Medicare is the new third rail of American politics, but the Democrats running for president don't get it.
The most significant outcome of the third Democratic debate had nothing to do with the competing candidates. It concerned the central Democratic proposal of the campaign: mandatory Medicare coverage for all.
This proposal, which has come to define the dominant Democratic left, stands discredited after the debate. The consensus, even among Democratic candidates, is that it costs too much and will strip 150 million people of their private health insurance coverage. The more Democrats become wed to mandatory Medicare as their key issue the more they will be unacceptable to voters.
The kinder, gentler alternative — the public option, which would create a government-designed and -subsidized insurance company to compete with private firms — won't fare much better. It won't take long to figure out that, with a public subsidy, the public insurance company — the so-called public option — will out-price and out-compete the private alternatives, creating just the sort of public sector monopoly it is supposed to avoid.
But the real weakness of the Democratic proposal — and the issue that spells disaster for the party — is what Medicare for all will do to Medicare for the elderly. Giving Medicare to almost 200 million Americans will swamp the system and destroy it. Medicare for all means Medicare for none.
The reason Medicare works so well and the elderly beneficiaries love it so is that it is an entitlement program. The bureaucrats who run it are conscious of the fact that the patients it assists are stakeholders who have paid into the system for decades. When a claim is filed, someone is asking to use the money they have paid into the system during their entire working lives.
So Medicare rarely says no and usually lets doctors and patients choose their own course of care with minimal intrusion. And it normally reimburses providers very generously, usually paying about 80% as much as private insurance. So almost all doctors and hospitals gladly take Medicare.
But if the system were to become saddled with more than 100 million people who may not have paid into the system (and certainly have not paid as much as a 65-year-old has), it becomes a welfare program akin to Medicaid. Instead of giving you back your own money, it taxes Peter to pay Paul.
As such, it is subject to tight restrictions and limits on what treatments will be covered and how long hospital stays can be. Typically, Medicaid reimburses only 72% of what Medicare pays for the same service. With Medicare itself covering only about 80% of the fees paid by private insurance, that comes to barely 57% of the cost.
If Medicare were to be extended to everyone, the system would have to try to dumb down reimbursement rates to save money as Medicaid does. Doctors would refuse to treat Medicare patients, and hospitals would not admit them. Even outpatient and emergency room care might be curtailed and unavailable.
And the Medicare trust fund, which is now scheduled to run out of money in seven years, would likely be broke before the president who is elected in 2020 finishes his first term. It could not handle the massive influx of new claims were the coverage extended to all Americans.
Medicare for all equals Medicare for none and Medicaid for all.
Politically, the elderly will be livid at the Democrats who are willing to end Medicare as we know it. Their revenge at the polls will be a very consequential factor in the looming Democratic defeat of 2020.
Medicare is the new third rail of our politics, and none of the Democrats running for president get it.
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