Managing the Medicaid public option

Lonnie Palmer
Lonnie Palmer is the author of the solutions-based book “Why We Failed: 40 Years of Education Reform”

by Lonnie Palmer

Now that new tax law has eliminated the Affordable Care Act’s mandate, health insurance premiums will skyrocket and, like Maine, other red states will press harder for Medicaid expansion.

And what would be the harm in that. At $5,736 per enrollee per year Medicaid is the lowest cost and most effective public health insurance program in the U.S.

The question is: how do we pay for Medicaid for all?

Medicaid for all? Are you crazy?

Not at all. With expanded Medicaid, the government would control a larger share of the health care market. With that control the government could set reasonable prices for services and drugs, encourage the growth of cost saving cooperation among providers already started with Obamacare and take more of the middleman (health insurance companies) and their useless charges, paperwork and distortions out of the health care cost equation, actually creating true competition for private insurers.

Exorbitant drug prices and excessive salaries for medical specialists, hospital administrators and insurance company executives would retreat closer to where they belong. Unnecessary medical procedures and bills would be curtailed. (Employer sponsored health insurance policies currently drive medical costs higher because they pay much higher rates for drugs and medical services than Medicaid.)

A Medicaid public option would also appeal to red states’ low wage workers who have been required by the mandate to purchase expensive private insurance ($4,000 yearly average premiums, $3,000 yearly average deductibles, $20-plus average co-pays at the doctor’s office). These workers view their Medicaid eligible neighbors with their $0 premiums, $0 deductibles, $0 co-pays as lazy goldbricks who receive free high-quality health insurance from the government.

It’s unfair and they have a point.

A modest proposal

So how do we fund a Medicaid public option that everyone has access to?

Allow all workers of all income levels to sign up for Medicaid with no deductibles and no co-pays for 10 percent of their salary (per household) deducted just like Social Security and Medicare from each paycheck. And that 10 percent covers the entire family.

This 10 percent payroll deduction would apply to poorer citizens with minimal incomes who now get Medicaid free as well as their lower wage neighbors the same way Social Security and Medicare payroll deductions are made.

Same payroll deduction rates, same benefits.

Americans with employer supported health insurance can keep it or take the cash the employer was paying for their health insurance (beyond the cost of Medicaid for them and their families which would be paid for by the employer). If the employer’s contribution didn’t pay for the full cost of Medicaid the employee would make up the difference with payroll deductions not to exceed 10 percent of their salary. Health insurers would be forced to compete and beat Medicaid prices and benefits to stay in business.

The government already budgets hundreds of billions each year for Medicaid which would pay for most of the remaining Medicaid expansion health care costs not covered by the 10 percent payroll deduction. That includes Medicaid for all the poor children not covered by a family health insurance plan.

Meanwhile, the 10 percent payroll deduction will cover over 80-90 percent of the cost of Medicaid for all the younger workers under age 40 and pay approximately one third of the yearly cost of Medicaid for the older workers over 40 until they hit Medicare.

The remaining cost would be covered by new taxes – a carbon tax, reinstating the estate tax and returning income tax rates for the wealthy back to Obama era levels.  With these additional taxes this proposal is deficit neutral.

People hate taxes but they’ve learned to hate more costly and unfair health insurance and medical bills even more.

Are you listening Democrats?

Lonnie Palmer is the author of the solutions-based book “Why We Failed: 40 Years of Education Reform.” Buy it on Amazon click here