Just One Thing, Mr. Whitcomb

In a signed editorial that doesn't appear to be online, Providence Journal Editorial Pages Editor Robert Whitcomb suggests that the simple solution to America's healthcare problem is to expand Medicare to encompass everybody:

The Republicans will do anything but go to thye simplest, most cost-effective reform — putting everyone into Medicare. The latter's overhead: 2 percent; for-profit insurance companies': 25 percent. Why must everything in health care be done in such complicated and expensive ways? The reason is simple: Because rich and powerful people profit from the current arrangements. ...

... Americans are hungry for such reform. As it is, America has the worst healthcare system in the developed world — it's unfair, unbelievably inefficient and complicated, and grossly expensive. The best way to reform it is to disconnect health insurance from the workplace and to make sure that everyone is in the same national pool — the healthy and the unhealthy. That's what makes insurance plans fair and efficient, not the current cherry-picking arrangements.

In short, extend Medicare to everyone. And for minor medical problems, people should pay out of their own pockets, which would act as an economic discipline. The invisibility of real costs to many people with insurance has driven up overall costs. Medicare, like all insurance, should be for serious problems.

Clearly, Mr. Whitcomb is not proposing just an extension of Medicare, as it exists, to everybody. He would limit insurance to "serious problems" (I agree). He would require people not to insulate themselves from the process that turns their money into the health services that they use (again, I agree). He would disconnect health insurance from employment. Ah, now there's the thing.

A quick refresher on how Medicare is funded:

The two parts of traditional Medicare are funded in very different ways. Part A, which covers in-patient hospital bills, is financed by a trust fund known as the Hospital Insurance Fund (HI Fund).

The 1.45 percent that the government deducts from your paycheck -- and also from your employer -- is placed in the HI Fund to cover Part A services. This payroll tax provides the bulk of the money that flows into the HI Fund; that money is in turn used to cover Part A expenses.

Part B, which covers doctor appointments, is run by a separate trust fund, called the Supplemental Medical Insurance Trust Fund (SMI Fund). Enrollee premiums and funds from the general budget supply the SMI Fund, which then pays for Part B services.

So, for Part A, you currently pay 1.45% of your salary and your employer pays the same amount again on your behalf, as it were. The link between healthcare and employment remains as a function of Medicare's structure. Now consider that this money associated with your salary currently covers just over 25% of a senior's healthcare. By 2075, every two workers will be paying for a single retiree, so the percentage of salary will have to go up to roughly 6% (employee and employer contributions) to maintain the equivalent services.

Were everybody to dive into the Medicare pool, the ratio would become approximately 0.8 workers per recipient, making the percentage contribution a little under 13% of salary. Sharp readers will have noticed that I've forgotten an additional consideration that I haven't the time to work through, just now: If Medicare covered everybody, each worker would also be paying for those who are unemployed, whether they are adults or children. My guess is that the percentage of salary would increase to an amount at least as high as the combined contribution that my employer and I currently make to my healthcare. In other words, "including everybody in Medicare" isn't but so different from requiring all employers to offer healthcare to their employees' families, with an additional fund for unemployed and retired adults.

And nothing above addresses the increased cost of "enrollee premiums and funds from the general budget" that would have to be raised via taxes for Part B. I don't know from where Whitcomb took his overhead numbers, but it isn't at all clear to me that my cost — taking myself as an example of exactly the sort of head of struggling household whom healthcare costs could easily break — would improve, as an absolute matter or in relation to services.

Worse yet, the risk is surely tremendous that the system would change when it shifts from covering a minority to being the only game in town — and one run ultimately by politicians. Who will decide what are "minor medical problems"? Who will decide from whom it is proper to demand payment for non-emergencies? The answer cannot be other than "rich and powerful people," back again, but with a government-sanctioned monopoly.