federal ccntribution would cover this benefit plan. The copays and benefit plan would start out mirroring Medicare. The HSA contribution would be set at the current 18% of GDP now devoted to healthcare but would be reduced over time to be comparable to other countries with universal healthcare around 10-12%. Technological in the form of AI, robotics , telemedicine, biomedicine and other forms of technology which will enable the healthcare industry to improve quality and access while reducing the cost and providing care to all. This is enactable because all parties to healthcare gain something from this proposal. I can explain more about this proposal if anyone is interested.

  2. It’s obvious that if someone spends less money someone else makes less money. The important point to make, however, is who is making less money? The insurance industry would like everyone to believe that is is their thousands of (presumably well-paid and happy) workers. Drug makers want everyone to believe it is their innovative scientists. And some providers say it is the hard-working doctors and small hospitals (with their well-paid, happy workers) who will lose out. There is another scenario. What if there is a lot of excess in our healthcare system? Money being spent where it doesn’t need to go. Like to insurance companies that spend 15% of premium dollars on administrative costs to pay to compete with one another while Medicare pays less than 2% (including the cost of paying private insurance companies to manage their billing)? What about all those workers? Private insurance companies will need to shift more of them to help take care of Medicare billing. And Medicare for All will open more opportunities for other work (such as home healthcare). Is there no excess cost in the drug industry? They have among the highest profit margins of all industries. They can afford to negotiate lower prices without sacrificing any workers. How about providers? Their fees do not need to be lower. They will get more money for Medicaid patients, no longer have any unreimbursed care and may get reimbursed for services not now covered. They will also have lower expenses because of the decrease in their administrative costs under a single payer system. There’s also a lot of excess in provider payments. Some of them charge excessive fees compared to their peers and some overutilize services, especially those who own facilities they refer patients to. This can be better controlled with large savings under Medicare for All. Yes, some providers will get paid less, but only those who are receiving excessive payments compared to their peers. It’s these kinds of savings that can result in a win for society without harm to the economy. Medicare for All can be paid for, whether through taxes or premiums, at a lower cost to individuals and government than our current, unwieldy system. And if people really like their current insurance, there is no reason they can’t keep it. After all, we need private insurance companies to handle Medicare claims. All private insurance, though, just needs to be secondary to Medicare. A simple solution.

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