PARALLEL UNIVERSE: Robert Reich Speaks Out Again on 'Medicare for All' Saying It's Not the Problem -- It's the Solution

By David M. Kinchen
Robert Reich
Robert Reich
 Editor's note: This updates my June 6, 2011 column, which in turn updated my May 28, 2011 column on Medicare for all -- a subject on which I've blogged repeatedly (If I blog anymore on this self-evident solution to our broken health-care system, I'll go blind!)  So I'm quoting liberally from Robert Reich's July 23 blog, which states that "Medicare Is the Solution, Not the Problem" to what ails the nation's broken health-care industry.

 Not only is Social Security on  the chopping block in order to respond to Republican extortion. So is Medicare.

But Medicare isn't the nation's budgetary problems. It's the solution. The real problem is the soaring costs of health care that lie beneath Medicare. They're costs all of us are bearing in the form of soaring premiums, co-payments, and deductibles.

Medicare offers a means of reducing these costs -- if Washington would let it.

Let me explain.

Americans spend more on health care per person than any other advanced nation and get less for our money. Yearly public and private healthcare spending is $7,538 per person. That's almost two and a half times the average of other advanced nations.

Yet the typical American lives 77.9 years -- less than the average 79.4 years in other advanced nations. And we have the highest rate of infant mortality of all advanced nations.

Medical costs are soaring because our health-care system is totally screwed up. Doctors and hospitals have every incentive to spend on unnecessary tests, drugs, and procedures.

You have lower back pain? Almost 95% of such cases are best relieved through physical therapy. But doctors and hospitals routinely do expensive MRI's, and then refer patients to orthopedic surgeons who often do even more costly surgery. Why? There's not much money in physical therapy.

Your diabetes, asthma, or heart condition is acting up? If you go to the hospital, 20 percent of the time you're back there within a month. You wouldn't be nearly as likely to return if a nurse visited you at home to make sure you were taking your medications. This is common practice in other advanced countries. So why don't nurses do home visits to Americans with acute conditions? Hospitals aren't paid for it.

America spends $30 billion a year fixing medical errors - the worst rate among advanced countries. Why? Among other reasons because we keep patient records on computers that can't share the data. Patient records are continuously re-written on pieces of paper, and then re-entered into different computers. That spells error.

Meanwhile, administrative costs eat up 15 to 30 percent of all healthcare spending in the United States. That's twice the rate of most other advanced nations. Where does this money go? Mainly into collecting money: Doctors collect from hospitals and insurers, hospitals collect from insurers, insurers collect from companies or from policy holders.

A major occupational category at most hospitals is "billing clerk." A third of nursing hours are devoted to documenting what's happened so insurers have proof.

Trying to slow the rise in Medicare costs doesn't deal with any of this. It will just limit the amounts seniors can spend, which means less care. As a practical matter it means more political battles, as seniors - whose clout will grow as boomers are added to the ranks - demand the limits be increased. (If you thought the demagoguery over "death panels" was bad, you ain't seen nothin' yet.)

Paul Ryan's plan - to give seniors vouchers they can cash in with private for-profit insurers - would be even worse. It would funnel money into the hands of for-profit insurers, whose administrative costs are far higher than Medicare.

So what's the answer? For starters, allow anyone at any age to join Medicare. Medicare's administrative costs are in the range of 3 percent. That's well below the 5 to 10 percent costs borne by large companies that self-insure. It's even further below the administrative costs of companies in the small-group market (amounting to 25 to 27 percent of premiums). And it's way, way lower than the administrative costs of individual insurance (40 percent). It's even far below the 11 percent costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.

In addition, allow Medicare -- and its poor cousin Medicaid -- to use their huge bargaining leverage to negotiate lower rates with hospitals, doctors, and pharmaceutical companies. This would help move health care from a fee-for-the-most-costly-service system into one designed to get the highest-quality outcomes most cheaply.

Estimates of how much would be saved by extending Medicare to cover the entire population range from $58 billion to $400 billion a year.  More Americans would get quality health care, and the long-term budget crisis would be sharply reduced.

Let me say it again: Medicare isn't the problem. It's the solution."

* * * Right on, Dr. Reich!  (I know, his doctorate is a Ph.D., but he's the kind of doctor who can fix our medical-industrial complex!)  As I said back in June:

Republicans are slow learners but -- in the wake of May's GOP defeat in a special election in Upstate New York where Democrat Kathy Hochul defeated a Republican in a solidly GOP district -- they may finally discover that Medicare is really a deadly "Third Rail" that will electrocute anyone who touches it. 

President Clinton's labor secretary Robert Reich cites the district's rejection of Rep. Paul Ryan's  (R-WI) Medicare "reform" plan in his blog, repeating an idea that he's proposed before and which I cited in my Jan. 27, 2011 Parallel Universe column in which I praised Reich. And, to top it off, one of the world's most respected economists, Paul Krugman, has declared that Vouchercare is no substitute for Medicare for all.  

