The-Ave.US

Jon Walker’s series on health care and the path to universal, affordable coverage in the United States.

PART 1

This is a critical moment for the future of health care. President Barack Obama’s market-based Affordable Care Act (ACA) has simply not lived up to many of its big promises, and House Speaker Paul Ryan’s politically toxic American Health Care Act (AHCA) would make things comically worse.

A lot of people were let down by the ACA as many empty promises were made that left many in a worse situation. Millions of people either had to still buy private health insurance or hope that their employers would buy one of the plans from somewhere like Sana Benefits as a perk. With this being said, AHCA will put even more people n dire healthcare situations.

The AHCA proved, despite President Donald Trump and congressional Republicans’ big claims, that Republicans have no plan or desire to create a better health care system to address the American people’s needs.

This is an important moment for an honest assessment of how we could adopt a proven system that would actually deliver affordable universal care and the many hurdles standing in the way. This is the first article in a series, which will attempt to provide such an assessment.

Trump was able to successfully campaign on a new health care plan that would be “something terrific,” implying with his attacks on the ACA that he could lower drug prices, premiums, and deductibles. There is such a pent-up demand for these problems to be addressed that the public was willing to listen to a charlatan, who almost immediately proved to lack any real solutions.

Even under the ACA, many people find the health care system deeply confusing. They lack coverage, face outrageous surprise bills, or struggle to afford the premiums and out-of-pocket costs.

Among adults with insurance, 43 percent say they have difficulty affording their deductibles, half worry about affording care, and a third have had family postpone care because they could not afford the costs of treatment.

The public is potentially ready to consider implementing an alternative system. Polling shows a clear majority support a federally funded healthcare program providing insurance for all Americans. Fifty-eight percent favor an “universal form of Medicare-for-all.”

But getting from where we are now to a truly universal and affordable system is not going to be easy; if it was, it would have happened already. There are financial, political, and legal hurdles, as well as massive entrenched industries that will need to be confronted.

What is needed is a proper understanding of the goal, the options for how it can be achieved, the obstacles that will need to be overcome, and the way to push for reform.

Choosing words carefully

The United States spends dramatically greater percentage of GDP on healthcare than other countries with universal health care systems. Yet, the U.S. covers fewer people, provides less care, and there are worse public health outcomes.

If we want to make meaningful progress on these issues, affordable universal health care must have a defined meaning to make any fight real or else vague terms will be exploited.

Back in 2010, President Obama and Democrats distorted the English language when selling the Affordable Care Act as both “universal” and “affordable.” It was called universal, even though at the time Congressional Budget Office (CBO) said millions of americans would still be uninsured. It was called affordable despite the fact that its design inherently meant some people would face premiums even the law defined as unaffordable.

Similarly, some people having “insurance” they don’t feel they can afford to use was conflated with actual care.

While Democrats abused the language of health care reform, Trump went even further. He took it into a backroom to torture it until it would say “2 + 2 = 5.”

Just before taking the oath of office, Trump vowed his goal was “insurance for everybody” before immediately turning around to push for a replacement measure that would dramatically increase out-of-pocket costs for many and cause 24 million more Americans to be uninsured.

“Care” needs to be defined as access to emergency services and a minimum level of basic medical needs within a reasonable timeframe. The ACA had a decent definition for the minimum level of medical care, but it just didn’t make it affordable. Insurance you can’t afford to use is not really care.

In response, some Republicans are trying to redefine what counts as basic care in the name of “affordability,” but insurance you can afford, because it doesn’t provide basic medical care, is even more useless.

“Affordable” must mean that making use of this basic level of medical care wouldn’t create a financial hardship. In the simplest terms, this means no one in the system seriously concerned about a health issue should be discouraged from seeking care due to cost.

This is one of the greatest shortfalls of the Affordable Care Act. Even with the subsidies, a 45 year-old making just $40,000 a year is expected to pay nearly 10% of their income in premiums for a plan with a deductible around $3,500 and an out-of-pocket limit of $7,150 for covered in-network services.

The amount doesn’t cover all possible medical expense, and there is the real possibility that even if you do your due diligence to go to an in-network hospital you might end up with a surprise medical bill from an out-of-network doctor at the hospital. Any affordable system needs to prevent this type of abuse.

Besides what they pay in taxes, people in many countries are expected to pay basically nothing out-of-pocket for basic medical care. Most out-of-pocket health care spending is for uncovered services like dental or nominal co-pays for doctor visits or prescription drugs. For example, in Sweden in 2015, the annual out-of-pocket limit for medical visits is roughly $123 and $246 for prescription drugs.

