The notion that a country can pay LESS for healthcare and get BETTER outcomes is not theoretical – it is demonstrable. Nearly every western country pulls off this feat vis-a-vis the US every year. The notion that government-run health insurance can outperform private insurers is likewise NOT theoretical, but demonstrable, both between and within countries. Other countries’ publicly financed healthcare systems beat the US privately financed system, as measured both in lower costs and longer lives. So there’s no need for ex ante theorizing – we’re left to the task of explaining post hoc why US private insurers get outdone year-in and year-out.

Medicare (public) beats Medicare Advantage (private), no matter how you measure it. Medicare has lower costs, slower cost growth, lower overhead, and even has better outcomes. Medicare Advantage’s net cost to taxpayers has been estimated at about $10 billion per year – that’s the extra amount that Americans end up paying simply because 30% of seniors are enrolled in Medicare Advantage instead of conventional Medicare. And CBO projects that the situation will only worsen over time, as Medicare continues to do a far superior job at containing cost growth.

But Medicare Advantage has become big business for insurers, who use a fraction of insurance premiums to lobby Congress to keep the party going. Lobbying and advertising costs, incidentally, are not counted in the overhead estimate for private insurers, which run about eight times higher than overhead for traditional public Medicare.

The solvency of Medicare’s trust fund is not about health or economics, but politics. That insurers are quicker to jack your premiums than politicians are to fund Medicare is a matter of cultural idiosyncrasy, not the reality of paying to heal the sick. Americans lay out about $8000 per person per year on health care – double the OECD average. Conservatives would have you think that people prefer paying $8000 in fees and premiums to insurers and providers, instead of $4000 in taxes to the government for the same services. Given all that we know about public versus private health insurers, an all-public system – Medicare-for-all – would almost certainly have lower costs and better outcomes than the current mostly-private system.

Surely there other factors that partially explain inferior health outcomes in the US. Relative to other westerners, Americans are more likely to be obese, poor, drive without seatbelts, own guns and abuse drugs. But they are also less likely to smoke, and more likely to exercise. Observing, for instance, that even Americans who are not obese live shorter lives than their non-obese counterparts abroad, the most comprehensive study on point concludes that the US health care apparatus is itself one likely partial explanation for lower US life expectancy.

The ACA is a step in the right direction, in that it will bring insurance to many who previously lacked it. But the ultimate goal should be Medicare for all.

 

Refs:

big report (300pp+): obssr.od.nih.gov/pdf/IOM%20Report.pdf

report brief (4pp): http://www.iom.edu/~/media/Files/Report%20Files/2013/US-Health-International-Perspective/USHealth_Intl_PerspectiveRB.pdf

http://www.thefiscaltimes.com/Columns/2014/04/16/Medicare-Advantage-Isn-t-Reducing-Health-Care-Costs

http://healthaffairs.org/blog/2011/09/20/medicare-is-more-efficient-than-private-insurance/

http://www.pnhp.org/news/2013/february/setting-the-record-straight-on-medicare%E2%80%99s-overhead-costs

http://en.wikipedia.org/wiki/Medicare_Advantage

http://www.commonwealthfund.org/Publications/Issue-Briefs/2008/Sep/The-Continuing-Cost-of-Privatization–Extra-Payments-to-Medicare-Advantage.aspx