BE WARY OF THE MEDICARE-FOR-ALL SCHEMES
by Don Fredrick, ©2019, blogging at The Complete Obama Timeline
(Jun. 29, 2019) — Most of the 2020 Democrat presidential candidates support a “Medicare-For-All” scheme in which all 320+ million people in the United States (that includes 20 million or so illegal aliens) would be entitled to “free” health insurance from the federal government. A few of the candidates, reasonably concluding that the 150+ million American workers who currently enjoy decent (and in many cases exceptional) employer-paid health insurance do not care to give up those benefits, have said they would only support an expansion of Medicare “for those who want it,” while allowing those with employer-paid coverage to keep it. That concession might sound good to many voters (“I get to keep what I’ve got, while we help others”), but they fail to understand that such a plan would, in fact, ultimately result in the termination of most employer-paid health insurance plans.
Giving Medicare coverage to anyone who wants it would not directly and immediately mean the end of private group health insurance plans, but it would lead to that in the long run. It would be an eventual consequence, whether intended or not. Most of the Democrat candidates know that (and welcome a collapse of the private insurance industry). Many leftist media pundits know that too, but they are not about to make reality clear to the voters because their goal is to defeat Donald Trump, not enlighten the citizens. But why would an expansion of Medicare to include non-retirees threaten employer-paid group insurance? A common-sense example answers that question:
Imagine that your city has three large companies that manufacture widgets. Assume that Company A sells its widgets for $10. Company B makes a slightly better product and charges $10.25 per widget. Company C sells a widget of slightly lower quality for $9.75. All three companies enjoy decent sales, and each company has 500 employees. Assume also that all three companies provide group health insurance for their employees, and that coverage costs each company about $10,000 per year per employee.
Now look ahead to 2021 and assume the Democrats have held the House of Representatives and won the Senate and the White House. They eagerly pass “Medicare-For-All” legislation that allows group insurance policies to remain in effect but allows everyone in the nation to receive free Medicare coverage if they so choose, regardless of age. “Where is the problem?” you ask. People who like their employer-paid coverage would be allowed to keep it, while anyone who prefers Medicare (or who had no insurance at all) could get “free” federal health insurance.
Let’s put aside the (monumental!) question of where the money for the Medicare expansion would come from. (It would, of course, come from both higher taxes and the nationwide price inflation that is the inescapable consequence of increased federal deficits and the expansion of the money supply to cover those deficits.) Instead, put yourself in the shoes of the people who own and operate widget companies A, B, and C. That is where the common sense of people who run businesses comes into play—and it will quickly offset the lack of common sense among politicians.
Company A spends $5 million per year on employee health insurance (500 employees multiplied by $10,000 per employee). Its board of directors, seeking increased sales and market share, votes to terminate its group health insurance. “Why bother continuing that coverage?” the board members ask each other. “After all, all 500 of our employees can now get free Medicare coverage!” Company A terminates its group insurance policy, dumps its 500 employees into the Medicare system, and reduces its payroll costs by $5 million per year. Having freed up that revenue, the company lowers the price of its widgets to $9.25. Undercutting it competitors, Company A immediately sees its sales and revenue increase dramatically.
Companies B and C, of course, see reduced sales. Why? A portion of their sales have now gone to Company A. As time passes, Companies B and C continue to lose sales and lay off many of their employees. Company A, meanwhile, has used some of the $5 million in cost-savings to buy new and improved machinery that enables it to keep up with increased production demands without having to hire any new employees. The people laid off by Companies B and C are out of luck; Company A does not need them.
As time passes, Companies B and C closely examine their bottom lines, see the light, and decide they will also terminate their group health insurance plans. Why would they not do so? Company A has a $5 million per year operating expense advantage over them! If they do nothing, Companies B and C will continue to lose business, while Company A will continue to grow. Rather than put themselves out of business, Companies B and C follow the route taken by Company A, and suddenly every employee of Companies A, B, and C is without employer-paid group health insurance. They have all been dumped into the same “Medicare-For-All” pit.
It is incredibly naive to believe this will not happen. The only unknown is the pace at which it will happen. If that does not seem clear, change the scenario slightly and assume the Democrats pass legislation giving every American worker a new, free car every year. Does it not seem logical that every employer in America who has offered company cars for some of its employees would immediately eliminate that benefit? That the free car from the government might only be a Chevrolet while your company car was a Cadillac makes no difference. Your employer will almost certainly stop giving you a company car.
If Medicare-For-All were to become law, within a few years almost no one in America would be covered by an employer-paid group health insurance plan. Even if you are somehow unable to understand that, most of the politicians understand it. (The eventual collapse of private insurance plans is a feature of their “public option” and Medicare-For-All schemes, not a bug.) Any suggestion that “You can keep your plan” will be a lie—just as it was when ObamaCare was being shoved down the throats of the American people.
Interestingly, the politicians who support a Medicare-For-Anyone-Who-Wants-It plan are the same politicians who whine that some businesses (Walmart, McDonald’s, etc.) can “get away with” paying employees far less than $15 per hour (or whatever is deemed to be a “living wage”) because those businesses are somehow “subsidized” by the welfare benefits the government gives workers who are at the lower end of the wage-scale ladder. But an expanded Medicare program would do precisely the same thing. Using tax dollars to subsidize employee health care is no different than subsidizing employee rent with public housing or employee income with welfare checks. Many employers will justifiably ask, “Why should I spend a fortune on group health insurance for my employees when they voted for a president and a Congress that promised them free federal health insurance?”
Ironically, these Medicare-For-All schemes will significantly harm the voters the Democrat politicians rely on most: labor union members. The reality is that some of the most generous and popular group health insurance plans are those enjoyed by union workers. “Vote for me and I’ll see to it that you will lose the health insurance you love!” seems not to be the best campaign slogan. Yet most of the Democrats running for president are essentially saying just that.
Meanwhile, the workers dumped into Medicare will not be happy. Most Democrat politicians paint a rosy picture of their federal schemes, denying reality for the sake of votes. Senator Kamala Harris (D-CA), for example, has stated that many workers dislike their employer plans because the insurance companies require pre-approval for some medical tests and procedures. Her implication was that the Medicare-For-All schemes would have no such restrictions. That is, of course, nonsense. The existing Medicare system also has many similar restrictions. A senior citizen on Medicare cannot simply demand any test or procedure and expect it to be immediately approved and performed with no questions asked! A complaint about headaches does not mean a brain scan will automatically be approved by Medicare any more than it would automatically be approved by a private insurance company. (The sad state of journalism today is that the “journalist” who interviewed Harris did not challenge her on the issue.) The reality is that Medicare would be more in the red than it already is if there were no rules or restrictions. “Medicare-For-All” would not only be no better, it would probably be worse because the federal government simply cannot afford to give 320+ million people all the medical care they want whenever they want it. But at least with employer-paid insurance you have a fighting chance and can file an appeal challenging any denials of coverage. In fact, with a big employer on your side you may win your argument, because your employer can threaten to take its insurance business to another provider. But try arguing your case with a low-level government bureaucrat who has been ordered to deny as many hip replacements as possible because a corrupt and mismanaged federal system is more broke than your bones.