COVID‐19 highlights one of the major problems with America’s hybrid arrangement for financing health care. While the Affordable Care Act (ACA) improved financial access and reduced racial disparities in coverage,^1,2 it has proved inadequate in the face of the pandemic’s disruption of employer‐sponsored insurance (ESI). The number of uninsured persons, almost 30 million in 2019, jumped by 5 million or more in spring 2020.^3,4The ACA also cannot do much to control private health care spending. As deductibles and coinsurance rise, tens of millions of insured Americans face a growing share of rising total costs. In 2018, an estimated 42% of those with individual insurance and 28% of those with ESI met the Commonwealth Fund’s definition of underinsurance.⁵

Decreasing coverage, climbing costs, and the mounting public anxiety about both may well reenergize serious health reform. When the legislative standoff that has blocked improvements to the ACA ends, reform should not only improve enrollment and benefits but actually make care affordable, that is, both adequately subsidize decent coverage and control the total cost of care. Fortunately, the foundation has been laid for ambitious reform without major disruptions.

Although the ACA established a framework for achieving near‐universal coverage, premium subsidies have not been adequate, and counterattacks by Republicans have dented the structure. Linda Blumberg and her colleagues at the Urban Institute proposed a package of fixes for the ACA,⁶ many of which have been incorporated into both HR 1425, the Patient Protection and Affordable Care Enhancement Act, and President‐elect Joe Biden’s campaign proposals.⁷ The ACA’s expansion of Medicaid eligibility has proven very effective in the 34 states that are participating.⁸ With sophisticated ballot campaigns for Medicaid expansion in 10 holdout states—some of which have already succeeded—and full federal funding for states newly expanding Medicaid, millions more people would be cut from the uninsurance rolls.^9,10 To make the ACA’s Marketplace coverage decent and premiums affordable, Blumberg and colleagues propose increasing the ACA’s premium tax credits so that no household would pay a premium of more than 8.5% of their income for the benchmark plan and increasing that benchmark from covering 70% to covering 80% of expected claims. They would also restore tax penalties for the individual mandate and add a federal reinsurance program, autoenrollment, and a public option.

The incremental federal outlays for these fixes would be relatively modest. Blumberg and colleagues estimate that these enhancements (Scenario 4) would have increased 2020 federal outlays by $45.6 billion.¹¹ The Congressional Budget Office’s projection for HR 1425 is slightly higher, nearly six hundred billion over 10 years.¹² As Sherry Glied pointed out, “What is impressive is how far these relatively modest proposals could take us . . . bring[ing] the national uninsurance rate among non‐elderly legal residents of the US down to 3.1 percent, counting those eligible for Medicaid as effectively insured.”¹³

Controlling health care spending is a tougher challenge, one that has eluded US health policy for more than a half century. However, as I describe later, Medicare Advantage could be deployed to invite most privately insured Americans into good, truly affordable coverage without disrupting existing sources of employer funding. To understand how, it is important to recognize that Medicare is no longer simply a public program but a hybrid that includes a robust private segment, Medicare Advantage (MA) health plans. MA plans now cover 36% of beneficiaries, continue to grow rapidly,¹⁴ and offer many of the advantages of social insurance with considerably more flexibility. They could be adapted to enlarge benefits and provide a peculiarly American response to relentlessly rising health care costs.

Simply matching increased premiums with increased tax credits, as the ACA does, is, at best, a band‐aid solution. Sooner or later, we must address the underlying driver of runaway costs. That driver is the high prices that many medical providers are able to extract from private payers. Most advanced medical economies address this with some form of rate regulation or administered pricing. We should deploy an equally effective, but far more flexible, alternative: private MA plans.