First, Reich says that Ryan's plan "would turn Medicare into vouchers that funnel money to private health insurers." His May 26 comments can be found at

"Former President Bill Clinton counsels Democrats not to say Medicare is fine the way it is. He's right. But instead of talking about Medicare as a problem to be fixed, Democrats should start talking about it as a potential solution to the challenge of rising health-care costs - as well as to our long-term budget problem.

Can we be clear about that budget problem? It's not driven by Medicare. It's driven by the same relentlessly soaring health-care costs that are pushing premiums through the roof and causing middle-class families to shell out more and more money for deductibles and co-payments.

Some features of Obama's new healthcare law will slow the rise - insurance exchanges, for example, could give consumers clearer comparative information about what they're getting for their insurance payments - but the law doesn't go nearly far enough.

That's why Democrats should be proposing that anyone be allowed to sign up for Medicare. Medicare is cheaper than private insurance because its administrative costs are so much lower, and it has vast economies of scale.

If Medicare were allowed to use its potential bargaining leverage over America's hospitals, doctors, drug companies, and medical providers, it could drive down costs even further."

Joining Reich in his call for Medicare for all is Nobel Prize winning economist Paul Krugman, a professor at Princeton and a New York Times columnist. (He won the Nobel in 2008). On Monday, June 6, Krugman wrote (link: 06/06/opinion/06krugman.html? nl=todaysheadlines&emc=tha212):

So let me make two points. First, Obamacare was very much a second-best plan, conditioned by perceived political realities. Most of the health reformers I know would have greatly preferred simply expanding Medicare to cover all Americans. Second, the Affordable Care Act is all about making health care, well, affordable, offering subsidies whose size is determined by the need to limit the share of their income that families spend on medical costs. Vouchercare, by contrast, would simply hand out vouchers of a fixed size, regardless of the actual cost of insurance. And these vouchers would be grossly inadequate.

But what about the claim that none of this matters, because Medicare as we know it is unsustainable? Nonsense.

Yes, Medicare has to get serious about cost control; it has to start saying no to expensive procedures with little or no medical benefits, it has to change the way it pays doctors and hospitals, and so on. And a number of reforms of that kind are, in fact, included in the Affordable Care Act. But with these changes it should be entirely possible to maintain a system that provides all older Americans with guaranteed essential health care.

Consider Canada, which has a national health insurance program, actually called Medicare, that is similar to the program we have for the elderly, but less open-ended and more cost-conscious. In 1970, Canada and the United States both spent about 7 percent of their G.D.P. on health care. Since then, as United States health spending has soared to 16 percent of G.D.P., Canadian spending has risen much more modestly, to only 10.5 percent of G.D.P. And while Canadian health care isn’t perfect, it’s not bad.

Canadian Medicare, then, looks sustainable; why can’t we do the same thing here? Well, you know the answer in the case of the Republicans: They don’t want to make Medicare sustainable, they want to destroy it under the guise of saving it.

Exactly! I've repeatedly blogged about opening up Medicare, one of the most beloved of federal programs since it was inaugurated in 1965,  as a public option to all who are willing to pay for it. This is called expanding the risk pool and it's what insurance is all about: The more people in the risk pool, people of all ages, the better off the insurer and the people who are insured. Before I became a journalist in January 1966, I worked for almost four years as an insurance claims adjuster for a major insurance company, so I can claim some expertise in the matter. (I stand by my claim to some degree of expertise,  despite the disparaging remarks from a respondent to my previous column, who misspelled my name and said my tour of duty in the insurance industry, before I became a journalist,  wasn't relevant).

 Canada's Medicare works because the government uses its clout to negotiate lower prices on, for instance, prescription drugs. Generic Plavix (clopidogrel) sells online for $68 (U.S.)  for 200 75 mg  pills in a pharmacy in a Vancouver, BC suburb.  I couldn't find 200 pills at Walgreen's online site, but the big chain sells 180 75mg generic Plavix pills for $136.75 -- twice what we Yanks pay for 20 fewer pills from the British Columbia pharmacy.

Reich,  Chancellor's Professor of Public Policy at the University of California at Berkeley, says "Let the GOP go after Medicare. That will do more to elect Democrats in 2012 than anything else. But it would be wise and politically astute for Democrats to go beyond just defending Medicare. Strengthen and build upon it. Use it to reform American health care and, not incidentally, rescue the federal budget." 

Good advice from a guy who knows what he's talking about and who was one of Clinton's best cabinet members, if not the best.  And good for Krugman for pointing out the facts about Canadian Medicare and its dedication to keeping medical costs down. He's right: Vouchercare is no substitute for Medicare
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