Medicare for All vs. Public Option: What Makes More Sense for America?

Understanding the Different Democratic Healthcare Proposals

In This Article

Healthcare reform has taken center stage for the U.S. 2020 elections and beyond. Should we make improvements to our current system, transition to "Medicare for All," or consider a public option?

Health care is expensive, and many Americans cannot afford it. People are filing for medical bankruptcy at alarming rates (two-thirds of annual non-business bankruptcy filings are for medical reasons ). Some take other measures. People are delaying care, skipping medications, and risking their lives because they cannot pay their bills. Whether you believe health care is a right or a privilege, something has to change.

Pros and Cons of The Current System

In the current American healthcare system, there are three options: 1) private insurance (e.g., an employer-sponsored plan), 2) a government plan (e.g., Medicare, Medicaid, VA), or 3) a plan from the Health Insurance Marketplace (e.g., an Obamacare plan).

Pros

Before the Affordable Care Act (ACA, aka Obamacare) passed in 2010, private insurers could impose higher costs or outright deny coverage to people who had pre-existing conditions. They could also put significant restrictions on their coverage benefits. The law expanded coverage to everyone, regardless of their medical history, and required that all plans cover essential benefits. Those benefits included ambulatory care (doctor and other outpatient visits), emergency services, chronic disease management, hospital stays, lab tests, maternity and newborn care, mental health care, pediatric care, prescription medications, preventive services, rehabilitation services, and substance abuse treatment.

Simply put, the Affordable Care Act expanded healthcare access. In 2010, the number of Americans without health insurance stood at 45 million. Once the law took effect, that number decreased to 26.7 million by 2016.

Cons

Fewer insurance companies are offering plans in the Health Insurance Marketplace because they are finding it harder to make a profit and those that do are increasing the rates of premiums and deductibles. Middle-class families and individuals that do not meet the income levels for federal subsidies feel they are being priced out of affordable healthcare.

Since President Trump was elected in 2016, there has been a steady rise in the uninsured rate. It can be argued that this corresponds to GOP attempts to repeal the law and uncertainty about the law's future. When President Donald Trump signed the Tax Cuts and Jobs Act of 2017, he eliminated the federal tax penalty for the individual mandate. Without an effectual mandate in place, the constitutionality of the ACA has been brought into question. The law will remain in effect until the case is reviewed by the Supreme Court. At this time, the GOP has not introduced an alternative health plan to replace it.

Pros and Cons of Medicare for All

Medicare for All is a plan for single-payer healthcare in the United States. It would expand Medicare benefits to people of all ages, replace other forms of government-funded health care (e.g., Medicaid), and eliminate private health insurance (e.g., employer-sponsored health plans). Private plans, if they were available, would be for supplemental benefits only.

Pros

Medicare today covers nearly 60 million seniors 65 years and older as well as Americans with qualifying disabilities regardless of their age. Medicare for All would expand coverage to more people, regardless of their age or disability.

According to recent polls, 95% of people who are on Medicare rate their coverage as good or excellent. Medicare for All would offer even more comprehensive benefits, including essential benefits similar to those required by the Affordable Care Act and potentially adding coverage for dental, vision, and even long-term care, services not covered by traditional Medicare.

Medicare today is not free. There are monthly premiums, deductibles, coinsurance, and copays. In 2016, the average person on Medicare spent $5,460 in out-of-pocket healthcare costs. Depending on the plan, Medicare for All may eliminate cost-sharing altogether. Other plans may recommend cost-sharing based on income.

Unlike private insurers, the government is not going to profit from health care. There will not be a CEO making millions of dollars. With a single health plan in place, administrative tasks are consolidated and costs are projected to go down.

Cons

In 2018, national healthcare spending increased by 4.6% to $3.6 trillion. Federal spending on Medicare ($750.2 billion) and Medicaid ($597.4 billion) accounted for 37% of that amount, equal to 6.5% of the Gross Domestic Product (GDP). When you add millions of people to government-funded health care and expand Medicare's current coverage benefits, federal spending is going to rise significantly. The price tag for a Medicare for All plan that covers everyone is estimated to cost $34 trillion over 10 years. An increase in taxes is expected to finance the program.

As it stands, Medicare generally pays healthcare providers and hospitals less than private insurers. The Congressional Budget Office found that private insurance paid 11% to 139% more for 20 specific services. A study by the RAND Corporation looked at hospital reimbursements in 25 states. It found that private insurers paid 156% to 311% more than Medicare.

More doctors could leave the workforce if less income meant they would face steep pay cuts. The Association of American Medical Colleges already projects a doctor shortage of nearly 122,000 physicians by 2032.

There are other drawbacks to Medicare for All. A single healthcare option reduces personal choice and may not cover everything you need. When a service is needed but not covered, you may have to pay out of pocket or seek supplemental insurance. Also, with a focus on keeping costs down, a single-payer system may not be quick to explore newer treatments that may be more expensive or experimental. There would not be the market competition to incentivize it to do otherwise.

Pros and Cons of a Public Option

A public option is a government-run insurance program that people can choose to use instead of a private health plan. It operates in direct competition with private insurance. Both Medicare and Medicaid would continue.

There are different variations on the public option model. One would be run by the federal government, like Medicare, but others could be state-run, like Medicaid.