The Netherlands and Switzerland have two of the most “market based” health care systems in Europe. In the Netherlands, middle class people that don’t qualify for subsidies have a deductible equal to $415 and even that is seen as too burdensome to many political parties there.

In Switzerland, subsides cap your premiums at 8 percent of income and the highest deductible plan you can choose has a deductible of effectively $2,500 and further coinsurance spending limited to an additional $700. In addition, for all plans, maternity care is covered with zero out-of-pocket cost. These high deductible plans are meant almost exclusively for young adults to lower their premiums. Most people in Switzerland simply choose to pay slightly higher premiums for plans with a deductible of just $300.

Making our system at least as “affordable” for all middle class Americans as the highest out-of-pocket plan in the European country with the highest out-of-pocket costs should, at least, be seen as an absolute minimum benchmark.

With 62% of Americans reporting they would have trouble coming up with the cash for a $500 emergency, it may make sense for the country to adopt a plan that makes essential care cost-free, aside from nominal co-pays.

To adhere to our definition of ‘affordable,’ the out-of-pocket limit at worst shouldn’t exceed one biweekly paycheck. And even that amount would still be a burden for many since unexpected health care costs often come hand-in-hand with a loss of working hours.

“Universal” at minimum should mean a system that provides a basic affordable care for effectively all citizens and legal residents at a reasonable price. Ideally, this would mean a system that would automatically enroll everyone, but there is minor leeway.

There are always a few individuals who choose to live off-the-grid or have strong religious beliefs who may refuse coverage, but a universal system must be defined as one that is actively providing basic care to everyone who wants it, at a price they can afford.

Under even some decent international systems, enrolling every single person can be impossible. For example, Belgium, Switzerland, and the Netherlands have an uninsured rate around 1%. In policy terms, that means the goal should be a plan the CBO scores as covering at least 99%.

Affordable universal care can be treated as a buzz phrase. It needs to be a clear and defined bench market that we can work towards. Otherwise, it is always going to be politically easier to simply redefine “affordable” or “universal” than making the tough changes our system needs.

Fortunately, there are plenty of models from other countries that show how we can achieve affordable universal care.

The next part of the series will focus on how other countries use different methods to achieve this goal and what would need to happen to move the United States in that direction.

PART 2:

There are three general types of universal health care systems. Each system, which other industrialized democracies rely upon, has its quirks.

It is critical to understand what makes each system unique when organizing for universal health care in the United States. For decades, politicians from the Republican and Democratic parties have cited often heard claims about the downfalls of single-payer health care to protect health insurance companies.

Unraveling for-profit health care will continue to be difficult if citizens remain uninformed on how different universal systems truly function.

Socialized medicine

Examples: United Kingdom, Norway, and Denmark
Closest American analogy: Veterans Health Administration

In simple terms, this is a system where a significant portion of the health care system is directly owned by the government and many specialist doctors are government employees. Money to fund it is collected via taxes. In most places, citizens are enrolled automatically and anyone who is part of the system can enter a government hospital and get treatment.

Even under these systems, not everything is directly owned by the government, nor are health insurance companies completely eliminated. Primary care providers are normally private entities paid by the government based on the amount of service they provide.

For example, in places like Norway and Denmark, some people have private insurance/supplemental insurance often through their employers, which lets them use private facilities for faster treatment or non-covered items.

The closest thing the United States has to such a system is the Veterans Health Administration, which is socialized medicine for veterans. It theoretically could be expanded to everyone, but replicating it population-wide would be a significant lift. Only about 15 percent of hospitals are public in the United States. It would require building a new public hospital system parallel to the current system or nationalizing a large number of facilities.

Single-payer

Example: Canada
Closest American analogy: Medicare

The government collects taxes and uses the money to run an insurance company, in which everyone is automatically enrolled. People visit medical facilities and providers are reimbursed by the government, which directly decides what it will pay and what is covered. Hospitals can be a mixture of public, non-profit, or for-profit facilities.

Single-payer systems do not fully eliminate the concept of private insurance. In Canada, roughly two-thirds of the population has supplemental private insurance coverage for things the government doesn’t cover, like vision, dental, and private hospital rooms.

Some systems let people buy-in to a parallel private insurance system. It is very similar to how Medicare is run in the United States; many people on Medicare buy supplemental private insurance (i.e. Medigap) or select alternative private insurance (i.e. Medicare Advantage).

This would be a significantly easier transition, easier being a relative term. Just over one third of the country is already covered by Medicare, Medicaid, or Tricare. Medicare or Medicaid could be expanded to cover more and more people.

