Moneybox

Is Banning Private Insurance the New Individual Mandate?

Protesters supporting “Medicare for all” hold a rally outside PhRMA headquarters on April 29, 2019 in Washington, DC.
Protesters supporting “Medicare for All” hold a rally outside PhRMA headquarters on April 29 in Washington.
Win McNamee/Getty Images

While no one exactly knows what “Medicare for All” might look like in practice, rhetorically, it is meant to be the antithesis of Obamacare, as far as plausible Democratic health reforms go. The Affordable Care Act is incremental and complicated. Medicare for All is sweeping and simple. The Affordable Care Act regulated the private insurance market but didn’t end it. Medicare for All would blow it up. The Affordable Care Act was hellish to explain. (A generation of reporters has the phrase “three-legged stool” burned into their brains.) Medicare for All is easy to sum up: Everyone gets the same government health plan, paid for with taxes. Done.

And yet, for all their fundamental differences, both systems have at least one big thing in common. Each is (or, in the case of the ACA, was) built on a central and unpopular provision that is also a focal point for critics, and may not actually be all that essential to the broad goal of getting every American generous insurance. For Obamacare, that plank was the individual mandate. For Medicare for All, it’s the ban on private insurance.

The individual mandate, which required all Americans to either obtain insurance or pay a tax, has become a cautionary tale for politicians (other than Joe Biden, who apparently wants to bring it back) and policy thinkers about the dangers of foisting an unpopular health care policy onto the public. When Barack Obama ran for the Democratic nomination in 2008, he opposed the mandate and savaged Hillary Clinton’s health care plan in debates and TV ads for including one, arguing that it was unnecessary and might force some families to buy coverage they couldn’t really afford. That turned out to be a winning message. Once he became president, however, Obama reversed himself under pressure from his advisers and Democrats in Congress who were looking for a better Congressional Budget Office score and backed a mandate in the Affordable Care Act.

We all know how that turned out. The mandate ended up being one of Obamacare’s least popular provisions, a magnet for Republican attacks and lawsuits challenging the statute’s constitutionality, including one that is currently threatening the law’s future.

What makes the individual mandate story a tragedy, rather than a mere misstep, is that it might not have been necessary in the first place. Requiring all Americans to buy insurance was supposed to be an essential piece of Obamacare. Otherwise, the thinking went, many people would game the new system by waiting until they got sick to enroll in coverage, driving costs up for everyone else and destabilizing the market. But the mandate turned out to be less effective at getting Americans to sign up for insurance than its architects hoped. And after Republicans effectively nullified it as part of their tax bill in 2017, Obamacare’s exchanges pretty much kept working, since families kept buying subsidized coverage. In retrospect, it’s entirely possible that, with a few structural tweaks, the ACA could have worked fine and been more popular without the mandate. Candidate Obama was probably right.

Much as the mandate dominated the Democratic health care debate in 2008, the discussion over heath care in this year’s primary has focused on Medicare for All’s ban on most private medical coverage. Under the law Bernie Sanders has put forth, and some candidates including Elizabeth Warren have endorsed, the federal government would offer a single, generous health plan. Insurers like Blue Cross Blue Shield or Aetna could technically continue to do business, but they would be barred from selling policies that covered any of the same benefits as the federal plan—what’s known in the health policy world as “duplicative coverage.” Since Sanders wants Medicare to pay for the vast majority of services and procedures Americans would need, there wouldn’t be much room left for private carriers. That’s what makes it a true single-payer system.

Like the mandate, banning private coverage is not a very popular idea. At least, it isn’t right now. Polling suggests that many Americans like the phrase Medicare for All, because they assume it means giving everybody the choice to sign up for government coverage. Once you explain that it would force them to swap their current insurance for a public plan, support drops dramatically.

It is not entirely clear why this is the case, since few people really seem to be in love with their insurance company. Some surveys have found that enthusiasm for Medicare for All bounces back up if pollsters explain that, while private carriers would disappear, people would still be able to keep their doctors. That suggests some Americans are actually worried about losing their favorite physician, not their Cigna card. But for the time being, the ban on duplicative coverage seems like a poison pill for public opinion. That’s why NBC made it one of its “raise your hand if” questions at the debate: It’s divisive.

