Healthcare is one of the hottest topics as presidential hopefuls gear up for the next election. Candidates vying for the Democratic nomination have introduced or thrown their support behind one of at least 10 bills outlining proposed public healthcare programs, such as new plans to provide coverage through the Affordable Care Act (ACA) marketplace or Medicare buy-in options for people that aren’t eligible under the current program. Perhaps the most talked-about concept, however, is Medicare for All, the single-payer federal program that would replace private insurance and provide healthcare coverage to all U.S. residents.
Medicare for All Means Universal Coverage & Care
Medicare for All proposals definitely have worthy goals. The most obvious upside is that everyone would have healthcare coverage without worrying about the direct cost of insurance, deductibles, or copays. Out of pocket cost is often a barrier to care. The National Health Interview Survey revealed that 9 percent of U.S. residents have either delayed care or didn’t seek care in 2017 due to cost.
Another purported benefit of Medicare for All would be a healthier population. There would be fewer financial friction points in keeping appointments, seeking preventative care, and filling prescriptions. With all U.S. residents granted access to healthcare, it could conceivably impact the diagnosis and treatment of conditions like diabetes, heart disease, or certain cancers.
But How Do You Cover the Costs?
The concept of Medicare for All, unfortunately, also has a downside: The matter of who pays.
Today, consumers, who aren’t covered by an existing government plan like Medicare or Medicaid, buy insurance directly through the Obamacare exchanges or are covered to varying degrees by their employers. When an employer purchases insurance on behalf of their employees, the funds used are in lieu of salary and other benefits.
Both the bill introduced by Sen. Bernie Sanders (D-VT) and the bill introduced by the House Progressive Caucus require tax increases to cover costs of Medicare for All. And the costs could be astronomical. The Mercatus Center at George Mason University estimates a Medicare for All plan would cost about $32.6 trillion from 2022 to 2031. Keep in mind, however, that these proposals would shift the costs that are currently borne by individuals directly or indirectly through their employers.
What Remains to Be Seen About Medicare for All
As the country awaits debates and hearings on the proposed expansion of public healthcare programs, it’s difficult to classify all issues as pros or cons yet. For example, some analysts are chalking up the fact that businesses with 50+ employees would no longer bear any responsibility for their employee’s healthcare coverage, which is currently mandated under the ACA, as a pro. Others project that higher taxes to cover the plan, however, could be viewed negatively or even as a non-starter to considering the plan beyond the proposal phase.
The effect Medicare for All would have on the quality of patient experiences is also difficult to predict. If you put stock in studies based on experiences in other countries with single-payer systems, that data may suggest that U.S. residents who are used to care on demand may need to get used to a longer timeframe for certain types of procedures or treatments. A Fraser Institute study found that Canadians wait an average of 19.8 weeks to see a specialist after a referral from a general practitioner, and they wait, on average, 11 weeks from the consultation with a specialist until they receive treatment. How things would work in the U.S., however, is only conjecture at this point.
What Medicare for All Could Mean for Medtech Companies
If you dig deeper into proposed Medicare for All plans, you’ll see that each bill has provisions that put the government in charge of regulating healthcare costs, largely expected by determining the reimbursement of doctors and hospitals for their services according to an established schedule or budget.
While the federal and state governments currently sets reimbursement levels for Medicare and Medicaid programs, private insurance companies negotiate their reimbursement terms with healthcare providers. The amounts private insurers reimburse are often much higher, typically covering a wide range anywhere from one and a half to five times what the government would pay.
Setting prices on medical devices or Medtech systems may limit the revenues and profitability in the sector. This dynamic, in turn, could dictate how much money is available for investment into R&D, not only for the U.S. but for the entire world. In his Forbes article, Chris Conover, former research scholar at the Center for Health Policy and Inequalities Research at Duke University, points out that although the U.S. contributed 16.2 percent to the world GDP, it accounted for 44.4 percent of biomedical R&D spending. “As President Barack Obama might have put it,” says Conover, “the U.S. punches way above its weight when it comes to investing in biomedical R&D.”
In addition, Bloomberg Politics, citing BofA-ML analyst Bob Hopkins, says the bill would hurt Medtech companies by “eroding structural incentives for surgical interventions.” Most at risk would be companies like Stryker, Intuitive Surgical, Medtronic, Zimmer-Biomet, Becton Dickinson, Edwards Lifesciences, and Boston Scientific.
The investment community tipped its hand a bit in April when Sanders introduced his Medicare for All bill — healthcare company stocks plunged for two days after the announcement.
Wait & See
With a Democratic House and a Republican Senate, Medicare for All legislation has little hope of passing into law now. It is certainly something to watch, however, as the next election approaches, especially if party majorities shift.
Also keep in mind that a Medicare-for-All program, doesn’t necessarily mean that is the only type of healthcare insurance consumers will buy. According to AARP, even in the current Medicare population, only 1 out of 10 beneficiaries rely solely on Medicare. The others have supplemental insurance to help cover their healthcare expenses.
Given the attention Medicare-for-All proposals are currently receiving, especially in light of next year’s elections, it’s certainly something to think about with regard to the potential impact on your Medtech business.