All-payer

Examples: Belgium, Japan, Germany, Switzerland
Closest American analogy: Federal Employer Health Benefits, ACA exchanges

In general terms, all-payer systems have a number of highly regulated private insurance companies that people can choose from or be assigned. Insurers are normally required to be non-profit, and there is some mechanism to compel people to sign up. The system is funded by general taxes, payroll fees/taxes, and/or premiums.

The government does most of the critical work that it would under a single-payer system but indirectly through regulation. It decides what needs to be covered, how plans are designed (to extreme detail), how the risk is spread between insurers, what can be charged, what is covered, how bills are processed, and how providers are reimbursed.

That is how they achieve the efficiency and low administrative costs similar to single-payer systems.

All-payers pay the same, using the same billing process. Additionally, the government uses significant risk adjustment to redistribute up to half of all premium dollars among the insurers based on who they sign-up.

This is a critical task that needs to be done right so insurers compete on quality instead of competing on how best to avoid covering sick people. The latter is a lot easier and what allows American insurers to excel.

In these systems, the insurers range from very tightly regulated utilities to entities that are basically nothing more than large cooperative bank accounts under de facto government control.

There is no real analogy for all-payer in America. Supporters of the Affordable Care Act have repeatedly claimed the exchanges were similar, but they are starting to admit they were similar in the way that a goldfish is similar to a great white shark because they both are fish.

The ACA gave the insurers large subsidies and the individual mandate, forcing people to be their customers without extracting the same major concessions as Switzerland when they adopted their system.

Our private insurance system lacks the heavy standardization, strict regulations, requirement for basic insurance to be not-for-profit, strong risk adjusters, and most importantly the all-payer rules that make other systems work.

All-payer requires significant regulation

Without the government creating a global reimbursement rate for all insurers, we have hundreds of insurers individually negotiating with thousands of providers for possibly millions of different payment rates. It creates a massive administrative burden, reduces competition, and empowers providers.

Moving our private insurance sector towards a functional all-payer system would rely on the government adopting laws massively expanding regulations over the health care industry-complex regulations that are essential but almost unknown to the public and not well understood by many so-called health care wonks.

It also requires federal and state administrations with the funding and desire to strenuously enforce them. The current Republican Party’s general opposition to regulation, attacks on risk adjustment mechanisms, and total unwillingness to take part in the ACA’s tiny steps in this direction create real concerns about the viability of this path. Regulations are easier to undo than public programs.

Senator Marco Rubio’s successful fight against the risk corridor provision in the ACA, which he dubbed a “bailout for insurance companies,” is illuminating. This provision was very important because it made the market nature of the exchanges work, but the GOP still opposed it.

In the end, the GOP effectively killed the risk corridor provision and President Barack Obama’s administration let them. The Obama team either did not understand its importance or realized it was too politically difficult to defend. Neither option should make anyone confident about going a regulation-focused route.

One less obvious thing worth highlighting is that even in the most left-leaning countries, private health insurance is not entirely eliminated. It is just relegated to a very modest role as small supplemental coverage or a needless luxury.

The simple fact is that throughout human history people with significant money have found ways (legally or illegally) to get faster and more luxurious services, such as private hospital rooms. Health care is no different, and smart systems find a way to allow this without preventing everyone else from having their basic needs met.

These three systems are not entirely mutually exclusive. Some systems combine elements of two or all three. What is important for success is that every health care action, big or small, has to be judged on whether it moves our system towards one of these or away from them.

A look at what these proven systems would require leads one to the conclusion that some form of single-payer is the most viable and practical path forward for the United States. The transition cost to socialized medicine would be massive, and an all-payer system would almost definitely fail.

PART 3:

Politics is what stops the United States from adopting a functioning universal health care system.

Based on past Supreme Court decisions, there are no constitutional or legal reasons Congress couldn’t simply adopt something like Medicare For All. Similarly, there is no financial constraint. The federal government can easily borrow money for any short term transition costs.

Therefore, it is purely politics, which has left millions without coverage-millions who can’t afford care-and almost everyone dramatically overpaying for their care.

To understand the politics stopping something like Medicare For All, one must understand the lobbying forces stopping it. And to understand that, one needs to understand why America spends a far greater share of it gross domestic product (GDP) on health care than any other country.

It is not because Americans, for the most part, use a lot of health care or live better. For some procedures and medications, the U.S. is one of the best countries for such treatment and care. However, the country has a below-average number of doctors and a below-average number of hospital beds. Life expectancy in the U.S. is also below most industrialized democracies.

