New Study Shows Medicare for All Would Save US $5.1 Trillion Over Ten Years

[grantcart]

111. Its not 3% and its not 20% and insurance companies cannot "declare certain things are costs"

1) Declaring certain things are costs

Let me explain the difference between "gross profit" (or for the health care industry "Medical Loss Ratio) and "net Profit".

Gross profit is everything besides direct labor, direct materials and direct expenses. That includes overhead, indirect labor, and net profit.

The gross profit for the health industry is now either 15% for some plans or 20% for other plans, Everything else is what is paid to the producers of the health care service (doctors, nurses, hospitals, etc).

The insurance company gets either 15/20 the more that the "declare certain things are costs" then the less profit they would get. Their accounting is not like other businesses where additional "costs" would lower taxable income. The more costs that they declare the less net profits for the shareholders.

2) There is no 20%. There is either 15/20% which probably evens out to about 17%.

While some of Medicaid is run completely by the government there are large parts supplemental b, c and d that are run on the same medical loss ratio as Medicare so that there would be 0 savings in making it Medicare for all because the Medical loss ratio is the same.

When you factor that some of Medicare is run at the same medical loss ratio then the savings you will get from the difference in Medical Loss Ratio from only part A has to be averaged with the other parts that that have the same MLR as the current system has. Estimating that part A accounts for 70% of total Medicare expenditures a reasonable formula for the percentage of savings on the total Medicare expenditures would be

17% X 70% would equal 12%

A reasonable estimate on the total current Medical loss ratio for plans that would be converted to Medicare would not be 15%, 17% or 20% because a significant part of Medicare currently uses a Medical Loss Ratio at the same rate as non Medicare health providers.

A more realistic number would then be 12%

3) The cost of Medicare total Medical Loss Ratio is not 3%

That is the cost of their billing services which only accounts for some of their direct costs.

What it doesn't include:

a) Client introduction and account management services:

That is handled by the Social Security Administration and it means that the SSA has to spend additional money that is directly related to performing key services for Medicaid

b) The cost of the loss of prepaying for premiums. Medicare is not free. You are prepaying for it and that money is getting a 3% return for SSA. That is a cost that you pay because if you had a personal bank account and accumulated the interest (which I am not advocating) that income would be yours. For a fair comparison of actual costs the loss of interest income from that money that is paid over decades should be included.

c) Account management, again all of this is done, at additional cost by SSA

d) Premiums paid for no service. SSA/Medicare are social insurance where everyone pays. Individual insurance is you pay and you get the service. Not everyone who pays into SSA/Medicare is going to get the services they paid for. My father died at 58 and although he paid into Medicare for decades he received no service. That doesn't happen in individual insurance.

If we are going to have an honest comparison in the real costs then this payment for no service needs to be added to the Medical Loss Ratio of the social insurance. In individual insurance there is no situation of clients losing their premium value because they died. Once the client passes away the insurance is terminated.

(Noting the costs of premiums paid for those who don't get the benefit because they die before eligibility doesn't imply that the system is not fair, it is, but if we are going to have an honest reconciliation they must be included)

I would say that a very low estimate of these "hidden" costs of Medicaid would reach about 3%.

If we round down we can say that a more accurate real cost of Medicaid would be 5%

4) A more realistic estimate on the savings on overhead or Medical Loss Ratio of converting all of non Medicare plans to Medicare then would be around 12% minus 5% or something between 7 - 10%.

Is that enough of a savings to make the change?

Absolutely but if we don't make structural changes to how the money is paid to the actual health care side it won't be enough of a savings.


Going from individual health care to Medicare for All will provide only modest reduction in cost and little improvement in outcomes

If we look at a comparison between the US and the Canadian system we can see that a more fundamental change is necessary to control costs and improve outcome (meaning healthier and longer lives)


here are the facts:

US Canada

Per Capita Cost $ 9,892 $ 4,753

Percent of GDP 17.9% 10%

Average life expectancy 79.3 82.2

Infant mortality 6.5 4.9
per 1000 births


What these figures show is

1) The difference in cost is much greater than either the 20% savings you keep referring to or the adjusted 10% that I document. A 20% reduction in US costs would result in a reduction to $ 7,900 per capita cost and a 14.3 % GDP while a 10% reduction in US costs would be $ 9,000 and 18%

2) In other words changing from individual insurance to Medicare for All will still mean that we are paying 40% more capita and in GDP percent than Canada

AND NOT GETTING THE SAME OUTCOMES

3) This other discrepancy between Canada and the US has nothing to do with the kind of insurance system we have but in how the care is delivered:


The difference between fee for service and fee for care

Fee for Service

The US system is based on paying the doctor for every activity they do, the more they do the more they get paid.

As I am a diabetic I can tell you that a US doctor is going rush in and start ordering a bunch of tests AC1H, check for eye damage, etc etc. Compare results with last visit, Ask if you want referrals to dietician, counselling etc. Then as quick as possible schedule the next visit and go through the same check list and order prescriptions.

Lets say that all of these Dr related activities cost $ 5,000 over a year because 4 visits and a ton of tests and referrals are made (in which the doctor gets paid on each service)


Fee for Care

Under a Fee for Care system a reasonable cost is set for typical patient care. In this case lets say a 60 year old diabetic patient slightly overweight, OK, 40 pounds overweight.

The national health care system determines that a reasonable fee for an average patient fitting these particulars is $ 2,500.

Now the incentive has changed from doing a lot of things to getting the patient healthy. The first meeting with the doctor might take almost an hour during which he asks about daily physical exercise, diet, etc. Why would the doctor want to spend so much time with the patient? Because he wants to get the patient healthy so he doesn't return so often. In that way the doctor will, over the long term, be able to see more patients and make more money.

We know that it works because Canada is spending less money per person and getting better outcomes in key areas like life expectancy and child mortality.



So is transforming from individual health care to Medicare for all worth it? Yes but it will require 60 Senators and the President to fight with the health insurance industry.

Even if there were no savings I would argue that it is worth it because it establishes a permanent benefit that is simpler and will get benefits to people faster.

But what is also needed are changes in how the fees for service/care are made, and we can make those changes now under the ACA, which has already allocated funds for developing trial uses of it.

Changing to Medicare for All is a good goal but it will not bring us the same cost structure and outcomes of the Canadian system, that requires changes on how the 85% of the health insurance costs are spent.