My brain can’t comprehend what this would do and how it would work. Also, does this lower health care costs? How? Why?
What is this “public option”?
In: 11
Medicare is a government healthcare program. While seniors make payments, the program’s healthcare costs more than that, so taxes on younger workers are needed to pay for the program.
If “medicare for all who pay” would depend on how much people pay. If the new people pay the full price of their care, it will not reduce their healthcare costs. If to new people pay what seniors pay, it will save them a lot of money. Of course, that savings would mean more taxes for everyone.
In any given population, if your goal is to maximize the proportion of people who are insured, it works best with a highly diversified pool of ‘customers’ because then the probability of an insurer having to pay out a claim is closest to the overall population average. The term “public option” means the government offers a healthcare plan, but it also implies private carriers are also available. (It’s a euphemism designed to make private insurance sound like the default, whereas in most wealthy societies, public is the norm). When multiple providers are available, the rational thing to do for low risk people is to pick an insurer who only serves similarly low-risk people, because then your premiums will be cheaper. That leaves mostly higher risk people paying higher premiums for the public option.
It’s a lot like school systems. Imagine the law said that if your family sends its child(ren) to private school, you don’t have to pay the property taxes that would otherwise fund public schools. What happens is that the rich families do that, which is cool for them, but then everyone else who can’t afford private schools has to pay higher taxes to fund the only schooling they can afford. Over time you end up with a less educated society, and a bigger divide between better and worse educated people. Even the rich lose out, eventually.
The political debate is whether wealthier lower-risk people should “subsidize” higher risk ones.
This may not decrease overall cost to the health care system if more people are on Medicare. Medicare dictates its reimbursement. The issue is that they have a tendency to underpay.. if the reimbursement is less than cost, it must be made up somewhere. Generally, it’s those with commercial insurance who make up the shortfall. If more are on Medicare, there will be a bigger shortfall and the costs will increase to those with commercial insurance.
I’ll answer the lower healthcare costs bit.
Most people, most of the time are healthy. It’s only the relative few that have serious health problems. Insurance companies take the money that the healthy pay and don’t provide them with any services (since they’re healthy and don’t need any) and they use a lot of that money to pay for the really sick people (and pocket the rest as profit).
If you increase the pool of people then they can make more money based on the larger demand and economies of scale.
Here’s a working example, let’s say you’re selling widgets that cost you $75 to make and you’re selling them at $100 each. You have customers where you sell 100 widgets per year. So your profit is: 100 widgets * ($100 selling price – $75 production price) = $2,500/year.
Now let’s say someone increases how many widgets you sell and you now sell 500 widgets per year. The same math applies just changing the number: 500 widgets * ($100 selling price – $75 production price) = $12,500/year. That’s a lot of profit but the person buying all those widgets wants a discount because they’re giving you so much business and say they want that selling price to drop to $85. The math is now: 500 widgets * ($85 selling price – $75 production price) = $5,000/year. Your profits have doubled – since you made $2,500 before – so you’re in better shape even if the individual price has dropped 15%.
This is a bit more simplistic since economies of scale means your $75 will drop in price too but just to give you an idea. Add above lesson to healthcare where your healthcare costs would drop 15% but you still get the same service with the increased pool of people. Since you have this large pool, you can better negotiate prices for individual healthcare plans.
Latest Answers