For one thing, as Obamacare has shown, “people will be paying for it, not the government, so what’s the problem?” is not quite as simple as it sounded when you were saying it in front of a room of cheering supporters. For whom is it likely to be a good deal? Sick people. Medicare can adjust the buy-in premium to take account of this, but then next year, folks are going to be looking at the new higher premiums, and who is likely to opt in at that high price? The sickest folks in the insurance pool. Better adjust those premiums again …
Yes, it’s our old friend, adverse selection, which pops up whenever you build an insurance market without underwriting. Medicare is a government program, so it can’t death spiral out of existence. However, there will be considerable political pressure to set the premiums well below the expected actuarial expenditure on care for beneficiaries. So instead of a death spiral, you get a fiscal crisis in Medicare.
Yet here’s a measure of how badly thought out this idea of expanded Medicare is: Adverse selection isn’t even its biggest problem. A far bigger problem is what this might do to hospital budgets. Why? Because Medicare doesn’t necessarily pay enough to keep those hospitals running.
Deep in the weeds of health wonkdom, a long battle has been going on over whether — and to what extent — Medicare controls its costs by offloading them onto private insurers, a phenomenon called cost shifting.
An alternative: The Bill To Permanently Fix Health Care For All. I especially like this: “All customers must be billed for actual charges at the same price on a direct basis at the time the service or product is rendered to them.”
Related: The Healthcare Confusopoly.