I only have one thing to say in response to Simon Johnson’s full-throated defense of Elizabeth Warren’s “Medicare For All” plan from the Wall Street Journal:
A millstone hangs around the neck of every company in America, and this dead weight gets heavier each year. Americans currently spend nearly 18% of gross domestic product on health care, with some projections suggesting this will reach 21% by 2027 before continuing to rise. Since the 1970s the U.S. has failed to control the cost of care, and a great deal of this burden falls directly on companies and new entrepreneurs. These costs undermine competitiveness and make it harder to create jobs and pay decent wages.
The health-care burden hurts American business in three main ways. First, there is the onerous contribution most companies are required to make through employer-sponsored insurance. Every business owner wants employees and their families to have health insurance, but the cost rises inexorably. Mandatory employer coverage is like a tax on businesses, with a major difference that private insurance companies take a cut of the revenue. Under current law, firms with more than 50 employees must either offer employer-sponsored coverage or pay a fine—so in effect the government forces employers to pay private insurers.
Second, companies cannot by themselves easily constrain health-insurance premiums. They need healthy workers who are not ruined financially when a family member is rushed to the emergency room. In most competitive markets across the U.S., if an employer cuts back on health benefits (or raises deductibles, copays or out-of-pocket expenses), it raises the burden on employees and increases the risk that the best will leave.
Third, the unpredictable nature of health-care costs makes it significantly harder to start and run a company. Every year, entrepreneurs and managers hold their breath while insurance companies decide what to charge them. The Affordable Care Act slowed the growth of medical costs—for a while. But under the Trump administration, health-care sector mergers (such as Cigna-Express Scripts, CVS-Aetna and Optum-DaVita) have effectively reduced competition and increased pricing power.
To address this triple threat, Republicans have tried to make the health-care system more “competitive.” But the competition they seek has failed to constrain costs. Rather, it has created an incredibly opaque price system with powerful players grabbing excess profits at every opportunity—the main reason medical care in America costs so much more (relative to income) than it does in any comparable country. The Republican approach is a recipe for human and economic disaster.
Some Democrats propose to restrain the price of health-care to consumers by adjusting the Affordable Care Act in a modest fashion, such as by adding a public option. This has short-term appeal but would not address the deeper long-term problem: the rising underlying cost of care, which private insurance companies have consistently failed to bring under control. None of the proposals for partial reforms—such as those proposed by presidential candidates Joe Biden and Pete Buttigieg—would be likely to lower costs relative to the current law’s baseline.
By contrast, Sen. Elizabeth Warren’s Medicare for All plan would cut costs by reducing inefficiency, eliminating predatory pricing (for example, for prescription drugs) and using the purchasing power of a single-payer system. Her plan would also constrain the growth rate of underlying medical costs. This is exactly what America’s peer countries do to keep costs under control. U.S. companies consequently struggle to stay competitive in international markets. If health-care costs continue to grow unchecked, America’s businesses will be ruined.
Most medium and large companies self-insure. His entire argument founders when you understand that.