Administrative Costs and Overpaying For Services

Since we lack single-payer or even an all-payer system, what the United States has is hundreds of insurers with hundreds of different insurance plans that negotiate with thousands of providers over the price of everything.

Keeping all these different reimbursement rates straight and collecting all these different co-pays and co-insurances creates a massive administrative workload for both insurers and providers.

That means billing departments in America are big and complex. Many medical centers will outsource their billing and payment collections to companies like Precision Medical Billing so that they can handle this for them. However, the lack of a single-payer system makes process medical expenses are much harder to process. For example, traditional Medicare has an overhead cost of 1.8 percent. The average private insurance company has an overhead cost of about 13 percent.

The Affordable Care Act requires only 80 percent of premiums to be spent on care. If private insurance had the same overhead cost as Medicare, Americans would save roughly $100 billion each year.

Even the insurance industry admits, while their profit margins are modest, basically one-fifth of all the premiums they collect are not used on care. It is not the profits of the private insurance companies that drive up costs but the administrative waste created by their existence.

Having so many different payers with different rates and billing processes is expensive for providers. In the U.S., 25 percent of hospital spending is administrative costs, compared to just 12 percent for Canadian hospitals. Cutting that down could save another $100 billion a year.

The reason providers put up with something so chaotic and costly is that it allows them to get away with charging much more. American providers receive dramatically more money for deliveries, hospital stays, and bypass surgeries. American doctors are among the highest paid in the world.

Medicare has such a large pool of patients that it is able to negotiate better reimbursement rates with hospitals. On the other hand, numerous private insurance companies have smaller individual pools and a much weaker negotiating position.

This is what providers like about them. According to researcher Ben Ippolito, the average hospital profit margin on privately insured patients increased from 15 percent in 2002 to 44 percent in 2013. While the massive variation in different hospitals’ list prices has almost nothing to do with cost or quality, they do inflate profits.

The ACA expansion of coverage via private insurance was not just to try to buy the support of insurers. It was also about buying off hospitals by designing the law so that the newly insured would overpay.

This is why one of the American Hospital Association’s (AHA) main goals in ACA negotiations was stopping a public option that would pay Medicare rates.

President Barack Obama campaigned on giving citizens the choice of a government-run insurance plan (the public option) on the exchanges, but as a result of a deal he cut with the hospitals, the public option did not make it into the final law.

The public option was envisioned as a way to effectively let younger individuals buy Medicare coverage.

The AHA reiterated their opposition to it last year during the Democratic convention, stating they had “serious concerns that creating a public option with Medicare-like payments” would “[depress] insurer payments to health care providers.” Expect similar opposition to a functioning all-payer system if providers think it would lower rates.

Waste And Overcharging Is A Bigger Hurdle Than Partisan Politics

These costly inefficiencies in our system create big profits for companies, salaries for tens of thousands of administrators, and create entire markets for auxiliary companies. Industry players are well organized, know their entire business models are at stake, and have some of the biggest lobbying budgets in the country.

Let’s recall: The ACA’s design was not a result of partisan or ideological compromise but rather a product of negotiations primarily with the healthcare industry.

For a telling look at the entire ACA process, it is worth reviewing the original health care expansion proposal offered by the trade association America’s Health Insurance Plans (AHIP) in 2008.

This was effectively the entire health care industry’s vision of how to cover millions more without doing anything that would endanger their profits. The final ACA legislation was very similar to what the private insurance lobby laid out before the congressional negotiations ever started, even though the private insurance industry never fully embraced it.

Back in 2008, Obama campaigned aggressively against an individual mandate. Instead he promised a public option, a national exchange to regulate insurers, to “allow Americans to buy their medicines from other developed countries if the drugs are safe and prices are lower outside the U.S.,” and to “repeal the ban that prevents the government from negotiating with drug companies.”

Such measures would significantly lower costs for regular people by reducing industry profits. None of them were part of the AHIP proposal and none made it into the final law. On the other hand, the individual mandate Obama campaigned against was in the AHIP plan and did make it into law.

Very early in 2009, Obama secretly made a big political trade-off. He chose not to take-on the industry and basically adopted their existing plan instead. He broke his promise to push for proven solutions to bring down health care costs for everyone in exchange for the health care industry’s cooperation.

Specifically, an agreement to spend big on a campaign promoting insurance coverage expansion for the poor was established. He cut a deal with Billy Tauzin, a lead lobbyist for the trade group Pharmaceutical Research and Manufacturers of America (PhRMA), to drop his call for drug re-importation and government direct drug price negotiation. In exchange, PhRMA accepted minor cuts to help finance the ACA and spend $150 million on an advertising campaign.