Popular concern about health care costs has grown in recent years. For most of Barack Obama’s presidency, an annual poll of public priorities showed that some 60% of the public viewed medical costs as a middling priority, behind five or six more important policy issues. But in each of the last four years (2017 through 2020), slightly more than two‐thirds of respondents named medical costs as one of their top priorities, slightly behind the economy or terrorism. Importantly, a majority of Democrats (80%) and Republicans (52%) agreed on this.^15,16 (Since the latest annual survey was conducted, early in 2020, the pandemic has likely replaced terrorism as a top priority but has only reinforced concerns about coverage and costs.) Responding to pressure from consumers and employers, some states are beginning to press insurers and providers to contain total medical expenditures (TME).¹⁷

After decades of analysis and debate, it is now generally recognized that the primary cause of America’s high TME is the extraordinarily high prices that we pay for medical services.^18-22 (In regard to overall impact, high administrative costs and greater reliance on technology, such as sophisticated radiological scanning, are often cited as secondary, contributory causes.) By contrast, Americans use most inpatient and ambulatory services far less often than do patients in peer countries. If anything, we need to increase the use of many services.

Pricing is especially problematic for the 177 million privately insured Americans. Commercial insurers are usually “price takers,” paying whatever hospitals, specialists, and drug and device makers can extract in negotiations. By contrast, Medicare sets its payment rates for Parts A and B services at a much more reasonable rate, that is, closer to international medical prices.²³ (The proverbial exception that proves the rule is private Medicare drug plans, which pay prices that are far above those in peer countries.²⁴)

Commercial insurers often pay as much as two or three times the average price paid in peer countries for the same prescription drugs, hospital care, surgeries, and radiology scans.²⁵ This means that private insurers in the United States also pay far more than Medicare—nearly two and a half times more than Medicare pays on average for hospital services.²⁶ Not only are average prices high, but fees for similar services also vary greatly from region to region, depending on the providers’ concentration and relative negotiating leverage. With the continuing consolidation of hospitals and their acquisition of physicians’ practices and other clinical services, the providers’ leverage to dictate prices only grows.^{27,28(pp81‐82)} As politically difficult as this situation is, we simply cannot address health care spending without confronting the high prices that private insurance pays.

Fortunately, we have a ready‐made private solution in MA plans, though one that is heavily regulated. As Mark Schlesinger and Jacob Hacker astutely noted years ago,²⁹ Medicare is no longer just a public program. Rather, it evolved in the 1980s and 1990s to accommodate private prepaid group practices and was transformed by the Budget Reconciliation Act of 2003 into a true public‐private hybrid. This hybrid framework offers Medicare enrollees the choice of the original fee‐for‐service (FFS) Medicare or private MA plans. MA network plans cover all traditional Medicare benefits, cap annual patient spending (out‐of‐pocket maximum), and generally add benefits and/or lower cost‐sharing to attract enrollees.

These options have been exceptionally popular, with enrollment in MA plans more than quadrupling since 2005 (24.1 million members in 2020). Their impressive growth has accelerated despite a substantial reduction after 2010 in the federal payment formula, designed to level the playing field between MA plans and FFS Medicare. MA plans are now so widespread that they are available to virtually all Medicare beneficiaries and enroll more than 10% of Medicare beneficiaries in all but two states. The plans are growing at the rate of two million members per year, on track to represent half of Medicare by 2029.¹⁴

Key to the plans’ growth is a provision in the 2003 act establishing a default fee schedule: absent a negotiated contract specifying otherwise, Medicare providers must accept Medicare payment rates for MA plan members. This not only caps out‐of‐network charges, but more important, it also anchors negotiations over payment rates to Medicare’s own fee schedule. Although MA plans are free to pay more when necessary to attract providers—or less if they can negotiate that—most MA plans pay hospitals rates similar to Medicare’s.^30-33 This prevents oligopolistic providers from dictating fees and leads to creative dollar flows that encourage value‐based care, which is critical in the face of continuing provider consolidation.

However, most MA plans do not simply pay Medicare fees, but also use provider risk‐sharing to incentivize quality improvement and cost control. As a result, risk‐taking providers—primary care physicians in particular—often earn revenues on their MA patients well above Medicare’s fee schedule. National data on surpluses generated in this fashion are unavailable, but at one of the larger MA plans in the Northeast, for example, although Medicare FFS rates prevail, about half the contracting provider entities are in full risk arrangements, and another quarter are in partial risk arrangements. These contracts typically generate year‐end surpluses for their primary care physicians (PCPs) that bring the total reimbursement up to 150% to 300% of Medicare’s rates (personal communication from the president of a large Medicare Advantage plan, August 12, 2020).

