Former Vice President Joe Biden last week introduced his healthcare plan, which expands on the Affordable Care Act. It’s already the subject of much debate, but it has served one important purpose — it reminded us that “Medicare for All” isn’t the only way to get to universal health coverage.
Biden’s plan, like other recent proposals, suggests that universal coverage would not require a complete overhaul of the health system or the elimination of a meaningful private insurance market. In fact, private insurance, public insurance, choice, competition, workplace benefits and universal coverage are fully compatible, and most other wealthy nations with universal coverage employ a combination of all of them.
Countries with these mixed systems of private and publicly financed insurance not only cover everyone, they spend less doing it. Germany, the Netherlands and Switzerland — capitalist, free market democracies with thriving economies — cover all their citizens at a fraction of our cost. Of course, getting to universal coverage in this way would require changes to how private insurance works in the U.S., but there is plenty we can learn from countries that are doing it successfully.
First, European countries that rely on private plans simplify things tremendously by standardizing the benefits that all private plans offer. This cuts down on the inefficiency and waste that arise when everyone’s plan covers different things at a different price. This inefficiency shows up here in the U.S. in the need for each doctor and hospital to check each patient’s benefits and to bill only for those healthcare items covered by that particular plan. The result is that whole floors of hospitals and insurance companies in the U.S. are filled with clerks paid to submit or reject bills in endless ping-ponging disputes over what is covered.
Standardized benefits also simplify things for people and reduce the time they have to spend choosing among plans, as well as ensure that they are covered for health services essential to their health and well-being. Insurers can also live with the simplicity of standard benefits, as the California Affordable Care Act marketplace demonstrates.
So that no one is bankrupted by their healthcare costs, European countries place limits on what people have to pay. For example, in Germany, no one spends more than 2% of their income on out-of-pocket costs. And, if they are very sick or have a chronic illness, out-of-pocket costs are capped at 1% of income.
The ACA has already helped to reduce some healthcare costs by requiring free preventive care in private plans, limiting expenses for low-income people in the individual market, banning benefit limits, and preventing insurers from excluding preexisting conditions. A universal coverage plan relying on private insurance would have to go further, by capping what anyone would pay in private insurance, perhaps as a percent of income as Germany does.
Universal coverage that relies heavily on private insurance would also need to require or arrange for all Americans to enroll in health insurance — as the ACA originally required before the individual mandate penalty was repealed by Congress. Other countries that use a private system impose this requirement to ensure that healthy people participate, which helps make insurance more affordable for all.
As under the original ACA, people would have to purchase insurance, the premiums of which would be subsidized, or to pay a tax penalty. Another arrangement would be so-called auto-enrollment. Though its practicalities have not been tested, auto-enrollment is a process through which every American would be enrolled in a plan automatically, but could opt out if they chose. Experience suggests that the great majority of Americans who are auto-enrolled would keep their coverage as long as it was affordable, ensuring enough healthy enrollees without the coercive aspect of the mandate.
To make insurance premiums affordable for everyone, the government would cover the cost of premiums that exceed some percentage of individuals’ or families’ income. The ACA already does this for people in the individual market with incomes below 400% of poverty level ($100,400 a year for a family of four). That income cap could be eliminated and subsidies extended to people covered by employer-based plans so that the most people would pay for insurance would be 10% of their income.
These arrangements are fully compatible with employer-sponsored insurance, though such insurance would have to meet new requirements for standardized benefits, premium contributions and tighter limits on out-of-pocket costs. People eligible for Medicare and Medicaid could continue to get their coverage through those existing federal plans with reforms to ensure the coverage is sufficiently generous to meet their needs.
The point is not that the details described here are the best that can be devised. The point is that universal coverage can be achieved through a mix of approaches — as it has been in other countries — and does not necessarily require having a single public plan.
Americans are worried about affording their healthcare. The effectiveness of the policy crafted to address that concern matters far more than its label.
David Blumenthal is president of the Commonwealth Fund. Sara Collins is vice president for healthcare coverage and access at the Commonwealth Fund.