‘Medicare for All’ likely to keep private payers, but erode margins: Moody’s

By | October 20, 2019

As 2020 Democratic presidential hopefuls tout healthcare reform plans from beefing up the Affordable Care Act to “Medicare for All,” Moody’s, Harvard Medical School and others are weighing in on the cost and likely disruption to the health sector.

Their conclusion: Medicare for All could prove a significant threat to traditional insurers, but building on the ACA could push the nation close to universal coverage without extensive sector trauma.

A Medicare for All type system is endorsed by presidential candidates Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vermont, while a public option and further expansion of the Affordable Care Act has been championed by former Vice President Joe Biden and supported by other moderate candidates.

The reports agree that Medicare for All would not only be costly to implement, but could be a drag on profit margins throughout the healthcare sector. By contrast, an ACA expansion could achieve nearly universal coverage were it expanded in the appropriate fashion.

The grimmest of the reports came from Moody’s, which concluded that all but a limited public option would significantly erode margins for payers. Far more disruptive would be an expansive public option where even those with private health insurance coverage could buy in, or a single-payer system.

Although Moody’s acknowledged that “any enacted law would likely retain a role for insurers,” it concluded that “such an outcome would nonetheless require companies to alter their business models, which would be highly disruptive.”

The Commonwealth Fund/Urban Institute report examined a variety of options, ranging from expanding the ACA to moving to a single-payer system.

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The most cost-effective solution appears to be the expansion of tax credits to purchase coverage. According to the data, that would drop the number of uninsured or underinsured from 34.6 million to 6.6 million, a decrease of more than 80%. That would cost the federal government $ 161.8 billion a year, but cut national health spending by $ 19.1 billion per year.

By contrast, a single payer “lite” solution – where the ACA is expanded to all Americans and they pay no premiums, would only cut the number of uninsured down to 10.8 million, while costing the government $ 1.5 trillion per year. A complete single-payer program – Medicare for All – would eliminate all uninsured, but cost taxpayers nearly $ 2.9 trillion per year.

Meanwhile, the Harvard/Hunter College research, published in the most recent issue of the American Journal of Public Health, took on the presumption that a great expansion of the insured in the U.S. could dramatically skew utilization rates.

Not so, concluded the researchers, who not only scrutinized the impact of the ACA, but also 1966, the first year of operation for the historic Medicare and Medicaid programs, which covered millions of older and low income Americans overnight.

Unadjusted office visits after expanding Medicare dropped to 424.8 per 100 enrollees, compared to 426.5 per 100 in the years prior to Medicare being expanded. Surgical procedures dropped, to 6.7 per 100 from 7.0 per 100.

For those impacted by the ACA, office visits dropped to 372.1 per 100, versus 372.4, and surgical procedures dropped to 15.9 per 100 from 16.1. Those more likely to visit the doctor or undergo a procedure were again in lower income groups.

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“Projections of changes in utilization (and costs) for future reforms should consider the possibility that, for supply constrained services, increased use among newly covered individuals may be offset by small reductions among those whose coverage remains unchanged.”

The authors said the research suggests “that future coverage expansions may be achievable without an unaffordable surge in the utilization of physician care.”

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