I suggest two ways to deploy MA plans to attract purchasers into providing good coverage while controlling the costs of care.

The Public Option

Well before the ACA, California progressives championed the public option as an alternative to private insurance, and the US House of Representatives inserted it into early drafts of the ACA.³⁴ The public option was intended to compete with private plans on the ACA Marketplace, presumably on the strength of savings achieved by paying Medicare fees and lowering administrative costs.³⁵

The greatest challenge in establishing the public option is setting providers’ fees low enough to achieve significant savings yet high enough to attract a broad provider network. In 2019 Washington State enacted a public option that is authorized to pay providers an average 160% of Medicare rates and higher if needed to recruit particular providers.³⁶ Colorado was considering a public option (shelved on account of the COVID‐19 pandemic) that would have paid hospitals an average 168% of Medicare rates.³⁷ Other proposals would set rates at various percentages of Medicare.^38,39 However, anything above Medicare rates would be an arbitrary markup of the country’s most widely used fee schedule, would erode promised savings, and would still be contentious.

MA plans offer a clever way to construct a public option. The rationale for using their federally authorized pricing advantage for the federally subsidized Marketplace plans is both practical and political: MA plans already perform most of the functions needed to compete for direct enrollment, offer networks broad enough to attract many Medicare beneficiaries, and, most important, default to the federal fee schedule in the absence of negotiated provider contracts.

Specifically, MA plans should be required to offer plans in the Marketplace at an actuarial value (AV) of 80%, so‐called gold plans. (80% AV is the benchmark benefit that Blumberg and colleagues and HR 1425 propose for enhancing the ACA.) Deploying MA plans as the public option to lower the gold plans’ claims costs and premiums would enhance the value of richer over skinnier bronze and silver plans, thereby attracting more direct enrollees to good coverage. By reducing providers’ collections and bad debt, the higher coverage level for the public option would also cushion (slightly) the impact of fee reductions.

Operating a public option in diverse, competitive markets is no small undertaking. For example, all but three of the 23 consumer‐operated and ‐oriented plans (CO‐OPs) that the ACA supported in place of a real public option have failed.⁴⁰ While CO‐OPs faced special challenges, most notably Congress’s retroactive undermining of the ACA’s risk corridor program, these challenges applied equally to the CO‐OPs’ (thriving) competitors. With fewer employees than a large state Blue Cross plan has, CMS has no experience running a competitive health plan. Moreover, if its public option were to flounder in the way CO‐OPs have, it would be a major setback for reform.

To serve the Marketplace, MA plans would need to expand provider networks for pediatrics and reproductive health and to modify systems for budgeting and premium rating. But these plans already perform most of the functions needed for direct enrollment: nongroup marketing, sales and enrollment, individual billing and collection, federal billing and reconciliation, network development and provider relations, care coordination, benefits design and risk adjustment, all under intensive CMS regulation. On measurable quality indicators, they perform comparably to, or better than, traditional Medicare. In the form of “special needs plans,” they care for 3.3 million of Medicare’s and Medicaid’s sickest patients, and do so with significantly higher quality of care than conventional public programs.¹⁴

In regard to proponents’ argument that the public option should reduce wasteful overhead, exactly who would operate the public option and how it could cut administrative costs were never clear. MA plans are relatively efficient: they are required to spend 85% of premiums on medical claims and many do far better than that. For example, in 2012, Massachusetts set the minimum at 88% for all individual and small‐group plans, a level that most of the state’s MA plans also exceed.⁴¹

Of course, provider organizations will howl and lobby vigorously against any significant fee cuts. But the reduction in revenues occasioned by a public option would be relatively modest. In the short run, these plans would be available to only 10 million Marketplace enrollees, about 3% of insured Americans and even less than that as a percentage of patient volume. In addition, many Marketplace plans already pay well below standard commercial insurance fees. Medicaid managed care organizations (MCOs), which cover about 30% of Marketplace enrollees, pay closer to Medicare’s rates than to standard commercial insurance rates (personal communication from Justin Lake, managing director, Wolfe Research, August 25, 2020). A public option in the Marketplace thus would only modestly reduce providers’ total revenues.

