ROCHESTER, Minn. -- With a pair of recent victories having established Vermont Sen. Bernie Sanders as the current Democratic Party frontrunner, and with the longtime political outsider mostly polling even or ahead of President Donald Trump, the candidate's call for a single-payer healthcare plan -- also known as Medicare for All -- has quickly become elevated from fringe proposal of the political left to a legitimate and potentially transformational policy proposal deserving closer scrutiny both locally and nationally.
As outlined, the plans offered by Sanders and other presidential hopeful Sen. Elizabeth Warren, D-Mass., would likely raise taxes on corporations and the wealthy, if not necessarily the middle class, while doing away with private insurance premiums, deductibles and copays. Further complicating its global balance sheet of gains and losses, Medicare for All would potentially add trillions in new federal spending while relieving Americans of trillions in healthcare expenditures.
It's even possible this trade-off in outlays and revenue leads to savings.
"Taking into account both the costs of coverage expansion and the savings that would be achieved through the Medicare for All Act," as an analysis by the Yale School of Public Health reported this week in the journal The Lancet, "we calculate that a single-payer, universal health-care system is likely to lead to a 13% savings in national health-care expenditure, equivalent to more than $450 billion annually."
What remains to be determined is how a policy doing away with private insurance and all of its employers and operations would affect a robust healthcare marketplace long accustomed to pitting payers against providers in opaque negotiations over pricing. It is a system that has made American physicians and healthcare administrators among the highest-paid in the world, and one that has delivered eye-popping operating margins like those posted this week by Mayo Clinic, which last year made over $1 billion dollars in earnings for the first time in its history.
According to the clinic's latest audited financial statement, of that $11.6 billion in revenues recorded by the health system during 2019, the clinic took in roughly 60 percent of its $11.6 billion in revenue (or $6.9 billion) from private insurance. Public payers chipped in just 28% of total medical services revenue at Mayo last year (for $3.2 billion), and patients paying cash contributed the remaining 12%. This same filing notes that $379 million earned by the clinic from Medicaid still left it $495 million short of costs, overhead that smaller healthcare providers do not share.
While Mayo Clinic spokespersons could not produce an average shortfall the clinic receives from public payers under its high-cost operating structure, American Hospital Association studies show that nationally, Medicare and Medicaid pay hospitals 86 and 88% of their costs respectively, with private insurers paying one and half times hospitals' cost. With Mayo getting 60% of its revenue from contract payments that routinely overpay, what happens if that sum is reduced by 14% or more?
"I think that in its purest form, Medicare for All, especially for a health system that relies on billing commercially-insured patients two-to-three times what they received for Medicare, that's very bad news for those health systems," said independent healthcare analyst Allan Baumgarten.
"There was a Rand Corp. study a year ago which said that across 20-some states, the amount paid by commercial insurance companies to two hospitals for inpatient care averaged 241% of that paid by Medicare," Baumgarten said. "So it would not surprise me if Mayo Clinic was billing at least 200% of Medicare to its commercial patients, or its self-pay patients."
Mayo spokespersons said the clinic plans to make do in any electoral outcome.
"Regardless of the candidates’ various proposals," said Mayo Clinic spokesperson Dusanka Anastasijevic in an email Wednesday. "Mayo is constantly working on driving down waste and increasing efficiencies in order to offset the rates offered by Medicare and Medicaid, which often fall short of the cost of treatment."
Baumgarten said that while hospitals could see their payments reduced under a single, national payer system with the power to determine costs, providers like Mayo would also see savings under Medicare for All.
"Right now, all these health systems have huge back offices of people where all they do all day is bill and fight with the insurance companies about preauthorizations and coding and how much they should get paid for something," he said. "In its purest form, Medicare for All makes all that and the burden of bad debt go away -- the losses when somebody comes into your hospital with insurance but has a high deductible, can't afford to pay, and you have to write that off as bad debt."
"I have no numbers to support this," he added, "but I'd say that overall, it's potentially a big blow to the revenue of the health systems, albeit partly offset by some savings through the reduction of adninistrative expenses and bad debt."
The overnight support for single payer has actually been decades in the making. The late Minnesota Sen. Paul Wellstone called for some version of single payer in 1993, and a group known as Physicians for a National Health Plan called for single payer in the American Journal of Public Health in 2016.
Complicating the picture, the majority of those who support single payer mistakenly believe they could keep their current insurance under a national health service according to the Kaiser Family Foundation, but also mistakenly believe they would continue to pay deductibles and copays under single payer. In actuality, Medicare for All would abolish both private insurance plans and its deductibles, suggesting that the errors held about a possible single payer future stand to both diminish and increase support for the policy.