Medicare for All is a Stalking Horse for a Public Plan Option

John McCracken, PhD

A clear majority of the American public views healthcare as the top priority for Congress, including lowering prescription drug costs (70%), creating a government-administered public plan to compete with private insurance (69%), and protecting patients from surprise medical bills  (56%).  About half (53%) indicate they would favor a single government payer health plan, aka Medicare-for-all.   

Several of the leading Democratic presidential candidates have embraced some version of a national health plan a key component of their campaign platform.  To date, ten legislative proposals have been introduced in the 116th congress, ranging in scope from a voluntary public plan option to a single-payer Medicare-for all.   

By most estimates, Medicare-for-all would cost the federal government between $34 – $36 trillion over the next decade, the bulk of which would represent the direct cost of eliminating premiums, copayments, and other out-of-pocket costs.  To put it into perspective, this estimated cost is equal to approximately 165% of current annual GDP.  

So far, proponents of single payer Medicare-for-all have been reluctant to be very specific regarding how such a plan would be financed.  Recently, however, the non-partisan Committee for a Responsible Federal Budget released its preliminary estimate of how a single-payer initiative could be funded.  The options included:

  • Double the payroll tax to 32% from the current 15.3%.
  • Establish a 25% income tax surcharge.
  • Enact a 42% value-added tax (VAT).
  • Require a public premium in the form of a head tax averaging $7,500 per capita, the equivalent of $12,000 per individual not otherwise on public insurance.
  • Double all individual and corporate income tax rates.
  • Reduce non-healthcare spending by 80%.
  • Double the national debt to 205% of the economy.
  • Impose very high taxes on high earners, corporations, and the financial sector.
  • A combination of the above approaches.

These financing options could conceivably be partially reduced by scaling back Medicare benefits and/or a significant reduction in provider payments.  But regardless of what efforts were made to control costs, each of the above choices would have significant consequences for the long-term level and distribution of U.S. income and economic activity. 

Polling from the late 1990’s through the late 2000’s found that fewer than half the American public favored a single-payer national health plan.  Since 2017, however, when the term “Medicare-for-All” entered the public discussion, polls show that a majority have grown to favor it.  The degree of support, however, has depended on how the question was phrased and whether it was accompanied by an explanation of how single-payer healthcare would be funded. 

It’s easy to predict that once the public becomes fully aware of the funding alternatives described above, support for single-payer health care will erode, likely significantly. Once that occurs, proponents of greater government involvement in healthcare are sure to re-introduce the public plan option. 

History of the Public Plan Option

The idea of a public health insurance option to compete with commercial insurance was first introduced in California in 2001 as an alternative to both expand coverage and drive down costs.  In 2010 it was included in the final House version of the Affordable Care Act, but was voted down in the Senate.  In 2016 the Democratic Platform Committee adopted a plank supporting the creation of a public health insurance option as an amendment to the Affordable Care Act, and President Obama actively campaigned for it in the run-up to the election

Since 2016 a public option has generated considerable support among prominent progressive economists, politicians and media.  Though three quarters (76%) of the American public views employer-sponsored health coverage favorably, a similar high percentage also say they also support a public option.

Once the cost and financing requirements of single-payer Medicare-for-All become widely known, the public could well turn to the public plan option as the preferred alternative to address their concerns about access and affordability.  In that sense, Medicare-for-All is simply a stalking horse for what a large number of those supporting greater government involvement seem to really want, a public plan option. 

John McCracken is Director of the Alliance for Physician Leadership, an educational partnership between the University of Texas at Dallas and The University of Texas Southwestern Medical Center which offers an MS/MBA program in healthcare leadership and management exclusively for physicians.