When we are ready to confront the costs of expanding access, MA plans can rapidly mobilize as the public option, and given the growing scale of MA plans, most providers would likely continue to participate.

Attract Large Employers to “Group Medicare Advantage”

Proposals for phasing in Medicare (or Medicaid) for all (or most) typically contrast their political appeal, lower incremental taxes, and practical feasibility with a purer version of Medicare for All. However, many phased proposals would also undermine group insurance, by giving all employees the choice of Medicare (or Medicaid) or by gradually reducing the age of eligibility for Medicare. Joe Biden’s presidential campaign promised to give all Americans the choice of his public option.^42-46

Meanwhile, many large employers are beginning to look to the public sector for help in controlling the medical prices that account for three‐fourths of their escalating ESI premiums. Having largely exhausted cost‐shifting strategies, employers cannot escape hefty annual premium increases, more than 4% in recent years.²⁵ In a 2020 survey of 90 large and mid‐sized self‐insured employers, nearly three‐fourths favored hospital rate regulation; one‐third saw Democratic proposals for a Medicare public option as helpful (and 29% were neutral on it).⁴⁷

Employers’ rising concern about controlling providers’ pricing and the public’s growing sensitivity to health care costs may create an opportunity to address both the inadequacy of some ESI coverage and runaway private spending. Many large employers already offer coverage at or above an 80% actuarial value, so mandating this level of benefits might not seem far‐fetched.^<48 But the increasing labor costs for employers that currently offer ‘subbenchmark’ benefits would reduce hiring, raise outsourcing, and generate other undesirable labor market impacts. Especially during the recovery from COVID‐19, the costs of such a mandate would be heavy, both economically and politically.

A gradual, voluntary transition to better, more affordable employer‐sponsored coverage is critical for its political and economic feasibility. The cost to employers of expanding ESI coverage and the consequent economic impacts could be materially offset by simultaneously reducing the claims costs for covered services. This would be done by giving all employers the option to replace their conventional group insurance with experience‐rated or self‐insured MA plans or to add it as an option side‐by‐side with conventional private insurance. Most MA plans already serve (and bill) employer and union groups, whose retirees make up 20% of their 24 million members.¹⁴

Under this approach, group MA plans would be required to offer as a minimum the gold level of benefits required of the public option. This would give all employers an option to meet or exceed this benchmark at a premium cost far lower than that of comparable conventional insurance. By choosing to offer group MA plans, employers with less generous benefits could increase employees’ compensation at a modest (or no) additional cost, and employers that already meet the benchmark would be rewarded with substantial savings. As premiums fall, wages and tax revenues would grow. Imagine a liberal reform that lowered premiums for many employers while expanding coverage (or wages) for many employees!

A voluntary inducement to raise benefit levels would not convince all employers offering “subbenchmark” benefits to offer gold plans, and if given a choice between a narrow‐network group MA plan and a conventional freedom‐of‐choice plan, some employees would opt for the broader network. However, the gain in value without the commensurate premium increase should, over time, powerfully incentivize switching. In this case, time is reform’s friend: providers will object to group MA plans’ use of lower Medicare rates as bargaining leverage. But tying the reduction in fees (and providers’ bad debt) to millions of employers’ (end employees’) voluntary decisions to upgrade coverage and their responses to this new opportunity over time would cushion the impact of revenue reductions. As I discuss next, further cushioning can be added if needed.

Why Group Medicare Advantage?

Group MA plans retain the employer’s contribution as voluntary, private premiums—not taxes—and thereby maintain group rating rules. Many proposals from moderate Democrats and their various policy advisers would give individuals the choice of Medicare (or a public option), without adequately confronting the technical and administrative problems of pricing the public alternative against ESI and operationalizing individual choice for 157 million insured employees and dependents. Employers’ choice may not resonate with the public, but it is important in retaining employers’ contributions as voluntary premium payments and preventing adverse risk selection against the public plan.

