By Ken Terry, author of the recently released book Beyond Medicare for All: Cracking the Code of the Healthcare Affordability Crisis.
Approximately 63 million Americans over 65 are on Medicare. Unlike many younger people, these seniors have guaranteed healthcare insurance. Yet their access to healthcare is diminishing, and their out-of-pocket costs are increasing. For example, the percentage of doctors in primary care has dropped from a third to a quarter in the past decade.
Meanwhile, the standard Medicare Part B premium has jumped 40% since 2020. Unless something is done to fix the overall healthcare system, seniors’ healthcare will fall apart along with everyone else’s.
Medicare for All is not the answer. Although it would cover everyone, it would not control spending or increase access to care for those already insured. The problem with MFA is that it doesn’t address some key factors that have driven up health costs to unaffordable levels.
For example, MFA would not touch our current fee-for-service payment system, which incentivizes healthcare providers to supply more services rather than improve the health of their patient populations.
So, while MFA’s cuts in administrative costs would trim health spending by up to 10%, that would be a one-time saving, and fee-for-service would contribute to the resumption of health cost growth.
More Services from Hospitals and Doctors, Too
Similarly, slashing provider payment rates to Medicare levels across the board would simply prompt hospitals and doctors to ramp up the number of services they provide. Some providers would go out of business because of the revenue cuts.
What we need is a free-market alternative to Medicare for All that focuses as much on healthcare delivery as on how we finance it. In my new book, I propose splitting health insurance into two parts.
Competing primary care groups of a certain size—comprised largely of doctors liberated from health system and corporate employment—would charge subscription fees for all basic care, including the lower levels of specialty care. These fees, which would be paid by employers, consumers, and the government, would roll up to an annual budget for each group. The federal government would buy subscriptions for all Medicare beneficiaries and would split the cost with the states for people on Medicaid.
How to Change Health Insurers' Role
Health insurers would also play a key role in the system. They would offer what I call “major medical insurance,” although it is quite different from what that term used to mean.
Major medical would cover hospital care, post-acute care, and the more expensive types of outpatient care, such as cancer care, ambulatory surgery, and costly tests and drugs. The plans would cover everyone, including Medicare and Medicaid beneficiaries.
As with basic care subscriptions, the cost would be borne by employers, consumers, and the government. Major medical plans would compete to cover standardized benefits on an online marketplace in each area. They could offer some extra benefits to the affluent.
Population Health Management
By taking financial responsibility for basic care, primary care physicians would have an incentive to keep their patients as healthy as possible. By working in care teams with other clinicians and social workers and coordinating with specialists to manage chronic diseases, the primary care doctors in these groups could prevent illnesses from spiraling, decrease hospitalizations, and greatly reduce the cost of care over time.
How about hospitals? Because of their market power, the huge healthcare systems that now dominate many areas can charge very high prices. Today, their average charges to private insurers are about two and half times what Medicare pays them.
My model would follow the example of Maryland to eliminate these behemoths’ bargaining clout. Many years ago, with the help of the Centers for Medicare and Medicaid Services (CMS), Maryland began to require hospitals to charge the same prices for equivalent services to every public and private payer.
As a result of this all-payer rate policy, hospital cost growth slowed significantly in Maryland. Later, the state began negotiating global budgets with hospitals. These budgets covered all inpatient and outpatient services, incentivizing the hospitals to become more efficient.
My model would emulate Maryland’s pioneering experiment. Hospitals in every state would negotiate global budgets and would have to stay within them. But, in contrast with Maryland’s approach, I propose that those budgets cover the same services as major medical insurance, including hospital, post-acute, and high-ticket ambulatory care.
Dividing health insurance into two parts and placing primary care physicians in charge of basic care would greatly increase the efficiency and quality of our healthcare system. It would also slow health cost growth enough that out-of-pocket costs for seniors and other Americans could become relatively affordable.
About Ken Terry
Ken Terry is a veteran healthcare journalist with more than 30 years of experience covering healthcare policy, economics, Medicare, physician practice, healthcare reform, and value-based care.
He is the author of three books, including Beyond Medicare for All: Cracking the Code of the Healthcare Affordability Crisis, which outlines a practical, market-based blueprint to reduce costs, eliminate waste, and make quality healthcare more affordable for all Americans.
Terry is a sought-after expert on healthcare affordability and the future of the U.S. healthcare system. Here’s his latest podcast appearance.
