It’s time for Medicare for All

Believe it or not, says economist Robert H. Frank, President Trump and congressional Republicans, while flailing and failing in their efforts to repeal and replace the Affordable Care Act, are actually proposing health care benefits that can best be delivered with a single payer, “Medicare for All” plan. They have good reasons to support single payer, Frank says, and he believes a change of heart is not at all far-fetched.

He’s also quite clear that the Affordable Care Act is not a failure, that its problems are fixable with the right level of subsidies. Either the fully-funded ACA or the (preferred) Medicare for All model would deliver much better care to all Americans for a much lower cost than our present system. And that would still be true, he says, even if we fully compensated the insurance companies that would lose their businesses to a single-payer plan.

Frank, a professor of economics at the Johnson Graduate School of Management at Cornell University, is the author of several books, including “Choosing the Right Pond: Human Behavior and the Quest for Status,” “Passions Within Reason: The Strategic Role of Emotions,” and “Falling Behind: How Income Inequality Harms the Middle Class.”

For decades his writings and interviews in popular media such as the Washington Post, the New York Times, the Guardian, USA Today, and MSNBC have helped non-economists make sense of complex economic principles. As a regular contributor to the Times’ business section for a decade, he has written about topics as varied as the many ways combatting climate change can grow the economy, the need for policies to reverse income inequality, the dangers of casino gambling, and why austerity won’t fix the economy.

He has been most passionate, perhaps, in his advocacy for a single-payer health care system – as the most effective way to cover everyone at the lowest possible cost. A decade ago, he wrote a scathing op-ed piece in the Times critical of President George W. Bush’s proposal to use tax cuts to make health insurance available to the uninsured. The people most in need, Frank wrote, don’t make enough money to benefit from tax cuts and insurance companies do not want to sell individual policies to those who most need medical care.

In 2013, as a visiting scholar in Sweden, he met with health economists who, he wrote in the Times, are normally skeptical of big bureaucracies. “Yet none of them voiced the kinds of complaints about recalcitrant bureaucrats and runaway health costs that invariably surface in similar conversations with American colleagues,” he wrote. “Little wonder. The Swedish system performs superbly, and my Swedish colleagues cited evidence of that fact with obvious pride.”

In a March Times column, he argued that Republicans have painted themselves into a corner, advancing a plan that would leave millions without insurance and drive premiums higher for many more. If they are serious about providing the health care benefits Trump promised during last year’s campaign, he wrote, single payer is the way to go.

CITY interviewed Frank by phone on April 20. What follows is an edited transcript of that conversation.

CITY: We want to talk about your view that a Medicare For All plan might actually have some appeal for Republicans. But first let’s talk about the Affordable Care Act.

I think it’s fair to say that if you favor universal health care, there are two paths you can choose from: a single payer, Medicare For All approach, or a highly regulated insurance market, which is the ACA approach – an individual mandate, subsidies for those who can’t afford insurance, a minimum package of benefits each policy must cover, no restrictions for pre-existing conditions, etc. Does the ACA just have too many moving parts for it to work as well as its supporters had hoped?

FRANK: There is a third approach you might want to mention, which is the one the British use: a National Health Service, where the workers are employees of the government. But yes, I think the ACA is a complicated set of pieces hard to mesh properly. But sure, it can work.

The complex system we have is strictly an accident. It’s not a good system. That’s because there was a deeply entrenched, employer-provided health care system that developed primarily during World War II, when there were labor shortages and employers could not recruit the employees they needed because there were caps on wages, so they offered fringe benefits as an inducement to get new workers. They used things like health care, which was a benefit and not taxed.

By the time 60 or 70 percent of the population had insurance in that form, a move to single payer would in effect take away an existing program that most people liked. So the Obama administration decided the only way to move forward was to build on top of that system. And I think the apparatus they built would have allowed for a transition to single payer, but it would have taken a long time.

CITY: So like all complex pieces of legislation, the ACA requires regular adjustments, because the original expectations or incentives aren’t quite right. Could it be saved even now?

FRANK: Oh, of course. The Republicans in Congress absolutely refused to cooperate in any way to patch some of the shortcomings. The main problem from the point of view of recipients is that the subsidies are smaller than they ought to be for low-income people.

The people who see the worst situation are those doing well enough not to qualify for Medicaid, but who are still close to the lower part of the income distribution, so the subsidies they get are not quite enough, or the deductibles are too big.