A good example of Medicare by choice is the bill sponsored in 2019 by Senators Jeff Merkley (D‐OR) and Chris Murphy (D‐CT) , built on Jacob Hacker’s innovative “Medicare for Everyone” proposal: their proposal would allow both individual employees and employer groups to opt for Medicare.⁴⁹ Unfortunately, offering both individual and group choice introduces even more complex risk selection dynamics than does either one alone. Professor Hacker envisions a free flow of enrollees in and out of ESI, Medicaid, and Medicare, with workers’ Medicare contributions progressively indexed to income. This idea would depend on the federal government’s tracking every move (monthly) across literally millions of ESI plans and tens of thousands of distinct Medicaid coverage programs.⁵⁰

While there is much to admire in Professor Hacker’s proposal for incremental movement toward Medicare for Everyone, especially the proposed retention of employer contributions, it does not adequately address the critical issue of calculating employers’ contributions to Medicare versus their private coverage, and it also requires a national enrollment process involving millions of employers and nearly one hundred million individual “shoppers.”

As an actuarial rule of thumb, 5% of a group accounts for 50% of its medical claims, which is also the national distribution of costs.⁵¹ Accordingly, giving individual employees the choice to join a generous Medicare plan at a flat or age‐based premium and giving employers the incentive to push their sickest employees out of their experience‐rated commercial plans would invite adverse selection against the public plan. For example, by offering a narrow‐network private plan or one with high cost‐sharing for cancer drugs, employers could “nudge” their sicker employees into Medicare. Employers’ experience‐rated premiums for the remaining healthy workers would drop and Medicare’s costs for each sick employee would skyrocket. Similarly, a tax formula for funding the voluntary conversion of employer groups to Medicare would tend to attract the sickest groups. Attracting sicker employees into more “efficient” plans is a sure way to kill efficiency.

All the various methods for pricing coverage have advantages and disadvantages, but mixing them for groups and individuals within those groups could be disastrous. The underwriting complexities of individual self‐selection into Medicare and income‐based premium contributions can be accommodated only by eliminating experience rating, as Merkley and Murphy propose. In theory, risk selection would be mitigated, though not eliminated, by risk‐adjusted community rating, but this would create two major problems.

First, it would substantially change the premiums for some 120 million beneficiaries of large employers. It would create winners and losers, and the losers would cry foul.

Second, administering individual employees’ choice using a risk‐adjusted rating formula would be extremely challenging. For example, adjusting community rates for a firm with 5,000 employees and 5,000 dependents would require developing a census of 10,000 potential enrollees months ahead of open enrollment and administering open enrollment two to three months before the plan year began and then adjusting the rates throughout the year for employee “adds” (including births) and “terms.” The employee census would be outdated before open enrollment even closed. Risk‐adjusted employee choice would fragment the risk pool, complicate enrollment, and raise administrative costs. This is one of the main reasons that despite decades of efforts to promote employee choice and its inherent appeal as a core tenant of “managed competition,” most employers still resist it.⁵²

In addition, most very large groups are self‐insured, for which the employer takes the insurance risk and enjoys considerable regulatory freedom. These employers highly value the flexibility, the savings on risk margins and premium taxes, and the economies of scale that they enjoy under the Employee Retirement Income Security Act of 1974 (ERISA). Consequently, they consistently fight any effort to roll back their exemptions and flexibility under ERISA. Even insured, experience‐rated employers would strongly resist the imposition of community rating, a uniform national open enrollment period, individual (instead of family) rating, and the many other changes needed to adapt group insurance to match Medicare’s administrative, coverage, and pricing practices. Just to cite one example, the battle over imposing uniform Medicare benefits, such as family planning, on ESI would be intense.

Could it be done? Only after overcoming political resistance from employers (allied with providers and insurers) and an implementation challenge that would make rolling out the ACA’s Marketplace look like child’s play. But it would be far less disruptive to bring group MA to employers. If group MA proved attractive, we could expect employers’ self‐interest to gradually displace conventional group insurance with modest disruption. The switchover would take time until commercial plans paying well above Medicare rates were either priced out of the market or developed the leverage to reduce their own fee schedules. Time would allow all elements of these systems to adjust.