Obama cut a similar deal with the hospitals in exchange for his promise to let the public option be killed (even as a he still publicly claimed to support a public option).

While the ACA went through more than a year of committee meetings and congressional deal-making, this was mostly a sideshow, which only tweaked the deal. It was broadly an attempt to give the legislation a bipartisan veneer to sell to the public what was already a mostly done deal.

Often the committee meetings were less about real negotiations between members of Congress and more about Obama getting his allies to kill provisions he campaigned on to protect industry deals.

When politicians claim they support the idea of universal care but are worried about whether reform is “politically viable,” oppose it because it will never happen, or think we require an “unique American solution,” what they often truly mean is they do not want to upset these industry players.

Maybe politicians want the industry’s campaign contributions, highly paid board seats, millions of dollars in speaker fees, or a cushy retirement job. Or, perhaps, they just do not want the industry’s campaign dollars spent against them. Last year, Blue Cross/Blue Shield spent at least $13,846,109 on lobbying and AHIP spent at least $6,960,000.

Before Hillary Clinton attacked single-payer as an idea that will “never, ever come to pass,” she was paid $2.8 million by the health care industry for just a few speeches.

Similarly, while former Senator Evan Bayh (D-IN) threatened to hold up the ACA if it wasn’t conservative enough, his wife received $2 million for sitting on the board of a for-profit health insurance company. Then-Senator Joe Lieberman (I-CT), who killed the proposal to let uninsured people over the age of 55 buy into Medicare, received over $2 million from the insurance industry and health care professionals. His wife also previously worked for a lobbying firm that handled health care and pharmaceutical clients.

Back in 2003, before Billy Tauzin was a PhRMA lobbyist, he was a republican congressman from Louisiana who designed Medicare Part D using a convoluted private insurance exchange system that resulted in higher reimbursements for drug companies. It prevented Medicare from directly negotiating for drugs or importation from Canada. Almost immediately, he took a job as a highly paid lobbyist for the drug industry, where Tauzin brokered the aforementioned deal with Obama to prevent the ACA from allow drug re-importation or Medicare drug price negotiations.

In exchange for a $150 million ad campaign from the industry, Obama made a backroom deal with Tauzin to maintain the 2004 backroom deal Tauzin pioneered as a member of Congress, which Obama explicitly opposed as a candidate.

Tauzin was not alone: two dozen other key players behind the Medicare Part D law found similarly lucrative lobbying positions.

How Might Federal Hurdles Be Overcome?

Resistance to change is one of strongest forces in politics. Even if change might improve things for 90 percent of people, many fear uncertainty, and the 10 percent, whose lives will be worse off, find a way to disproportionately make their voices heard.

Many good ideas with broad support have failed because the public feared implementation could go wrong. There is a reason President Obama kept repeating the “you can keep your plan” lie. It addressed this fear.

The failure to address status quo bias has undermined many efforts. Groups often get too focused on selling the long term benefits of their plans when what many people are most concerned about are the short term disruptions.

A significant part of any health care plan should be how to produce a smooth transition. There are ways to do this. For example, you can slowly expand Medicare like the original creators wanted. Cover every child born after the date the legislation is enacted, for example, or lower the Medicare age by two years every year.

The country could also go the route of former Rep. Pete Stark’s old Americare idea. It would basically make a universal Medicare buy-in for companies so appealing almost all businesses would eventually choose it at their own pace.

Advocates could push to expand Medicare to particular groups in need.

Medicare already covers people with kidney failure, and when Sen. Max Baucus (D-MT) wrote the ACA, he had it expand Medicare to all the people in Libby, Montana, who suffered from asbestos exposure.

Ironically, while creating a complex system of inefficient exchanges, Baucus knew Medicare was the fastest and most effective way to help his constituents in immediate need.

Why not push to expand Medicare to everyone in Flint, Michigan because of lead? Or everyone with Crohn’s Disease or everyone with HIV, or everyone in an Appalachian mine town after a mine shuts down?

Demand the solution to every medical-economic problem be “give them Medicare” until it is finally expanded to a critical mass.

The ACA has played a big role in politics moving forward. On one hand, the low quality of the exchange plans has probably killed any public will for expanding the private insurance marketplace. On the other hand, it likely increased public skepticism about the federal government’s ability to create brand new health care programs.

Dealing With Industry Opposition To Universal Health Care

Bribing all segments of the health care industry was the path President George W. Bush and Republicans took with Medicare Part D.