CITY: And probably also there should be higher subsidies to insurance companies so that the policies would not require such high deductibles and co-pays?

FRANK: Yes, exactly. But to do that you would need to fund the program more generously, and there was very strong resistance to that. The irony is that if someone proposes Medicare for All, people say, well, we would need to raise 10 percent of GDP in additional taxes. But what they leave out is that countries that have single payer pay about half what we do to provide medical services. They get better results than we do.

And so, yes, it would require raising extra taxes, but you would pay much less in private payments. You’d come out way ahead on balance. And nobody has explained why it’s worse to pay for things with taxes than it is to pay out of your pocket.

CITY: Let’s spend a minute on the way health care impacts our economy. It’s one-fifth of our GDP, but ACA opponents have always argued that the law is a jobs killer that would bankrupt the government. This is a zero-sum approach: every dollar you spend is down some black hole.

But wouldn’t universal coverage also create hundreds of thousands or millions of jobs, some of them well-paying jobs – held by people who pay taxes, buy homes, purchase more consumer goods, eat at restaurants? The multiplier effect alone almost justifies the investment in health care, doesn’t it?

FRANK: Yeah. People are worried if there will be enough for workers to do going forward. Robots are stealing jobs. And a lot of jobs being eliminated are in the health care sector. Medical devices do a lot of the monitoring people used to do. Radiologists cannot identify anomalies on X-rays nearly as well as the bots.

But there’s no end to how many jobs you could create in health care if you wanted people to be healthier. So if we’re getting more productive in other domains, you could stimulate more employment in the health care sector and get something for it.

CITY: One reason you say Medicare for All might be appealing to Republicans is that it would be cheaper. Why doesn’t competition in health insurance markets ever get us to lower prices and universal coverage?

FRANK: I think it would, in time. What we know is that providers like the Cleveland Clinic, the Mayo Clinic, Kaiser Permanente – the non-profit, broad-based clinics – seem to be delivering better care at lower costs than other forms of providers. I think in time, employers are going to want to switch to providers like that, because they’ll get more value by doing it. But they can only expand so quickly.

CITY: So if you did it right, you might actually get competition that could get you where you want to get?

FRANK: What’s true is that the people – including the doctors – who work for those providers are employees. They don’t get paid extra if they order more tests or procedures, so they don’t have any incentive to run up the bills for you.

They collaborate. Their data handling is very efficient. All the people who care about different organs in your body are talking to each other. You don’t get people working to cure one thing and making another thing worse in the process. I think eventually we would get where we need to be.

CITY: So if you took this market-driven approach, would that require more or less government intervention to make it work?

FRANK: If you kept the ACA on the books as it is, did some tweaks to get more providers to enter, keep on with the Medicaid expansion, gradually let people buy into Medicare when they are 50, we would get there without any radical change in the way we do business.

But don’t be cautious now, because the Republicans who are critical of the ACA – the things they want to keep [broad coverage for all, no ban on pre-existing conditions, keeping young people on their parents’ plans to age 26, etc.] are the parts of the program that are most closely in alignment with what single payer does.

We don’t know what the political climate will look like in 2018, but the hints we are getting is that the Trump administration seems totally adrift, getting less popular. The ability to pass anything is getting further out of their reach. It’s quite possible for me to imagine that candidates running on a platform that endorses single payer would have a huge leg up over opponents who don’t have a particular position.

CITY: Medical care in other countries is much cheaper than it is here, largely because the single payer negotiates prices. But would the same approach work here, where pharmaceutical companies, for example, say drug prices are high for breakthrough products because of the cost of R&D and the need to generate as much profit as possible before the patents expire?

They sell their products elsewhere for less because the single payers negotiate them down. So if they didn’t get the profits they say they need here, would they even bother developing new products?

FRANK: Those statements [by industry] are way over-played. The research that’s done by pharma is a lot of arms-race-style research. They’re all racing in parallel to develop drugs that do similar things that don’t violate each other’s patents to cure illnesses that are the most numerous in the population but aren’t necessarily the ones that matter most.

If you really want to spur additional research, you should not be cutting back funding for the National Institutes of Health and the National Science Foundation. Their discoveries are the basis for a lot of the drug development going on. We could spend a little bit more in that arena and make up for a lot of cutbacks in private pharma research.

CITY: In a single-payer system, what is the role of private insurers?