Of course, this is the nightmare scenario for providers who fear that a public option for the ACA Marketplace would eventually lead to broader reductions in fees. Their concerns are understandable: since 2015, Medicare’s hospital payments have covered about 91% of costs. During these years, the hospital industry’s substantial operating margins (about 6%) came entirely from the much higher fees paid by commercial payers. Were insurers to start paying Medicare rates, hospitals would therefore have to cut operating costs substantially.⁵²

In fact, this is exactly what happens to hospitals that are unable to raise commercial reimbursement rates enough to avoid experiencing financial pressure. When they are forced to do so, they control their operating costs. For the last several years, MedPAC has analyzed the adequacy of Medicare payments for a subset of top performing hospitals—those with both better‐than‐average quality and costs—and has consistently found Medicare payments to be close to adequate (2% below fully allocated costs) for relatively efficient hospitals.^{28(pp89‐93)}

Ultimately, any real cost control cannot avoid confronting this challenge. As Uwe Reinhardt often observed, everyone’s medical costs are someone’s revenues. If the United States intends to control medical spending, we must tackle medical pricing.

Given time, providers can adjust to such price reductions, painful as they will be. The key to economic, if not political, feasibility is to phase in price cuts and cushion them with selective revenue enhancements. Some gradualism is built into an approach that depends on employers’ voluntary adoption of group MA. Employers are generally slow to change benefits, at least until the first movers prove that changes in health plans that cost employers tens of thousands of dollars per employee are not going upset their employees. At the same time, raising payment levels for some 75 million Medicaid enrollees, as I will propose, would help offset the reduction in commercial rates. Furthermore, creative risk‐sharing arrangements typically offered by MA plans should actually reward primary care and other providers who can deliver value‐based care.

But providers may need more of a cushion, such as some combination of raising Medicare fees selectively, offering additional subsidies for repaying medical school debt, and phasing in the application of group MA payment rates as a default option. For example, if employer adoption of group MA proceeds too quickly, the default standard for group MA plans might be raised temporarily under a legislated formula, say to 125% or even 150% of Medicare rates. This would be necessary to avoid an economic shock to the health care system. Conversely, should the voluntary adoption of group MA prove workable but too slow, large employers might be encouraged to offer gold plans by means of tax incentives (carrots and/or sticks) for meeting this national benchmark.

Fold in Small Employers and Medicaid

While large employers sponsor the largest segment of coverage in America, two other sizable segments should ultimately be folded into these reforms. For both small‐group employees and Medicaid enrollees, access can be problematic. The former are often uninsured or underinsured, while the latter typically enjoy the best benefits (on paper) in America but cannot access the many providers who will not accept Medicaid’s very low reimbursements.

To raise coverage to an 80% benchmark for small employers (fewer than 50 employees) would be a huge lift, as only 41% of their employees are covered by ESI, and the benefits are often skinny.⁵³ But with access to savings from group MA, we could expect some small employers to raise (or maintain) coverage at or above 80% of the actuarial value. However, many (perhaps most) small‐group employees would still not enjoy this level of coverage. The economic cost and political resistance to requiring small employers to offer gold coverage probably would make such a mandate a nonstarter.

An alternative path for employers would be to allow their employees to buy coverage on the Marketplace if they do not have access to ESI at the benchmark level. Of course, this would crowd some small employers out of ESI, but only a minority of them cover their workers now—typically small groups of well‐compensated employees—and the tax advantages for well‐compensated employees would continue to keep many of these small employers in the game. For small employers who decide to drop coverage entirely because of newly available subsidies on the Marketplace, the loss to society would be solely financial. The small‐group market is not especially functional, as administrative overhead is far greater in small‐groups than in large‐groups, and small employers add little sophistication as purchasers.

Nevertheless, among the two‐fifths of small‐group employees currently covered by ESI, there may be considerable “crowd‐out” of employer funding. If so, the public premium subsidies needed as a result of crowd‐out could be raised by extending to small employers the tax penalty per employee receiving Marketplace subsidies that applies to large employers. To recognize the challenge of operating very small firms, yet eliminate the employer penalty “cliff” at 50 employees, the amount of the tax penalty per worker subsidized on the Marketplace should decrease with the employer’s size from the penalty’s current level at 50 full‐time equivalents (FTEs) to zero penalty at 5 or 10 FTEs.

