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Medicare for America Can Save Universal Healthcare

While Medicare for All and the Affordable Care Act hang on by a thread, two congresswomen have come up with a solution that can make universal healthcare a viable reality while allowing Americans to maintain the power of choice, which should please both sides of the aisle.

On December 19, Rep. Rosa DeLaruso (D-CT) Jan Schakowsky (D-Ill.) introduced H.R. 7339, a 113 page legislative alternative to Medicare for All with hopes to provide universal healthcare by amending the Social Security Act to broadly expand Medicare to all Americans within realistic parameters, including a place for private insurers. Americans would be able to opt-in to Medicare plans provided by government exchanges, employers, or private insurers instead of a single-payer government-run system. It would literally operate as an expansion of current Medicare benefits.

How it works

The “Social Security Act” would become the “Social Security Act Title XXII Medicare for America”. It would be incrementally implemented beginning once the legislation is passed and fully go into effect in 2022. Current healthcare providers who accept Medicare will also accept the public health option (Medicare for America). Non-existing Medicare healthcare providers who wish to provide services under the Medicare for America plan will be given a pathway to expand services.

As it stands, Medicare for America covers 80 percent of healthcare costs with the insured covering 20 percent. This cost splitting would be expanded to all Americans. Current provisions for pharmaceuticals provided in Medicare part D would be expanded to cover all Americans as well.

All US citizens would be eligible for coverage and provided Medicare cards upon enrollment, which can be automatic or manual. Automatic enrollments include:

  • enrollment at birth
  • current Medicare beneficiaries Including Part A and B
  • citizens age 65 and older
  • uninsured Americans

The general population with insurance can enroll on their own during enrollment periods.

Medicare healthcare providers would be required to switch patients over to Medicare for America. Small Businesses (companies with revenue of $2,000,000 or less) would be able to enroll their employees into Medicare for America plans. Large employers (100 employees or more) would be given a method or gateway to allow employees to opt-in to Medicare for America.

Individuals with qualifying health insurance coverage would be able to opt-out of Medicare for America. Qualifying health coverage includes:

  • employer medical coverage
  • veteran’s benefits
  • Indian Health Service for Native Americans
  • Medicaid
  • TRICARE
  • CHIP

What it covers

Medicare for America would provide comprehensive coverage for services including:

  • emergency services/ER visits/urgent care
  • hospitalization
  • maternity and newborn care
  • behavioral health, mental health, and substance abuse
  • prescription drugs
  • rehabilitation (physical therapy, occupational therapy, speech therapy)
  • long-term care services including hospice, nursing care, respite care and compensation of family caregivers
  • preventative health including oral and vision
  • medical equipment including wheelchairs, walkers, bathroom equipment, insulin and glucometers, breast pumps, wigs, etc.

The plan would also cover family planning services including abortion, contraception, and STD/STI testing.

Competition, additional benefits and ensured coverage

Private insurers wouldn’t be able to duplicate the Medicare for America plan, meaning no room for direct competition. However, private insurers would be allowed to provide Medicare Advantage Plans, which could have increased monthly premiums the insured would be required to pay.

States would be able to provide additional benefits, but private insurer additional benefits would have to meet certain requirements, such as adherence to the Public Health Service Act’s ban on exclusions based on preexisting conditions. Also, States wouldn’t be able to pass laws that prohibit the expansion of Medicare for America plans, meaning Red States wouldn’t be able to use their argument for limited government to limit Medicare expansion.

Premiums and deductibles

Premiums would be determined according to family composition and income. There would be a premium cap at a maximum of 9.69 percent of income, with grandfathered Medicare beneficiaries paying the lesser between old premiums and new premiums. Deductibles wouldn’t exceed $350 for individuals and $500 for families. The annual out of pocket threshold for individuals would be $3,500 for individuals and $5,000 for families.

How it will be paid for

The Medicare for America public health plan would be funded by a Medicare Trust Fund, which would be funded via

  • taxation: non-appropriated funds in the general fund Treasury
  • treasury funds for Medicare under Title XVIII and Medicaid under Title XIX beginning in 2026
  • additional appropriations allowed to be obtained annually
  • Medicaid Maintenance of Effort payments made to the Trust Fund
  • funds for the Federal Hospital Insurance Trust Fund and Federal Supplementary Medical Insurance Trust Fund transferred to the Medicare Trust Fund after necessary payments for claims for items and services have been made
  • a surtax of 5 percent applied to annual gross incomes over $500,000
  • Medicare Payroll Tax increase from 0.9 percent to 4 percent
  • net investment income tax increase from 3.8 percent to 6.9 percent
  • tax increases on small cigars, cigarettes, and other tobacco products by 100 percent with increase on pipe tobacco by 1666.10 percent
  • tax increase on alcohol by approximately 19 percent
  • termination of flex spending and health savings accounts

The legislation also includes adding a tax on sugared or sugar sweetened drinks that will be imposed on the producer, manufacturer, or importer. The tax would be .01 cents per 4.2 grams of “caloric sweetener,” namely monosaccharides (glucose and fructose), disaccharides (such as lactose, sucrose, and maltose), and high fructose corn syrup.

