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January 23, 2020
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David W. Johnson
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Economics Policy
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Why Medicare for All Can’t Work (And Here’s What Can)

America is a rich country. We spend 18% of our economy on healthcare, yet our country is plagued with poor outcomes. Everyone agrees that Americans deserve the right to quality healthcare, but it seems impossible to produce a system that values preventative healthcare over acute-care treatments. Hospitals are more concerned with optimizing revenue cycles than improving outcomes. As elections approach in 2020, healthcare is still a top issue for voters. Can any of the politicians propose a healthcare solution that benefits all Americans?

It’s time to have a constructive conversation about universal healthcare. Let’s get real: Medicare for All (M4A) can’t work, but affordable medical insurance for all can work. Extreme opinions on either side of the political spectrum will not produce the healthcare economy Americans deserve. Market socialists will drive Medicare costs up to $1 trillion by expanding Medicare for All, and Republicans seeking to abolish the Affordable Care Act (ACA) will reverse healthcare policies created by conservative think tanks. There is a middle-ground solution that can achieve universal health insurance coverage at lower costs while fostering consumer choice.

Medicare for All can’t work because it was created by Lyndon B. Johnson’s administration in 1965 with two fundamental flaws: 1) Fee-for-service (FFS) payments for treatment activity, not treatment outcomes, and 2) prohibition against governmental participation in medical decision making. This means that the government (and commercial health insurers by extension) are required to pay for all “reasonable” medical treatment, regardless of the outcomes. This has created an artificial demand in American healthcare in which supply drives demand. The more services created, the more customers purchase.

Voters may believe that the Health and Human Services (HHS) officials in the Trump and Obama administrations have opposing goals for American healthcare. In reality, both Adam Boehler, the Director for the Center of Medicare and Medicaid Innovation (2018-2019), and his Obama-era predecessor Patrick Conway (2011-2017), want to rid Medicare of FFS payment. Boehler said in a 2018 interview:

“I don’t know if there’s any question that when you have a payment system based on volume, you get exactly that—volume and high prices. So, we’re going to look really at saying, how do you have physicians spend time with their patients and do what they do best and not worry about their revenue cycle but worry about their patients and how you drive outcomes.

Boehler, Conway and other like-minded reformers want healthcare to reward greater outcomes and focus on the customer, not revenues. Healthcare companies should operate like any other business and place the needs of the customer above everything else. Providing the right incentives in a level-field competition will create a marketplace that eliminates over-treatment and provides superior value. Consumers reward value-creation and healthcare companies who identify this gap in the marketplace will become industry leaders.

Americans can achieve affordable health insurance for all by becoming better buyers of healthcare services. Changing the way healthcare services are purchased is the catalyst necessary to change the system. Government and the marketplace must align to reward efficient, high-quality healthcare service provision. Value must triumph over volume. Americans deserve kinder, smarter, more affordable healthcare. For more information on this topic, please read the full Market Corner Commentary here.

About the Authors

David W. Johnson

David Johnson is the CEO of 4sight Health, an advisory company working at the intersection of healthcare strategy, economics, innovation. Johnson is a healthcare thought leader, keynote speaker, and strategic advisor to organizations busting the status-quo to reform our healthcare system. He is the author of Market vs. Medicine: America’s Epic Fight for Better, Affordable Healthcare, and his second book, The Customer Revolution in Healthcare: Delivering Kinder, Smarter, Affordable Care for All (McGraw-Hill 2019). Johnson applies his 25+ years of investment banking in healthcare to identify ways the healthcare industry must change to deliver better care. He received a Masters in Public Policy from Harvard Kennedy School, an English degree from Colgate University, and served in the African Peace Corp service. Join over 10k+ healthcare executives who read our weekly insights and commentary on www.4sighthealth.com.

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