FRANK: Just look at Medicare. Almost all the retirees buy some form of supplemental insurance. It’s not obvious that having private companies provide that insurance is the most efficient way to do it. But if there were anything extra you could get by spending a lot extra on your coverage, some people would do it. So we’ll see private supplements, even if we were 100 percent Medicare for All.

CITY: Still, a single-payer system would be a big hit to the insurance industry.

FRANK: I imagine that phasing it in gradually would help. Have the eligibility age for Medicare go down step by step. Let the insurance companies be on notice that they have to look for other things to sell insurance for. But in the end, if we made a policy shift that put them out of business, I think it would be totally justified to give them compensation for that.

They went into those businesses in good faith. And just because it’s efficient to move to a different system doesn’t mean that we should feel free to put them at great cost with impunity. Buy them out.

People get angry when I propose that, but if you want to move to a single-payer system, most of the opposition that’s organized is going to come from those companies. And if they have the power to keep you from adopting single payer, then all right; whether or not you think they deserve a buyout, it’s the lesser of two evils.

CITY: I suspect most people are not very aware of that the ACA provides incentives and regulations to lower cost and emphasize wellness and preventive care – essentially using Medicare and Medicaid to nudge more people into primary care. Have those steps been working?

FRANK: There were lots of incentives for dealing with the chronically ill more effectively. A huge proportion of total expenditures are devoted to people who have chronic conditions, and they are not managed very effectively. So the ACA created lots of incentives to reduce readmission of patients in that category, and they’ve been quite successful.

CITY: What might it take to nudge Republicans toward Medicare For All?

FRANK: The easiest route would be for Trump himself to say, “Look, we’re going nowhere with this [repeal and replace] I promised voters a system that looks like, walks like, and quacks like a single-payer system. I’m going to call it Trumpcare and just do it. I’ll get the Democrats to go with me and enough Republicans will be scared to vote against me, and we’ll get it passed.” That’s how it could happen.

I don’t think Trump is on top of things to the extent that he could see clearly that it’s in his interest. Maybe there is somebody close to him who could persuade him. But I don’t expect Paul Ryan to lead the charge to do that. And probably no one else in the Republican caucus could do it either.

CITY: You’ve written about “loss aversion” [the fear of losing something important as a motivator] as an important element in the public’s view about health reform. How does that work?

FRANK: People won’t fight hard to get something anywhere near as hard as they will fight to keep that thing once they’ve got it.

It’s a ratio of about two to one when you’ve got ordinary goods. If you own a coffee mug, they have to pay you $12 to get you to part with it, whereas you only paid $6 to purchase it.

But when it comes to taking a risk with your health, if you’ve already been exposed to a risk to your health, you’ll pay X to eliminate that risk. But they’ll have to give you 250 X to get you to volunteer to take that risk if you haven’t already done it.

It’s a very difficult to get people to give up things that really matter to them. And health care is squarely in that category.

CITY: A lot of people who say they hate Obamacare have policies that exist because of Obamacare, but they don’t know that. How do you change their attitude?

FRANK: The Republicans have been bashing it for seven years, saying it’s an abomination, the worst thing that’s ever happened. And the Democrats haven’t been especially effective at combatting those criticisms.

And what we know is that the human brain has an algorithm hard-wired into it, and it’s that if we hear something over and over again, there must be something to it. A lot of people don’t have time to investigate every issue, so they just believe it.

The Republicans scored lots of easy points with that strategy. But now they’re like the dog that caught the car, and they don’t know what to do.

CITY: What about Republican theology? About 55 million Americans are on Medicare. Another 70 million are on Medicaid. So that’s more than a third of all Americans who are enrolled in single-payer socialized medicine. And those people are generally happy with what they receive.

On the other hand, Republicans have preached for more than 30 years that government doesn’t work and can’t work to make people’s lives better – that the solution is less regulation and a free market. How do you reconcile those realities?

FRANK: Ultimately you change that at the ballot box. In California 15 years ago, the situation was in many ways similar to the one we see now nationally. The Republicans had a big voice in state government. They were cutting budgets and cutting schools.

They were once the best public schools in the country, and they were getting ranked down with Alabama and Mississippi. The University of California was by far the best public system anywhere in the world, but it was being starved with budget cuts. The immigrant bashing was similar to what we’re seeing now at the national level.

And at some point the voters just tipped and said, “Enough.” Those voices aren’t in state government anymore. The budget’s back in balance. The UC system is getting funded. The roads are getting patched up. They’re doing all sorts of infrastructure work they couldn’t do before.

This article appears in May 10-16, 2017.