Taxable beverages include drinks from fruit juice concentrate and pressed fruits, infant formula, oral nutrition therapy for people who can’t metabolize dietary nutrients, oral electrolytes for children, etc. Exemptions would be applied to drinks with primary ingredients of soy, milk, rice, or other plant based milk substitutes. The tax would only be imposed on the first introduction of caloric sweetener to the final product. Revenues would be used to fund research to prevent and treat obesity, diabetes, dental caries and other diet related ailments.

Employer provided plans

Large employers would be required to dedicate 8% of their payroll budget to the Medicare Trust Fund. All employer provided plans would cover up to 80 percent of healthcare costs for full-time employees with a minimum of 70 percent. For part-time employees (those who work less than 30 hours per week), employer contributions would be made commensurate with the part-time employment ratio (number of hours worked/ 30-hour, part-time work week). Employees could opt-out of employer provided plans and choose the public health option, making the employer exempt from contributing that share of payroll to the Medicare Trust Fund.

Drug and medical device price protections

An additional proviso in the Medicare for America Act puts strict limitations on the ability of pharmaceutical and medical device companies to charge extreme prices. The clause requires in-depth reporting by pharmaceutical and medical device companies on business operations, pricing, and rationale for price increases. Ramifications for non-compliance include reduction of patents, penalty of up to 10 percent of gross sales on excessively priced prescription drugs or medical devices as well as a tax on profits from excessively priced drugs or devices. Additionally, direct-to-consumer advertising of drugs will be reviewed by the Secretary of the Department of Health and Human Services (DHHS) to determine if said advertisements would benefit public health.

These provisions are timely, as Sen. Tammy Baldwin (D-Wis.) recently sent a letter to Pfizer about the company deciding to raise the prices of 41 drugs in January, only months after it agreed to temporarily scale back on price increases per pressure from Trump. She requested a complete list of drugs that will go up, an explanation for why as well as information on the cost of ingredients, marketing and advertising spending, and total revenue and net profit generated by the medicines. The letter was dated December 11 and the Medicare for America legislation was introduced December 19. You can read Sen. Baldwin’s letter here.

The Urban Lobby’s Position

The Medicare for America public health option is a much more realistic step in ensuring healthcare is accessible for all Americans. The Affordable Care Act’s (ACA) individual mandate was nonsensical, as a penalty for not purchasing exorbitantly priced insurance plans was out of touch and has even been recently deemed unconstitutional. While The Urban Lobby doesn’t want to see the ACA overturned, healthcare reform that makes sense is needed. Medicare for America provides myriad options for Americans to get health insurance on their terms while mitigating costs and ensuring all Americans have access to healthcare. This legislation is preferred to the socialist Medicare for All plan, which is a single-payer government-run healthcare plan that leaves no room for freedom of choice and presents an unsustainable price tag for taxpayers.

Caveats with Medicare for Americans include an inability to gauge the cost of the program. According to POLITICO, Rep. DeLauro is “still looking at it [the cost].” While the bill clearly outlines where the funding will come from, an estimated price tag will help policymakers and analysts better determine if Medicare for America is, in fact, feasible. Also, it is laudable that Rep. DeLauro is echoing Sen. Baldwin’s concern for holding pharmaceutical and medical device industries accountable; however, there is still opportunity to add provisions for holding healthcare facilities accountable and ensuring quality care as outlined in the second part of the ACA, which includes patient protection. Overall, we are optimistic about this legislation and look forward to developments.

Read additional summaries from the office of Rep. DeLauro here. Get Congress.gov updates on H.R. 7339 (Medicare for America Act) here.

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Why America Should Turn Entitlements into Incentives

Entitlement programs such as welfare and food stamps disincentivize citizens from being productive members of society. Meaningful entitlement reform requires a re-routing of government funding to invest in Americans, the American dream, and a viable path to economic improvement.

America’s entitlement programs have done minimal to improve the poverty rate and actually create poverty traps. When entitlements are discounted from income resources, the poverty rate skyrockets, which means welfare programs are becoming a long-term necessity instead of a temporary leg up during hard times. Programs leading to dependency instead of self-sufficiency discourage Americans from believing in their ability to cultivate a quality of life they can be proud of. Re-routing entitlement funds to invest in the American dream of liberty and independence – self-sufficiency – will bring Americans out of poverty and, ideally, keep them there.

Poverty and Public Assistance

The Supplemental Poverty Measure (SPM), a joint publication by the Census Bureau and the Bureau of Labor Statistics, reported that the poverty rate for incomes that include SNAP benefits, tax credits, school lunch assistance, and housing assistance was 13.9% in 2017. This is higher than the official 2017 poverty rate of 12.3%.