  • Medicare buy-ins: One model allows buy-ins into the Medicare program. That means people who do not currently have access to Medicare would be able to enroll in the program if certain conditions are met. As it stands, Medicare eligibility begins at age 65 but many proposals suggest decreasing the age to 50 years old. Other plans may be more inclusive and allow a buy-in at any age. Other proposals focus on employers, rather than their employees. They would allow small businesses that offer health care to their employees through Obamacare to opt for coverage through Medicare instead.
  • Other models: Another public option approach would be a Medicaid buy-in program, a merger of Medicaid with Obamacare, expansion of Obamacare, or a new health plan altogether. Medicare, however, may be an easier target since it is an established plan that is already run by the federal government. Although Medicaid is partially funded by the federal government, it is run by the states and each state has a different plan. That adds a layer of complexity to using Medicaid as a public model for the nation at large.

Most public option plans would automatically enroll people who qualify for other low-income programs like the Supplemental Nutrition Assistance Program (SNAP) or Temporary Assistance for Needy Families (TANF). This would assure that people most in need would have access to care.

Pros

Many people get healthcare coverage through their employers. They do not pay the full cost of their premiums because their employer subsidizes part of the cost. When you leave your job or otherwise lose your health insurance, it may be difficult to get on a new health plan in a timely manner. There is always the option to continue on your employer-plan under COBRA but you would pay the full premium rate in addition to a 2% service charge. Quite frankly, the cost is out of range for many people. Instead, many people stay with jobs they do not like because they cannot afford to lose their insurance.

As it stands, people on employer-sponsored health plans are not eligible for tax subsidies but people on Obamacare plans are. A public option would qualify for tax subsidies as well. This could help decrease overall costs, making the public option competitive with the low rates offered by employer-sponsored plans.

Another advantage is that a public option can drive down costs in the private sector. By virtue of its size, the government may have more leverage to negotiate rates with hospitals, doctors, and pharmaceutical companies than private insurance companies. In order to remain in business and turn a profit, private insurance companies will have to offer quality health care at competitive rates. They may entice potential customers by offering more comprehensive benefits than the public option.

Cons

Like anything new, it is going to cost money. A public option, however, would cost the federal government significantly less than Medicare for All. Rather than relying heavily on taxes, a public option will require you to pay monthly premiums to finance the program. People who are unable to afford those premiums would be able to cut costs by use of tax credits.

Where Do the 2020 Democratic Presidential Candidates Stand?

Medicare for All

Sen. Bernie Sanders (I-VT) is the only candidate who proposes an all-or-none Medicare for All plan. In his plan, private insurance would be eliminated and Medicare coverage would be expanded to all Americans, replacing all other federally-funded programs. Cost-sharing would be limited to an annual $200 deductible for prescription medications. Otherwise, there would be no premiums, deductibles, coinsurance, or copays.

Public Option

With the following plans, Medicare, Medicaid, and private insurance, including employer health plans, would remain in place.

Former Vice President Joe Biden: The public option he proposes would be available to people eligible for Obamacare marketplace plans, people on employer-sponsored health plans, and adults who fall in the Medicaid coverage gap (e.g., they do not qualify for Medicaid or federal subsidies). People who qualified for coverage under Medicaid expansion could be moved from Medicaid to the public option. The Biden plan would expand tax credits to people across all income brackets so that premiums do not cost more than 8.5% of income. Anyone earning less than 138% of the federal poverty level (FPL) would pay no premiums. Uninsured individuals in coverage gap states would be automatically enrolled.

Candidates who have dropped from the race offered these proposals:

  • Former South Bend, Indiana Mayor Pete Buttigieg: The public option he proposes would be available to people eligible for Obamacare marketplace plans, people on employer-sponsored health plans, and people on Medicaid. Employers could also buy into the plan. Similar to the Biden plan, subsidies would be offered to decrease premiums to 8.5% of income, no premiums would be required for people earning less than 138% FPL, and uninsured individuals in coverage gap states would be automatically enrolled. Buttigieg would also put a cap on out-of-pocket Medicare expenses.
  • Former New York City Mayor Michael Bloomberg: He proposes a public option that focuses on people who are uninsured or who fall into the Medicaid coverage gap. Like Biden and Buttigieg, he would use tax credits to cap premiums to 8.5% of income. He would cap out-of-network expenses to 200% of Medicare rates.
  • Sen. Amy Klobuchar: She proposes using a Medicare and/or a Medicaid buy-in as a public option. She would also increase tax subsidies for Obamacare marketplace plans to decrease premium costs and would create a refundable tax credit for long-term care costs.

Medicare for All and Public Option

Sen. Elizabeth Warren (D-MA) supports both Medicare for All and a public option. Specifically, she would initiate a public option in her first two years of office that would decrease the Medicare eligibility age to 50 years old. Her plan would also enroll all children 18 and under and would be free of charge to anyone making less than 200% of the federal poverty limit. Others would face cost-sharing with premiums capped at 5% of their income. The plan would cover 90% of medical costs (Medicare only covers 80%). She would then pursue Medicare for All in her third year of office, eliminating private insurance and cost-sharing altogether.

A Word from Verywell

With millions of Americans uninsured or unable to pay for health care (even whey they have insurance), it is important now more than ever that we address the need for healthcare reform. Democratic proposals for Medicare for All and a public option have been debated on the way to the 2020 Presidential Election. Understanding how these proposals would work in the real world may help you decide how you want to vote.

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