Open Markets Promotes Health Care Reform to Lower Prices Without Raising Taxes or Ending Private Insurance

by Phil Longman

Open Markets Policy Director Phil Longman presented a groundbreaking plan to reform health care prices, in the cover story for the current issue of the Washington Monthly.

Longman proposed a system that we’re calling Medicare Prices for All. The basic idea is simple: Have the federal government mandate that the prices Medicare pays for health care apply to all health care plans.

This plan is also relatively simple to enact. Congress would pass a law requiring that all health care providers offer prices based on what Medicare pays. Americans get to keep their insurance if they want, but everyone gets the same lower price.

This plan would accomplish the major goals of lowering health care costs and thereby making it affordable for more Americans, without requiring anyone to change plans or pay more taxes. By contrast, support for single-payer health insurance, often referred to as Medicare for All, drops substantially when citizens find out how much it costs and that it would probably mean giving up their current private health care plans.

Medicare Prices for All would also end the broad price discrimination that permeates health care today. Patients who live in places with many competing hospitals would be charged the same prices as people who live in places monopolized by one hospital. The plan would eliminate differences among large and small health care plans, as well as among doctors who are “preferred providers” or “out of network.” All providers would get the same prices for treatments given to patients with the same conditions, just as they do under Medicare. Competition would shift from who can gain the most market power over prices to who can provide the highest-quality medicine.

Importantly, the plan would eliminate much of the incentive for hospitals to merge in the first place, by removing the opportunity to use their power over the market to increase prices for basic services.

Longman crafted the reform so that the cost savings would go mostly to people with commercial health care plans. Medicare Prices for All legislation would require employers and insurance companies to share the savings with employees. This could also be done through changes in the laws governing private health care plans.

The financial benefit to ordinary, working-aged Americans would be substantial. Typical middle-class heads of household receive about $14,500 in employer contributions to an employer-provided health plan and pay about $6,000 in premiums themselves. Under Medicare Prices for All, that household would see wages increase by about $6,800 to $8,200, according to calculations by Paul Hewitt, a former deputy commissioner for policy at the Social Security Administration.

In 2015, Longman was named by Sen. Bernie Sanders to a federal panel charged with planning the future of Veterans Affairs health care. Longman recommended opening the VA to more veterans and their families.