Why Medicare For All is attractive to many voters
There is no question that healthcare, and healthcare reform, is a critical and highly sensitive issue for national politics. However, the citizenry seems starkly divided today on how their healthcare system should work and how it should be reformed.
Healthcare reform has been a peak national policy issue in the US for at least the past 25 years. The desire for a universal health care system has been a consuming Democratic party platform issue since the failed initiative under President Clinton in 1994 and the successful passage of the Affordable Care Act in 2010, which defined the Obama presidency. In their campaigns for the 2020 presidential race both Elizabeth Warren and Bernie Sanders advocate for universal healthcare under the rubric of Medicare For All [M4A], thereby expanding the present Medicare program to all the nation’s inhabitants guaranteed as a human, not just a civil, right.
Despite strong divisions, evidence shows growing support for universal healthcare that proponents believe will ensure its passage sooner rather than later. And this support seems to defy much of the mixed success of universal healthcare in other developed democracies such as the UK, Canada, and several Western European countries. A dispassionate analysis of healthcare economics reveals tradeoffs among conflicting goals for any possible reform plan, yet these trade-offs are rarely examined or discussed in the national debate. We need to understand why.
Most policy studies base their findings on cost-benefit analyses where the data is static, essentially comparing snapshots of existing data across time. In this respect, cost-benefit analysis does not take behavioral changes adequately into account. The danger is that when things that affect our interests change, we adapt in ways that are not always predictable, changing the expected outcome.
Human behavior is not based just on rational cost-benefit analysis; instead, numerous behavioral and psychological studies show that when anticipating uncertain outcomes, we are primarily loss averse. This means if we anticipate change, we fear most any potential loss; in fact, these studies show that we are twice as concerned about any potential loss than we are about a foregone gain. Cost-benefit analysis wrongly assumes that we value gains as much as losses, but this isn’t supported by actual behavior.
This makes sense if we think about it in the visceral terms of evolutionary survival. A loss of any part of our resource endowment, whether it be food, shelter, a financial nest egg, or a loss of our health, is felt as a potential threat to our very survival. A gain foregone is no threat at all. In politics, this means we will fight twice as hard not to suffer a loss than we will to secure a gain. In terms of entitlement benefits, this makes it almost impossible to take away a benefit, even if we are offering something potentially better. Naturally, this psychology animates both sides of the M4A debate with the fear of losing our existing healthcare or suffering in health or financial security in the absence of adequate care.
This brings us to the second motivating factor, which is the importance of relative status. Most rational behavior models assume we are always motivated by absolute gains in wealth, yet in a society where citizens compete for scarce resources, like housing, jobs, or health care, relative wealth or status is what matters more. This seems to be what is motivating the inequality class divide in our current politics and also colors the healthcare debate. If I am financially devastated by a health crisis, while my fellow citizens are not, I am put at a greater disadvantage in terms of securing the necessary resources to maintain my status. In other words, it’s better if everyone shares the financial loss with me than for me to bear it alone.
When we consider M4A, then, it doesn’t matter if the program is uneconomic or unsustainable, or how much it costs, because it will all be shared and we will all survive or sacrifice equally (hopefully!). It matters less if one is mandated into a cookie-cutter healthcare plan as long as everyone else is compelled to join it too. So, the negative consequences of an uneconomic and unsustainable system — such as budget deficits, wait times, inadequate care — are all ignored in the debate because such concerns are not relevant to one’s basic survival needs.
Could there be a better approach?
That depends on what trade-offs one finds acceptable in exchanging security for freedom of choice. A one-size-fits-all Medicare plan means less choice, less autonomy, and higher total financial costs, but less individual uncertainty. A diverse competitive private market means more autonomy, more choice, greater efficiency with better value (because this is what markets deliver around the world — the key word here is competitive), but greater variability in outcomes.
Comparing these trade-offs, a reform strategy might instead choose to focus on managing the risks and vicissitudes of healthcare outcomes, in effect, dealing directly with the uncertainty of loss with targeted policies. Coverage for pre-existing conditions presents the biggest financial loss exposure and why it is so politically popular. Various risks could be addressed with a sound safety net for healthcare, which is what Medicare was intended for persons of 65 years and over.
When Medicare was enacted in 1965, roughly 50% of Americans over 65 did not have adequate healthcare coverage. Today this has been reduced to 2%. This is an important success, but also incurred at considerable national welfare cost. Current Medicare benefits are paid by current Medicare contributions, meaning financial viability is determined by the ratio of contributors to beneficiaries. As the population ages and longevity increases, the financial pressures on the pay-as-you-go system threaten to break it. Does this mean we will get no Medicare benefits at some point in the future? No.
But nobody can guarantee these benefits will be adequate to cover our healthcare needs. In fact, it is almost guaranteed they will not. Thus, the financial risk of expanding M4A from 15% to 100% of the population is considerable and should inform the debate. The reason it is not is mostly due to short-term psychological behavior. But this same behavior points us toward the most challenging and viable solutions.