The question now is whether banning private insurance is actually a necessary means to an end, in the way that the mandate was not.

When Sanders and Warren have talked about the need to do away with most private coverage recently, they’ve tended to focus on the billions of dollars that go to insurance industry profits rather than treatment, as well as the need to make health care a human right. And if you talk to people involved in health care policy on Capitol Hill and at think tanks, you’ll generally hear three main reasons why they think driving a stake through the insurance industry is essential.

The first is simplicity. Nobody likes shopping for insurance. Nobody likes dealing with their insurer. And nobody likes it when they lose an orthopedist because he decided to stop accepting their Aetna Select PPO. Putting everybody on one government health care plan eliminates those headaches. It would also keep the poor from falling through the system’s bureaucratic cracks. Today, many Americans don’t sign up for Medicaid because they don’t realize that they are eligible; under single-payer, that shouldn’t be an issue.

The second reason is cost efficiency. American medicine would be less expensive if you cut private coverage out of the picture, since you’d no longer have insurance companies earning a profit, and hospitals wouldn’t have to hire as many back-office administrators to deal with them.

Third, and finally, there’s fairness. Most single-payer advocates believe that every American should have access to the same exact level of medical care, whether they are rich or poor, and that the cost should be borne collectively by taxpayers. Leaving private insurance in place would let the wealthy buy perks and put some of the financial burden back on individuals.

These are all admirable rationales. But in the end, none of them are actually essential to achieving universal, affordable insurance, which is what most Americans seem to want out of health reform. It’s entirely possible to design a program that expands Medicare and lets anybody sign up for it—you can even enroll people without coverage automatically—while leaving some room for private insurers to continue operating. That’s the idea behind Medicare for America, the not-quite-single-payer plan that some progressive Democrats have backed. It’s also how most countries with universal health systems operate today.

The Sanders bill takes many of its cues from Canada, which bans duplicate coverage. But in places like Great Britain, Australia, Denmark, and New Zealand, people can buy private insurance that, among other things, gives them faster access to doctors and hospitals. This adds inequality into the mix, but it gives patients an out if they don’t want to wait months for an MRI or surgery. It’s a pressure valve for discontent in the system.

The fact that barring duplicative coverage isn’t essential to making universal health care a reality isn’t necessarily a reason not to push for it. But there are also some substantive policy reasons why it might not be such a great idea. Like the mandate, it might simultaneously generate a backlash, while working less effectively than intended.

For starters, Canada’s health care system is notorious for its long wait times. They tend to be worst for elective care like hip replacements. But they’re a constant source of frustration for patients, and it’s very likely that the U.S., which already suffers from doctor shortages in large swaths of the country, could face similar issues. It’s not hard to imagine the furor that would create.

At the same time, banning private insurance coverage might not stop some wealthy patients from buying better care. In Canada, private clinics have found ways to bend the rules and charge a hefty annual fee for “executive health packages” that supposedly offer services not covered by the government, but mostly seem to be a cover to let wealthy customers pay for quick, on-call access to a doctor. In the U.S., they might not even need that sort of legal fig leaf. As Jon Walker recently pointed out in the American Prospect, the single-payer bills making their way around Capitol Hill would let doctors opt out of Medicare and charge patients directly instead. As a result, you could start to see private health care clubs—Cleveland Clinics for the ultra rich. I’m told that hospitals or doctors could potentially make patients pay membership fees for guaranteed appointments. Meaning, even if you ban private insurance companies, you might still end up with a two- or three-tier health care system.

Of course, those would only be problems if single payer passed. The reality is that even if Sanders or Warren become president and are willing to obliterate the Senate’s procedural rules to pass a single-payer plan with a bare majority, they probably couldn’t get the votes. Whatever Democrats enact will have to pass muster with lawmakers like Colorado’s Michael Bennet, who is currently running for president against Medicare for All.

That, in the end, may be one of the most important differences between the individual mandate and banning duplicative private insurance. The mandate might have been a well-intended, unpopular idea that failed in many respects. But at least its inclusion at the time helped Obamacare pass. Barring private coverage wouldn’t even do that.