Per this report, if the Earned Income Tax credit was removed from income resources, then the SPM poverty rate would be 16.5%.  This shows that social programs help raise Americans out of poverty. In fact, Social Security was the most important anti-poverty program, moving 27 million individuals out of poverty. Refundable tax credits moved 8.3 million people out of poverty.

So, what’s the problem? Social programs are moving people out of poverty and have contributed to a three-consecutive year decline in the poverty rate. The problem is, these programs are moving Americans out of poverty and into dependence on the government, not independence and self-sufficiency.

The Path to Mediocrity 

Individuals who have received unemployment or any form of temporary assistance have seen first-hand the disconnect between government job assistance and acquiring gainful employment in the real world. Technology and educational materials are outdated, in-office job search requirements may actually prevent job seekers from maximizing their time, Department of Labor job listings are grossly limited with little to no jobs that match one’s skills, or worse, the job list only contains positions that are low-paying, part-time jobs doing menial work. The program is set up to keep recipients at a low level of society, which perpetuates poverty and the need to continue receiving government benefits.

Think about it: if the system keeps Americans in low-paying, menial jobs unrelated to their higher valued skillset (filling jobs for the sake of filling jobs), then recipients of public assistance benefits will have to continue relying on the system, thus propagating the illusion that public assistance is the answer to poverty in America.

Furthermore, welfare programs often disincentivize workers from being productive members of society. Henry Hazlitt illustrated this effect well in his book Economics in One Lesson:

“If the relief is $106 a week, for example, workers offered a wage of $2.75 an hour, or $110 a week, are in fact, as they see it, being asked to work for only $4 a week -- for they can get the rest without doing anything.”

In 2013, The Cato Institute published a report stating that welfare paid more than minimum wage in 35 states, with 13 states paying more than $15 an hour. If a system pays more than minimum wage in public assistance benefits, and job seeking resources and requirements are concentrated in government facilities, just for the jobs list to be populated with low-paying, minimum wage jobs that may or may not give a recipient gainful employment, then the trap for ongoing dependence on government benefits is set. Government goes on to receive praise for raising people out of poverty when it’s a trap to keep people dependent on government to begin with.

Restoring American Morale

What Americans need are clear paths to gainful employment, skills training and access to apprenticeships for career changes, and practical assistance in starting new businesses. Meaningful reform will reroute money to invest in America, not just tax and spend. Over time, money will be saved, the budget better managed, and Americans get back to self-sufficiency.

For example, in New York State, Temporary Assistance for Needy Families (TANF) and Supplemental Nutrition Assistance Program (SNAP) benefits can be claimed for up to 60 months (5 years). Using the Cato Institute’s 2013 report, total welfare benefits in New York total $38,004 per year per person. Full term welfare benefits pay one person $190,020 over five years (Approx. $109 billion total for all NY  state recipients).

Say the state of New York reduces the length of time to claim benefits to two years ($76,008 payout for sustenance), invests $10,000 in a skills training or entrepreneurship program, allocates $10,000 to job placement resources or a small business grant, and apportions $5,000 into financial literacy training. That’s a total of $101,008 invested in getting one American through the dark days and back to work at a higher level within two years, saving the state of New York and the federal government $89,012. Multiplied by the 572,720 welfare recipients in 2016, that’s total savings of approximately $51 billion in the same five-year period.

What about the short-term increase in spending to make this investment? How does government ensure those costs are covered, especially in the beginning? That’s where a tax the wealthy would want to pay comes in. Implementing a temporary Venture Capitalist (VC) tax set to operate more like a business investment than a government expenditure would offset some of the initial costs. The VC tax would specifically fund skills and entrepreneurship training, financial literacy courses, job placement, and business grants. Once a class graduates, corporations or business owners who pay this tax would receive a report on new talent ready for hiring and new businesses ready for investing.

Welfare recipients who opt for entrepreneurship training and a business grant would be partnered with a SCORE mentor from the Small Business Association (SBA) to see them through their first 6 months to one year of business. Upon successful launch of the new business, VC tax payers would receive a report on the specifics of the business, earning potential, opportunities, etc. Then, VC tax payers would be able to put in a formal offer to acquire the business, invest further for equity partnership, or another mutually beneficial offer that ensures a return on investment. Once all offers come in, the SCORE mentor will help the entrepreneur make the best decision and send the new business owner on his or her way.

Final Thoughts

Life happens, and people need help getting from point A to point B. That’s why social programs are important. However, able-bodied Americans shouldn’t be encouraged to depend on government entitlements over the long term. It discourages citizen morale, erodes human dignity, and proves to be inefficient. Meaningful reform that puts Americans back to work and on the path to self-sufficiency cannot be done by government alone. There must be a healthy, mutually beneficial partnership with industry and the nation’s top earners to ensure the big picture is kept in mind when it comes to policy and America’s place in an ever more global society. American welfare policy shouldn’t demoralize Americans and make them dependent on an overinflated government; welfare policy should help Americans help themselves and encourage independence.

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