Reading Elizabeth Warren’s Healthcare Plan, Part 7

Part 1: Quotes directly from Elizabeth Warren’s official website about her healthcare plan, from which I am drawing all of my information for subsequent posts

Part 2: Reviewing her plans for dealing with pharmaceutical prices

Part 3: How she will “improve the ACA” to get her transition to M4A started

Part 4: All the other things she’ll do before starting the transition to M4A, including some Medicaid changes, increasing access for rural and underserved patients, making antitrust enforcement stricter, and a variety of other incremental changes

Combine all the details from parts 2, 3, and 4, and you have the most likely scenario of how the healthcare system will end up with a Warren administration!

Part 5: How she will transition to M4A, which is mainly by lowering Medicare eligibility to age 50 and then offering a Medicare “public option” for people ages 0-49 that pretty much anyone can opt into

Part 6: A description of what she would have M4A look like based on the details she’s shared on her website

This is the final installment of my series on Elizabeth Warren’s healthcare plans. Let’s talk a little bit about how the healthcare system would do with a M4A as she has described it.

The first thing to note is that it will be simple, especially after all cost-sharing requirements are phased out. Everyone is covered, nearly all providers in the country will be in network, and there will be no confusing coverage issues or cost sharing issues. I love simple, especially because complexity in our current system is such an insidious and ubiquitous cause of waste.

Not only will it be simple for patients, but also it will be simple for providers. They only deal with one insurer, one price for each service, one set of coverage rules, one form for prior authorizations, etc. This will certainly contribute to lower administrative costs (a huge problem), but it will be in a zillion ways that are hard to predict until we see it happen.

People commonly voice to me this concern about a lack of cost sharing: “Won’t this mean people will run to the doctor every time they have a cough, so they’re going to drive up total healthcare spending a bunch because of all these unnecessary services?” Yes, people will have a lower threshold for receiving care. The Rand Health Insurance Experiment showed us that long ago. The thing is, people don’t know in advance which services that they’re seeking out are necessary and which are unnecessary, so getting rid of cost sharing will also get more people care that they actually need. There’s a theoretical benefit here that disease will be caught earlier when it’s cheaper to manage, although I haven’t seen evidence that bears that out. But the real issue with eliminating cost sharing is explained here.

Let’s move on to total healthcare spending to see what this single-payer system will do about that. Experts disagree on whether/how much this plan would decrease total healthcare spending, but remember that there’s a current level of spending and then there’s the long-term trend of spending. My guess is that the level of spending would go down a little bit due to the greater simplicity, even with more people covered and more generous benefits. But what about the trend of spending?

We will still have an aging and progressively more obese and sicker population. We will still have continued medical innovations that allow us to do more things for more people. Can you see that, even if we lower our current level of spending by implementing M4A, our spending trend is still going to grow faster than our GDP? How would Elizabeth Warren combat that?

The short answer is by administratively lowering prices–globally if necessary, but mostly via provider-specific price lowering according to “the progress of provider adjustments to new, lower rates.”

I love simplicity, but I equally despise administrative pricing, especially in this fashion that smacks of Soviet price controls. She seems to be proposing to “reward” a provider that does a good job getting costs down by giving them less money. What incentive does that create? This is going to get gamed like crazy.

And when providers–who have no direct control over their patients getting older and fatter and sicker–are required to deliver more care to these people (thus pushing up total healthcare spending), she will punish them by imposing global rate cuts. Or, she will try. That will be the true test of the power of the hospital and physician lobbies.

What will happen next? Some new reform will come along to solve the unsolved spending crisis, and we’ll be back to trying to overhaul our system.

If our country chooses M4A, so be it. I, as an individual, have very little control over that. But if we’re going to do it, maybe I can have some small influence on getting us to do it properly. Like I’ve said before, everything depends on how you implement a single-payer system to determine the sustainability of it. And I’ve already written about what needs to happen for it to be successful. That’s the purpose of my Building a Healthcare System from Scratch series, and I’ve also shown how the principles from that series would apply to an optimal single-payer system.

So, to conclude this series, I will say that Elizabeth Warren’s vision for M4A has some things going for it from a design standpoint, and her plan to get us there is very clever, but her legacy will be doomed to fiscal failure probably within a couple decades if she doesn’t also set up the mechanisms that are required to solve the spending trend problem.

2 thoughts on “Reading Elizabeth Warren’s Healthcare Plan, Part 7”

  1. series constitutes a digestible, thorough probe into the harsh realities of health care delivery and it’s imponderable correctives. As such maps out the critical considerations, that must be addressed, however unlikely. Therefore will serve as evaluation guide to whatever happens or doesn’t. A terrific tool.

    1. Your unique writing style is impossible to replicate, so I knew it was really you. Thank you for the kind words!

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