Seniors wanted drug coverage, but the industry hated the idea of Medicare using its strong negotiation position to directly buy drugs. Republicans responded by creating a complicated way to give private insurers money to buy drugs for seniors. It funneled billions to the insurance and drug companies at significant extra expense to taxpayers.

As previously explained, the Affordable Care Act took the path of mostly bribing the system combined with some deal-cutting. One would think bribing would be unnecessary because providers should love a plan to increase the number of people with coverage. But the health care industry feared reforms that would expose how much they are ripping off most people, and that fear outweighed their interest in gaining a few million new consumers.

The industry players did make modest concessions in exchange for massive direct subsidies and having the government force people to buy their products. Yet, the ACA still shows the limit of relying on bribery to get to universal coverage.

Theoretically, it might be possible to use the framework of the ACA to make a relatively affordable universal care system. That would require massively increasing subsidies across the board to really bring down out-of-pocket costs on the exchanges.

Making the exchange plans truly affordable would likely destabilize the entire employer-provided insurance system and undermine a big reason for the ACA’s Rube Goldberg design.

Employers would likely switch people to these massively subsidized and very efficient exchanges, at even greater cost to the government. It could work but would be so expensive it would run into serious financial sustainability issues. There also is no guarantee the insurance industry would behave even with this windfall or without Republicans undermining it.

Directly fighting the entire health care industry would likely produce the best, most cost effective single-payer system. It would be required to bring health care costs all the way down to first world averages. However, it would be a massive political challenge. The only way to fight the industry would be to find a way to convince a large share of the rest of economy that they should join the fight.

President Obama did not try to do this with the ACA. The ACA left the employer-provided system basically unchanged, giving them no reason to fight reform and no reason to fight for it either. As a result, the only real choice was bribing the industry.

Back in 2008, Obama’s campaign rhetoric implied he was going to bring a large swath of the population and the economy to fight the industry for broad reform. That would be the only way to make good on his promise to save the typical family “$2,500 every year”, but he quickly abandoned that tactic and promise.

Cutting deals requires painful and costly compromise but makes things politically easier. One obvious option is to try to cut a deal to split those who actually provide care (hospitals, drug companies, doctors) from the insurers.

For example, a deal could keep most reimbursement rates relatively high so that only private insurers are fought against. Private insurers are the least popular part of the industry and add the least value to the system.

A proposal that only reduced the administrative waste they create would still free up a lot of money to improve care. There is no guarantee that providers would go for this deal, though, since they might fear further cuts down the road.

There is also the question of what to do with Health Maintenance Organizations (HMO) like Kaiser Permanente, which are a combination of providers and insurers. Reformers could reduce industry opposition by creating a special carve-out to allow non-profit HMO plans as an option or deductible-free add-on to a single-payer system, but that would add new complexity. Either way, there are systems like Australia that have a very good universal public health system and a large optional private choice.

The Overall Stakes

Advocates of reform are normally aware of the stakes on their side. Medicare for All would save thousand of lives, give peace of mind to tens of millions, provide greater economic security for everyone, improve international competitiveness for American business, and more.

But advocates often overlook what is at stake on the other side, and real reform will mean destroying some fortunes.

The largest private health insurer has a market capitalization of well over $100 billion. Reform will mean shrinking or even putting companies out of businesses. It will mean making thousands of jobs redundant. While they add no value to our system, they are undoubtedly valued by someone.

Winning the policy argument is not enough. Winning the popular argument is not enough. Real reform will require forging a political coalition willing to break some pretty big eggs to make the omelet. It will need a grassroots movement to build pressure, an intellectual outreach effort to get other segments of the economy behind reform, and politicians to carry the message.

Advocates and organizers will have to fight a battle of inches in order to achieve universal health care.

PART 4:

Attempts to convince states to adopt single-payer healthcare face significant hurdles that are both legal and financial. The failures of single-payer in Vermont and Oregon are prime examples of what must be overcome.

When Gov. Peter Shumlin (D-VT) reluctantly gave up on his plan in 2014, he said, “I have supported a universal, publicly financed health care system my entire public life, and believe that all Vermonters deserve health care as a right, regardless of employment or income. Our current way of paying for health care is inequitable.”

“I wanted to fix this at the state level, and I thought we could. I have learned that the limitations of state-based financing-limitations of federal law, limitations of our tax capacity, and sensitivity of our economy–make that unwise and untenable at this time,” Shumlin added.

There is both a short and long term financial concern for any state health care reform plan, since it would dramatically increase the size of state government.

Based on data from Vermont’s attempt to create Green Mountain Care, a single-payer-like program, adopting such a plan would effectively double the size of the state budget.

