The past two years of “politics over policy” bluster coming out of Washington’s healthcare scene is seeing a shift in focus…the next round of elections looms large. Let’s not forget, over 40% of midterm voters said healthcare was the top issue facing the country far ahead of immigration and the economy. While Congressional gridlock and legislative logjams will impede progress on health policy in the short-term, some BIG hairy issues will take center stage over the next couple of years: drug pricing, ACA vandalism, surprise health care bills, and Medicaid expansion.
One issue that will dominate leading up to the 2020 election is ‘Medicare-For-All’. The following assessment from Bank of America provides a useful reality check on passage of Medicare-For-All, particularly when it’s defined as a single payer system.
10 reasons why MFA has little chance of passing*
Congress recently released a “Medicare for All” proposal that would completely replace the current managed care model by moving everyone to the traditional Medicare program. Although this has hurt multiples for the managed care sector, we essentially see this as an issue of headline risk with very little chance of implementation. Below we highlight 10 points on the “Medicare for All” (MFA) bill and why we see little chance of the bill being passed in the next 5-years.
- There are 107 co-sponsors of this bill, underscoring importance of the issue. However, this is below the 124 people who co-sponsored a similar bill last year.
- There are few details on how this would work and no details on how it will be funded. Cost has sunk every such provision in the past and we think is likely the biggest roadblock this time.
- The current Medicare program is expected to go bankrupt in 7 years. This program would cover more things than Medicare – vision, dental, hearing, LT care, have no premiums, copays or deductible and all providers will be in-network.
- We estimate paying hospitals Medicare rates would bankrupt the industry. The Center for American Progress estimates that hospitals need to be paid 20% more than the Medicare rate and doctors need to be paid 10% more to make those businesses viable – which would make it even more difficult to finance.
- Few (if any) industries are likely to support this proposal – beyond eliminating MCOs, it would eliminate all for-profit HC providers (hospitals, nursing homes, etc) and Medicare would negotiate drug pricing. We expect significant lobbying against this bill.
- Simplistic view is that Dems say we don’t need managed care. Factual evidence indicates government can’t manage utilization and MCOs must play a role.
- Medicaid MCOs manage 51% of Medicaid spending (vs 26% 10 yrs ago) and save states 10-15% and improve quality. Dem and Republican states have moved to MCOs.
- Medicare Advantage (MA) covers 35% of seniors (up from 25% 10 yrs ago despite rate cuts) as it is able to provide better benefits than Medicare for the same price.
- The stars have to align. Dems would need to win the Presidency and Senate (likely a large majority) to pass the bill. The President would need to make “Medicare for All” the key initiative for the agenda.
- But even that is no guarantee - Trump failed to repeal the ACA despite controlling the House (large majority) and Senate (52 seats). Obama almost failed to pass the Affordable Care Act (ACA) (a much less aggressive plan) despite controlling the House (large majority) and Senate (60 seats).
* Bank of America, Merrill Lynch, Industry Overview | March 2019