Plan B for Health Care Reform: It’s Called “Medicare for All“

My colleague, Bo Cutter, has noted the likelihood of continued challenges to health care reform in the wake of the recent Florida State Supreme Court decision to invalidate the entire health care bill. Frankly, the legal attacks on the bill, even if driven by highly suspect and selfish motives, are unsurprising. They represent the inherent flaws of a bill that entrenches private insurance as the basis for our health care system.

Randy Wray and I have argued previously that the health care reform plan represented primarily a huge and unprecedented mandate to benefit private insurers. Under the new “reform,” 50 million people are being told they must turn over their paychecks to private companies. Of course this was bound to lead to court challenges. And it is hard to fault the Virginia and Florida courts for rejecting the mandate. The auto insurance analogy that has been deployed in favor of the mandate is flawed because NOBODY is forced to drive a car.

If we had wanted incremental improvements to HEALTH CARE there are nearly infinite combinations of small policy changes we could have pursued — without involving insurers at all. And Dems celebrating this great victory by Wall Street were both laughable and hugely disingenuous. After TARP and the Dodd-Frank “financial reform” bill, health care reform represents yet another huge giveaway to large businesses whose 13 percent share of GDP (and the corresponding economic rents they extract) should have been vastly curtailed. (But hold on, it’s only a matter of time before they turn Social Security over to Wall Street.) The Obama administration’s health care reform plan is largely a Private Health Insurers Bailout Bill (HIBOB).

As radical as the Florida State Supreme Court decision appears, there is some merit to the decision given the fact that, perhaps through sloppy drafting, the “severability” clause was not included in the final bill, making it much easier for a court to strike the whole thing down. In fact, US District Judge Roger Vinson made precisely this point in his decision: “Because the individual mandate is unconstitutional and not severable, the entire act must be declared void.

The alternative of simply banning the individual mandate is a death spiral for the insurance companies’ profit which, given the complexion of this corporatist administration and Congress, would probably mean yet another industry bailout. I would argue that was the whole intent behind the current health care reform plan in the first place. Health insurers were losing premiums because employers were dropping coverage (in part because they could not compete, since no comparable country uses private insurance to provide health care). Healthy individuals were dropping out because no reasonable calculation could show insurance to be good value for the money.

And not just healthy young Americans: If you are single and have no chronic conditions, you are far better to pay out-of-pocket (UNLESS your employer pays most of the premiums and will not give you wages instead). Eighty percent of health care costs are due to the 20% of the population that is unhealthy and perhaps unlucky. If you can make it to age 65 without chronic conditions (you don’t smoke, are not obese, were not born with too many preexisting conditions, and so on), it is quite rational to avoid health insurance. And if you get extremely unlucky, you do not have to have health insurance to get some kind of health care. Sure, it is probably going to be inferior — but it could well be adequate. And in any case, you might not have that much faith in traditional medical approaches, anyway.

But insurers were terrified. They could see the writing on the wall. Hence, they went after Obama to get a HIBOB. Force healthy people to pay premiums. Yes, they knew there would be a trade-off; they’d have to take some unhealthy people. But giving them insurance IS NOT THE SAME THING as paying for their care. So they agreed to accept some pre-existing conditions but never agreed to actually pay for treatments for those conditions. And they won’t.

Don’t be surprised if the Roberts court throws the whole bill out. This is probably the most pro-corporate Supreme Court in decades and the Florida decision has effectively opened the door politically for the Supremes to do precisely that. That will create a huge political uproar, probably not unlike the political reaction engendered when much of FDR’s New Deal legislation was ruled unconstitutional by the Supreme Court. Roosevelt’s subsequent threat to pack the court does seem to have focused the minds of the Supremes, who mysteriously proved considerably more pliant in subsequent years.

There are obvious and vastly superior alternatives: Medicare for all has been suggested and that would represent a good start. Medicare is not really an insurance program, but rather a universal-payer, pay-as-you-go system (there is no way to stockpile medical services for future use).

An earlier version of the Senate’s proposed health care legislation featured a Medicare buy-in for people under 65 — a feature that remains doable despite today’s political constraints. This “public option” would provide more cost control (by competing with the private insurance companies), generate additional savings in Medicare (because you would be “risk pooling” younger and healthier Americans with the most aged and infirm, who traditionally absorb the highest proportion of our medical costs). It also would help to solve the problem of denying treatment based on preexisting conditions, expands the risk pool of patients, and enhances the global competitiveness of U.S. corporations (because why, in contrast to every other country in the world, should US corporations have health care as a marginal cost of production?). Thus, a Medicare buy-in would bring the U.S. health care system closer to the “ideal” low-cost, universal (single-payer) insurance plan. Highly unlikely to occur, but if the Roberts court does force us back to square one, shouldn’t we try to get it right this time?

Marshall Auerback is a Senior Fellow at the Roosevelt Institute, and a market analyst and commentator.