While single-payer would save money long-term, any big change will require a large startup cost in the short term.

It was estimated that Vermont needed a one-time $200 million bond issue to have the necessary reserves at launch. Almost all states have some form of balanced budget requirement, and it is much harder for states to borrow money than it is for the federal government.

Uncertainty was one of the most commonly cited fears about the ColoradoCare ballot measure in 2016. The Coloradoan editorial against the measure said, “ColoradoCare leaves too many questions unanswered for the Coloradoan Editorial Board, from both a funding and execution standpoint.”

Theoretically, a state can raise taxes to create the necessary funds and provide universal benefits later, but that tends to be pretty unpopular politically.

The long term budget issue is that the economy is cyclical, but health care needs are relatively constant. The amount generated by revenue sources for a single-payer system, like a payroll tax or sales tax, would drop during economic downturns while health care spending would remain relatively steady.

Needing to raise taxes during a downturn can hurt a recovery. Smoothing these temporary disparities is much simpler for the federal government, with its easy borrowing power, than it is for a state government.

Legal Hurdles Far Surpass Financial Hurdles

The big problem for any state reform is that the federal government already directly (via Medicare, Medicaid, Tricare, and ACA exchange subsidies) or indirectly-through employer-sponsored insurance exclusion and the Employee Retirement Income Security Act (ERISA)-controls most health care dollars. Those dealing with ERISA claims or denials and seeking assistance with the often difficult process may wish to get in touch with lawyers who have experience in this field – John Peace is an ERISA lawyer.

According to Rand’s analysis for Oregon, any true single-payer system would require the federal government to grant numerous waivers to redirect Medicare, Medicaid, and ACA tax credit dollars. These waivers would be tough to get from President Donald Trump’s administration, though not impossible.

ERISA is the 900-pound-gorilla standing in the way of state-based reform. Companies already find it hard to match ERISA compliance which is why brokers get help from companies offering software that will make it easier for them and their clients. It prohibits states from regulating most elements related to self-funded employer-sponsored health plans. According to the Kaiser Family Foundation, 61 percent of covered workers are enrolled in such plans.

The recent Supreme Court case, Gobeille v. Liberty Mutual Insurance Co., shows just how much ERISA can restrict states’ ability to act.

The court found Vermont cannot require self-funded insurers to disclose basic data about claims for their all-payer database. To what degree the vague law would prevent different state reforms is a significant matter of debate that makes any planning difficult.

State-based health care reform would be fairly easy if the state could simply require every employer to buy their employees the state-based, Medicare-like insurance policy or pay a large tax.

Back in 1974, Hawaii adopted a strong employer mandate law that required good private coverage before Congress adopted ERISA so it is exempt from the federal law. The Hawaii plan was fairly straightforward and worked well. ERISA prevents anything like that from happening now.

Unable to directly regulate most employer-sponsored health plans, state based reform plans tie themselves in knots trying to work around it. Most state single-player plans would indirectly but strongly encourage companies to drop insurance benefits and increase wages to make up for it.

Vermont considered funding their plan with a payroll tax because payroll contributions are deductible business expenses.

“This financing mechanism would best preserve the roughly $500 million worth of forgone federal income taxes owing to the current tax treatment of employer-sponsored health insurance,” one report argued.

Theoretically, over the long term this should mostly even out, but “mostly” is not a reassuring political qualifier. The interplay could create some real losers, especially in the short term.

How About A State Payroll Or Sales Tax To Fund Single-Payer?

It is not guaranteed a payroll tax-financed universal health care system would survive an ERISA challenge.

The Rand study for Oregon points out, “Because the single-payer option would provide universal coverage and use payroll taxes to help fund the system, self-funded employers operating in Oregon could argue that the option effectively compels them to discontinue their current health plans and offer alternative benefits.”

“Unless the state were able to obtain a federal exemption from ERISA, the single-payer option would very likely be challenged in court by self-funded employers,” the study adds.

The report indicates a sales tax-financed system might have better legal standing but even that could run afoul. The sales tax route creates the additional problem of how to recoup the money lost due to the federal tax exempt status of employer provided insurance.

To understand why let’s assume that if a state created a single-payer system, most companies would stop compensating their employees by giving them private insurance benefits.

Let’s also assume that instead of partly compensating employees with insurance they would just pay them higher wages. The problem is that, unlike insurance benefits which are tax exempt, these higher wages would be subject to federal tax.

Workers in this state would be sending way more to the federal government, even though their total compensation would not have increased. Getting the federal government to fix this or reimburse the state would be a challenge.

