Optimal Medicare Expansion

I have explained Optimal Medicare Expansion (OME) in several posts but haven’t provided a comprehensive summary of all its features vis-a-vis the other public health insurance proposals.  Each proposal I have seen has at least one major flaw compared to OME. What follows is a brief synopsis of its features with comparisons to the major proposals. I’ve provided links to posts that explain the various features.

Basic Design

Beneficiaries: All residents not eligible for Medicare Parts A-D.

Coverage: All healthcare services covered by Medicare Parts A-D. Only applies to services after the household deductible is satisfied. Primary insurance.

Household deductible: Minimum is zero. No maximum. Zero for low-income households. Increases with household income and decreases with pre-existing conditions, including age and gender. Not based on actual payments to providers, but rather the payments that would be made to providers if they were paid Medicare rates.

In-network providers: Paid full Medicare rates with no balance billing allowed for services that exceed the deductible. No restrictions on payment rates or balance billing before services exceed the deductible.

Out-of-network providers: Paid partial Medicare rate for non-emergency services and full Medicare rate for emergency services after deductible is satisfied. Balance billing allowed for all non-emergency services. No balance billing allowed for emergency services after deductible satisfied.

Proposal Pros and Cons

Optimal Medicare Expansion (formerly called Medicare Prime)

Pros: Closes coverage gap. Stabilizes private insurance market. No individual mandate. Reduces price of private insurance for low-income and middle-income families. Does not require an increase in taxation. Allows families to pay more for higher intensity coverage. Reduces information asymmetry.

Cons: Does not minimize national costs per increased quality-adjusted life years.

Affordable Care Act (also known as Obamacare)

Pros: Decreases coverage gap. Reduces increase in premiums for pre-existing conditions including age and gender. Allows families to pay more for higher intensity coverage.

Cons: Creates dead-weight losses. Imposes costs on taxpayers. Does not close the coverage gap. Creates an unstable individual health insurance market. Increases price of private insurance for families that do not qualify for subsidies. Creates complex regulations. Does not minimize national costs per increased quality-adjusted life years.

Medicare-For-All (proposed by Bernie Sanders, Elizabeth Warren and others)

Pros: Closes coverage gap. No individual mandate. Eliminates premiums and out-of-pocket costs. Minimizes national costs per increased quality-adjusted life years.

Cons: Creates a massive increase in deadweight losses and costs borne by taxpayers. Crowds out private insurance. Causes a large decrease in quantity supplied of healthcare.

The Public Option (proposed by Pete Buttigieg, Michael Bloomberg and others)

Pros: Builds upon Obamacare. Further reduces coverage gap. Offers lower premium health insurance option.

Cons: Creates dead-weight losses. Imposes costs on taxpayers. Does not close the coverage gap. Creates an unstable individual health insurance market. Increases price of private insurance for families that do not qualify for subsidies. Creates complex regulations. Does not minimize national costs per increased quality-adjusted life years.

Published by TheLoneEconomist

I am a PhD economist who studies just about anything and proudly specializes in nothing.

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