Access under Medicaid is another thorny challenge. On the one hand, Medicaid provides benefits and programs that are critical to caring for low‐income populations, and they often are customized to meet the health and social needs of vulnerable patients. On the other hand, navigating each state’s multiplicity of programs and complex eligibility rules is extremely challenging, and Medicaid’s very low payment rates severely constrain the choice of physicians. Medicare’s physician fees are on average nearly 40% higher than Medicaid’s and are 50% higher for primary care physicians.⁵⁴ The pernicious effect of widely disparate fee schedules on providers’ incentives to care for all patients is a real barrier to access in America.

The least disruptive way to improve access and equity under Medicaid would be to establish Medicare fees as the minimum threshold for Medicaid. In addition to raising provider participation levels and equalizing financial access, raising Medicaid fees would cushion the impact of group MA on physicians’ and other providers’ incomes. If politically feasible, raising minimum Medicaid payments should take place at the same time that group MA is initiated. Bringing Medicaid’s fee levels up to Medicare’s would also distribute the greatest relief to underpaid safety‐net providers. This would be especially timely in the wake of the COVID‐19 pandemic.

Finally, nothing short of nationalizing Medicaid can unscramble the myriad eligibility determination standards that now prevail across more than 50 polities. Making Medicaid the automatic default coverage for those who lose ESI—until their eligibility for other coverage is determined—would considerably narrow the cracks through which the uninsured too frequently fall. Until these former ESI beneficiaries are determined eligible for either Marketplace subsidies or unsubsidized (individual or COBRA) coverage, they should enjoy Medicaid coverage, retrospective to the date of their disenrollment from the group.

Conclusions

Fixing the ACA is only the first step in consolidating the health care reforms of 2010. We need to attract employers to good, affordable health plans in order to achieve near‐universal coverage under an acceptable national benchmark of benefits, along with the cost controls necessary to cement coverage gains. High prices under commercial insurance offers an opportunity to marry progressive health policy to purchasers’ self‐interest and choice. Bringing Medicaid payment levels up to Medicare’s while expanding its role as the safety net for those caught in the purgatory of eligibility determination would also significantly increase equity and expand access.

The reforms that I have just outlined are very ambitious. Yet, all of them build on “road‐tested” health insurance vehicles. They incorporate critical elements of public programs, the most important being a response to the runaway pricing that inflames America’s “hypercostosis.” Yet they preserve employer financing for the majority of Americans and build on private, competitive insurance, so they might even appeal to moderates and some conservatives. Indeed, expanding MA to active employees was recently suggested by Stuart Butler, a conservative thought‐leader on health policy.⁵⁵ A bipartisan group recently suggested MA plans as the public option.⁵⁶

This approach offers another important advantage. Even if not all of them can be enacted at once, each set of reforms promises significant progress. This is how health care reform proceeds in America. Progressives settled for Medicare in 1965, hoping that it would gradually expand to cover all Americans. It was extended in 1972, but only to disabled and end‐stage renal patients.⁵⁷ Medicaid was added as a modest, state‐run program to control Medicare’s potential expansion, and now Medicaid’s/CHIP’s enrollment has outgrown Medicare’s. Even though the ACA was too “stingy,” it laid the foundation for covering everyone. We can build on that, even if only one floor at a time.

Whether enacted all at once or in steps, phasing in a reasonable national benchmark of benefits and a national fee schedule on a voluntary (albeit highly incentivized) basis offers substantial advantages. While advancing access, equity, and cost control, phasing allows time for testing and remediating optimistic assumptions; for providers to adjust their business models to the staged conversion of up to 177 million patients from commercial to Medicare payment rates; for the slow‐moving pipeline of doctors, nurses, technicians, hospitals, nursing homes, and other clinical resources to catch up with growing utilization; and for the larger economy to accommodate significant shifts in the flow of funds.

Of course, incrementalism means compromise. A few states might still hold out against Medicaid expansion; some ESI would not meet the new coverage benchmark; some enrollees would choose less generous coverage; some Americans would not enroll in any coverage; and the complexity and administrative costs that inevitably accompany plan choice would remain. But even if not fully enacted, each reform would help important groups and avoid economic disruption.

Progressives were disappointed a half century ago that Medicare did not evolve into a universal program, but had they insisted in 1965 on all or nothing, would we have Medicare at all?

References

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