Medicare Advantage's Expansion Would Help Private Insurers

Since presidential candidate and U.S. Senator Bernie Sanders announced his “Medicare for All” plan in early April, the health insurance industry has uniformly opposed the policy. David Wichmann, CEO of UnitedHealth Group—which covers almost as many people as Medicare itself—remarked that Medicare for All would “surely jeopardize the relationship people have with their doctors, destabilize the nation’s health system, and limit the ability of clinicians to practice medicine at their best.”

Strong words from the CEO of the largest health care company in the world, which made $17 billion in profits in 2018. After the Washington Post published a story about UnitedHealth’s efforts to fight Medicare for All, Sanders wrote on Twitter, “When we are in the White House your greed is going to end.”

Yet even if Sanders wins the 2020 presidential election, his Medicare for All plan—which would end the current Medicare system and replace it with a new universal one, fundamentally transforming the U.S. health care system—is unlikely to be enacted. If a major health care overhaul is to occur, it will more likely be a drastic expansion of the current Medicare system.

If that happens, private insurers should be rejoicing, because they would likely benefit greatly from such a change.

The secret few politicians share is that over 34% of the current Medicare system (more than 20 million people) today isn’t actually run by the government, but by private companies. This segment of Medicare is called Medicare Advantage and it is growing at an increasing rate each year. The Congressional Budget Office projects that nearly half of all Medicare beneficiaries will be covered by Advantage over the next decade.

An expansion of Medicare will also likely mean a massive expansion of Advantage, a program by which private insurers receive the same amount of money Medicare would have spent on a given patient in a year. Those private insurers take on the challenge to spend less than the government would spend in order to stay in business. The Advantage program has attracted 289 different private insurers to compete for this business in 2019, including Troy Medicare, a startup I co-founded.

By expanding the current Medicare system from 60 million beneficiaries today to 327 million, the Advantage market would grow nearly six times overnight. This growth would greatly benefit UnitedHealth, Humana, CVS Health, and other private insurance companies offering Advantage plans.

Based on the policy proposals of the Democratic presidential aspirants, such an expansion appears to be the most likely outcome should one of them take the White House. Of the 23 candidates, most have only vaguely embraced Sanders’s idea of Medicare for All, and several have conceived of it to be an expansion of the current Medicare system. Joe Biden’s plan would allow all Americans to buy into a Medicare-like health insurance plan. Amy Klobuchar wants to expand Medicare, but doesn’t want to get rid of private insurers. Elizabeth Warren said she would “figure out how to do Medicare for all,” which would have a “temporary role” for private insurance companies. When enacted, these Medicare expansion plans above will likely not only retain the current Advantage private insurance market, but expand it to cover more Americans.

Even if Sanders or another candidate supporting his plan of completely scrapping the current iteration of Medicare wins, Congress is unlikely to go along with such a radical change. The two sides would most likely meet in the middle, meaning a massive expansion of Medicare.

The reason many candidates prefer to expand Medicare instead of completely replacing it is that the program is incredibly popular—90% of seniors say they are satisfied with their current Medicare plans. While politicians publicly attack big health insurance companies and call for socialized medicine, they consistently tout the current Medicare system as one of the most successful programs ever enacted.

The idea of covering all Americans under Medicare—and therefore expanding Medicare Advantage—is rapidly becoming a realistic scenario for the U.S. health care system. Instead of continuing to fight the idea of universal health care, the insurance industry should realize the benefits such a system can provide to American residents and companies alike.

Flaviu Simihaian is the CEO and co-founder of Troy Medicare, a health insurance startup.