Dealing With The Federal Straitjacket

If activists want to make states their focus in the effort to move toward single-payer, they need to address the legal constraints in addition to the political ones. For example, the state of California is considering a single-payer bill. The plan for running the actual insurance system is sound, but the legislators behind the measure still haven’t figured out how to fund it, which is difficult given constraints created by federal law.

There are three basic options to deal with these constraints:

1) Build a broad base of support in a state where the political establishment is willing to stomach large transitional costs and possible lost revenue for a law that could be undermined by the Supreme Court. This was tried in Vermont but it hasn’t worked yet, although it might in a larger state with a big tax base.

2) Try making a deal with the devil. There is a small chance a bipartisan Congressional deal could be reached to give states greater flexibility to pursue their own reform plans, including a waiver from ERISA. This would make state single-payer relatively easy. Any such deal while Republicans control Congress would likely give red states the flexibility to move in the wrong direction. States like Oklahoma would have the power to adopt some very regressive changes to their local health care system. The alternative is pushing federal law that would only waive ERISA for states pursuing single-payer.

3) Keep goals and proposals within the legal restrictions. It would be possible for states to greatly expand the use of public insurance without risking running afoul of ERISA. An all-carrot approach might convince companies to ditch private insurance.

Rand found Oregon could create a strong public option without a federal waiver. It would have lowered administrative costs and reimbursement rates, making it significantly cheaper than private insurance. If it was open to all companies, it is likely many employers would switch to it. It is not what many single-payer supporters want, but it is achievable in the short term. When most of the state is covered by public insurance, additional reforms become easier.

How The Single-Payer Movement Can Make Progress

This series is not particularly optimistic because optimism is not what enables people to successfully climb Everest. That requires an honest study of the pitfalls, dangers, footholds, and possible routes. Getting to truly universal affordable health care in the United States is a similarly monumental task.

In conclusion, I hope readers recognize two big takeaways. Single-payer or at least greatly expanding public insurance is the most practical and politically viable route.

While a highly regulated all-payer private insurance system is theoretically possible, using private insurance to achieve a truly affordable system without bankrupting the government seems even more politically difficult. The simple fact is public health insurance programs are more cost effective, easier to understand, more popular with recipients, more popular with the public, and harder to undermine.

Efforts to adopt the intense regulation necessary to make the private insurance markets really work would likely be fought as hard by the industry as single-payer, but without single-payer’s popular base. It is still too much regulation for Republicans but too little government to make liberals happy. “We want Medicare-for-all” or even “lower the Medicare age” is a simple and easy message large groups can rally around.

“We want plan standardization, a government centralized billing system, a large risk adjuster equal to at least 30% of premiums, etc…” doesn’t fit on a sign or get people engaged.

The other takeaway is this will be a big political war that requires battling against a large industry with deep pockets. It can be done, but it requires the political equivalent of trench warfare.

The Anti-Saloon League proved taking on large industry is possible in our system. While their goal of alcohol prohibition was misguided, their political tactics were widely effective. They didn’t just focus exclusively on putting prohibition in the Constitution; they worked for years to win hundreds of smaller battles to create the conditions to eventually make the 18th Amendment possible.

The League did not ask if every local bill was “prohibition” or “not true prohibition.” They asked if a bill would politically weaken the alcohol industry or strengthen it. If it would weaken their opponent, the League supported it.

Prohibitionists backed women’s suffrage because they knew women were more likely to support their cause. They supported the 16th Amendment, allowing the federal income tax, to undermine the alcohol industry’s argument that the federal government would not be able to fund itself without alcohol excise taxes. They spent years undermining the economic and political power of the industry directly and indirectly at the local, state, and federal level. It was only after they laid all that groundwork that they won.

The movement for single-payer needs a similar commitment to battles big and small to steadily gain territory.

New lobbying rules and campaign finance reform don’t directly impact health care, but they reduce the lobbying power of the health care industry. Making legislators’ pensions conditional on not taking lobbying jobs would reduce one form of legal bribery that makes reform more difficult.

Improving salaries for regulators would make it less likely they would seek jobs from industries they are supposed to be overseeing. Creating larger, better paid congressional staffs would mean legislators would not need to depend on outside lobbyists so much in crafting policy.

Expanding the role of public health care clinics-as California is considering-marginally reduces the scope of for-profit providers and makes it cheaper to create a universal system. Measures, like raising the medical loss ratio or moving even a small segment of people to public insurance, reduces the private insurance industry’s power.

The focus cannot only be on the goal of single-payer but also on every small step that makes getting to the goal easier.