Private Insurance Would Not Be Eradicated Under Medicare for All—But It Would Take a Huge Hit
Sen. Kamala Harris defended Sen. Bernie Sanders’ Medicare for All legislation Monday night at CNN’s town hall, correcting moderator Don Lemon’s statement that the new healthcare plan would “effectively eliminate private insurance.”
Harris acknowledged that Medicare for All would phase out private insurance as “the main source, but there would still be supplemental” plans available. In truth, the text of the actual legislation specifically states “nothing in this Act shall be construed as prohibiting the sale of health insurance coverage for any additional benefits not covered by this Act.”
If Medicare for All is passed, however, private health insurers will be banned from selling health insurance coverage “that duplicates the benefits provided under this Act” once the bill becomes fully effective four years after it’s enacted.
Sanders’ bill expands current Medicare coverage so that it would cover hospital and ambulance services; primary and preventive services, including chronic disease management; prescription drugs; medical devices; mental health and substance abuse treatment services; laboratory and diagnostic services; reproductive, maternity and newborn care; pediatrics; oral, ear, and vision services; and short-term rehabilitative services.
This exhaustive list leaves little room for private insurance companies to supplement coverage, but will aid the American public in that they will no longer have to pay the rising costs of co-payments and deductibles, except in certain outstanding cases. Sanders has multiple options for paying for Medicare for All, including making the income and estate tax systems more progressive.
By banning duplicate coverage, however, the $600 billion private insurance industry will be significantly reduced. The stock market is noticing: the S&P 500 Managed Health Care Index, which includes many health insurance stocks, fell 10% between February 26 and March 7, the period when House Democrats introduced their own Medicare for All legislation. Moreover, the U.S. Bureau of Labor Statistics reports there were 2.7 million employees of “insurance carriers and relative activities” as of January 2019.
It’s uncertain what will happen to these jobs if the private insurance companies are forced to downsize, but Sanders’ Medicare fora All bill dictates that for up to five years following the legislation’s enactment, “up to 1% of the budget may be allocated to programs providing assistance to workers who perform functions in the administration of the health insurance system and who may experience economic dislocation as a result of the implementation of this Act.”
So, while private insurance companies will not be eradicated if Medicare for All is passed, the industry will certainly take a massive hit, perhaps leading CNN’s moderator to say they will be “effectively” eliminated. Sanders justifies this change as a defense of the American people.
“The function of the current healthcare system is not to provide quality care for all in a cost effective way,” said Sanders during his own CNN town hall Monday night. “The function of the current system is to make billions of dollars in profits for the insurance companies and the drug companies.”