What struck me about Thomas Beck’s op-ed in the Wall Street Journal, complaining about “Medicare for All”, was how much he relies on the notion of “true prices”. Here’s his opening:
The notion of a “Medicare for All” system is enjoying a revival. Democratic primary victories by candidates who champion single-payer healthcare, most notably U.S. Senate candidates Abdul El-Sayed in Michigan and Peggy Flanagan in Minnesota, have pushed the proposal back into the healthcare debate.
What these candidates fail to understand—or refuse to acknowledge—is that applying Medicare payment rates to all services provided to all patients would destroy the American healthcare system.
and this is a passage that illustrates my point:
Congress’s Medicare Payment Advisory Commission estimates that hospitals lost about 12 cents on every Medicare dollar they received in 2024 and projects Medicare margins will remain roughly 10% below the break-even point in 2026. Those losses are sustainable only because Medicare is one part of a mixed-payer system.
The other main part is commercial insurance. A 2024 Rand study found that private insurers paid hospitals, on average, more than 2.5 times Medicare rates. Those much higher payments help support emergency departments, trauma centers, neonatal intensive-care units, behavioral-health programs, teaching hospitals and rural facilities, as well as investment in technology, cybersecurity and emergency preparedness.
In effect, America’s hospitals are financed by a combination of public underpayment and private overpayment. The arrangement may not be elegant or even rational, but it keeps hospitals operating. Medicare for All would destroy that balance.
In short his thesis is that private insurance pays the true price of healthcare and subsidizes Medicare.
But that’s not how hospital pricing actually works. Commercial rates aren’t derived from underlying costs at all they’re the output of market power and negotiating leverage between hospitals and insurers. A hospital with few competitors nearby can charge substantially more than a hospital lacking comparable market power; a hospital in a competitive market can’t, regardless of what Medicare pays it.
It’s true that revenue from profitable service lines and well-paying commercial patients funds unprofitable-but-necessary services like trauma centers, NICUs, and behavioral health. That’s a real financial structure. But it’s a static accounting fact about how a given system currently allocates money not a causal claim that Medicare’s low rates force private rates up. Under a single-payer system, that internal cross-subsidy would have to be rebuilt through the payment schedule itself, e.g. higher rates for money-losing service lines, which is a real policy design problem not proof the system is mathematically impossible.
But he’s right that “Medicare for All” has a math problem—it’s just not the math he’s pointing to. An explanation that hews more closely to the facts is that Medicare functions as a reference price and that our prices for healthcare are higher than those of other developed countries because all of the factors, e.g. care providers and insurance companies, lack incentives that would reduce prices and Congress has refused to control the price of healthcare. No foreseeable reform even one that completely eliminates private insurance is likely to bring U.S. healthcare spending anywhere near that of other developed countries without directly constraining the prices paid for healthcare.
