Insurance Companies For All
Some Americans (idiots) think the private sector can do it better and cheaper—so let’s buy some and see how it goes
Medicare For All is an exceedingly popular policy proposal. Recent polling shows 54% of all Americans support it. 21% of Republicans support it, too—which is graded on a curve, as half of Republican voters rooted for the murder cop. But hey: you can’t discount popularity.
The reason we’re not living in a Medicare For All utopia is that an extremely narrow percentage of the population controls all the levers of lawmaking power, and they are perhaps a bit influenced by those large corporate entities who stand to lose a whole lot of money should universal baseline healthcare completely obviate and kneecap their business model.
So, in the spirit of maintaining the illusion of choice, my proposal is simple: the U.S. Government gets into the insurance business, in addition to maintaining its current role as health care payer of last resort. Ultimately, there are two different approaches that we can take in this proposal:
- The U.S. Government picks a single winner, and throws its scale behind paying all of that insurer’s premiums in an effort to absorb people that don’t qualify for other government health care programs.
- The U.S. Government goes, as the kids used to say like fifteen years ago (oh Jesus I got old) buck wild, and picks all sorts of winners, and replicates that scale to become the market, paying every acquired insurer’s premiums to cover people based on proportionate share of the market.
Let’s look at each scenario and the price tag, because this is a stupid policy, and that’s what we do.
The Uncle Sam Insurance Company Corp, Inc., LLC
Using a very sciencetific approach—i.e., looking at a list of U.S. health insurance companies in alphabetical order and seeing which one was first—I’ve decided on Aetna as our test subject. A subsidiary of CVS Health, Aetna has about 22 million customers receiving medical insurance, and books total annual revenue of about $70 billion. (To be clear, some of this revenue goes to their dental insurance, pharmacy benefit management, and other programs, but I’m being really pessimistic with numbers so the Glenn Kesslers of the world can’t justify more than a Pinocchio or two. For this exercise, I’m going to assume there is near-perfect overlap of medical/dental/pharmaceutical coverage.)
Aetna’s enterprise value—that is, the fair cost of acquisition, counting assets and debts, subtracting liquid assets—hovers somewhere around $70 billion. Combined with their cost of coverage, America racks up a $140 billion price tag in year one, and covers 22 million people out of the box. So far, not so bad. But this is about actually helping people get health care, and not a profit-focused venture. So let’s dig a little deeper.
We need to figure out the serviceable obtainable market for this new United States of Aetna company. Let’s assume that Medicare recipients broadly won’t be jumping ship—which accounts for 61.5 million people as of 2019—as Medicare recipients really like it. Same with the approximately 6 million veterans that get their health care through the VA. In contrast, we will include the approximately 72 million people on Medicaid and 6.7 million kids on CHIP, because it is a reasonable assumption that states would try to direct people otherwise eligible for partially-state-funded programs to fully federally-funded ones. All told, that leaves about 262.5 million people that would be the target for Uncle Sam’s Discount Insurance Depot (placeholder; actual name TBD).
Assuming Aetna’s $60 billion in annual revenue and 22 million covered customers, that’s $2,727 per customer in revenue. Multiplied over 262.5 million people, that’s an annual bill of $722 billion. Now, mind you, that’s 262.5 million people that would end up with coverage while paying zero dollars towards premiums. But this does not, of course, map onto zero dollars towards actual medical care. There are two considerations.
First: cost sharing. Cost sharing has three complicating factors: copayments, deductibles, and coinsurance. The first—copayments—is actually the cost containment measure that’s seen decreased use over the years, shrinking from over half of out of pocket expenses in 2003 to less than 20% in 2018. Over that same time period, deductible payments more than doubled to about half of all out-of-pocket expenses, while coinsurance—the inscrutable provision that requires people to pay a portion of procedures after the deductible is exhausted—stayed steady around 20%. All told, in 2017, the average insured person on a large employer plan (which is Aetna’s wheelhouse) paid $779 for health care coverage beyond premiums, accounting for about 15% of total health care spending of insured people.
Second: medical loss ratio. Under the ACA, larger medical insurers are required to provide at least 85% of premiums on actual medical care or improving services. Any money short of that goal needs to go toward member reimbursement or otherwise hitting that 85% figure.
Given the these two considerations, one thing is clear: premiums alone aren’t capturing the cost of getting people health care. But importantly, whether you look at out-of-pocket expenses or medical loss ratio, napkin math suggests a 15% premium bump would amount to an all-insurance payout—and resulting in a total annual taxpayer bill of $830 billion (with a first-year cost of $900 billion when you factor in the initial acquisition cost).
There are several asterisks. One, some providers wouldn’t ordinarily accept Aetna’s reimbursement rates—the same structural issue many Medicare beneficiaries face. Two, people that generally get employer-provided health insurance are nominally healthier than the cohort of people that rely on Medicaid, which includes those people working lower-paid, more physically demanding and risky jobs, as well as disabled individuals that do not qualify for Medicare. Three, this is stupid and Aetna’s not for sale. But that for sure is not going to stop me.
But even with all those caveats, the above exercise is impractical in that it just substitutes a facade of market solutions, and is really just picking winners (most people) and losers (rich people that are rich because they’re bloodless vultures). Americans allegedly want choice, so goes the complaints against single-payer healthcare. So: let’s get fuckin bananas. Let’s buy a whole damn industry.
Buy ’Em All—Literally, Fucking Buy All Of Them
All the mewling context and bullshit above is still valid, but now we’re doing two other things:
- Identifying the biggest insurers’ share of market; and
- Extrapolating those same costs per user for the federal government.
We’ve already done the envelope math for Aetna, so now we’re just backfilling in for other insurers: some larger, some smaller, all with healthy enterprise values and large member bases. For ease of, well, easiness, I stuck with the top five health insurers, and imagined scaling them up so that they subsume all non-Medicare beneficiaries. Here’s the breakdown:
Year one would be relatively more expensive with all of those acquisition costs, but those are one-time expenses that shrink to rounding errors when annualized over the life of This Incredibly Stupid Plan. The cost of full coverage—again, including a 15% bump in spending to account for erstwhile cost-sharing—would nevertheless amount to significant savings. Really significant. About 40% cheaper than current annual health care expenditures across the board when you add Medicare costs back in.
This proposal gives Americans an illusion of choice just as illusory as the one they get now with for-profit insurance entities—but with more bureaucratic bloat. Meaning that it is not only a solution for health care coverage, but it’s a jobs guarantee program for the health insurance industry.
What’s the Point?
Is this proposal better than Medicare For All? Of course not. Increased access to medical care is great, but it can’t provide full dental coverage, or prescription drugs, or durable medical equipment, or nursing home care. Ultimately, this exercise should illustrate a.) that for-profit insurance companies are not the optimal vehicle for health care delivery and b.) actually providing people health insurance, even if done in an incredibly stupid and uncreative way, is way more affordable than otherwise advertised.