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“Medicare for All” System May Prove Potentially Disruptive For Americans, Claim Budget Experts

Within the health care industry, groups including hospitals, insurers, drugmakers and doctors have formed a coalition to battle a government-run system. Major employers are likely allies.

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Medicare for All
A sign is shown during a news conference to reintroduce "Medicare for All" legislation, on Capitol Hill in Washington, April 10, 2019. VOA

Congressional budget experts said Wednesday that moving to a government-run health care system like “Medicare for All” could be complicated and potentially disruptive for Americans.

The report from the nonpartisan Congressional Budget Office was a high-level look at the pros and cons of changing the current mix of public and private health care financing to a system paid for entirely by the government. It did not include cost estimates of Sen. Bernie Sanders’ Medicare for All legislation or its House counterpart, but raised dozens of issues lawmakers would confront.

“The transition toward a single-payer system could be complicated, challenging and potentially disruptive,” the report said. “Policymakers would need to consider how quickly people with private insurance would switch their coverage to a new public plan, what would happen to workers in the health insurance industry if private insurance was banned or its role was limited, and how quickly provider payment rates under the single-payer system would be phased in from current levels.”

One unintended consequence could be increased wait times and reduced access to care if there are not enough medical providers to meet an expected increased demand for services as some 29 million currently uninsured people get coverage and as deductibles and copayments are reduced or eliminated for everyone else.

“An expansion of insurance coverage under a single-payer system would increase the demand for care and put pressure on the available supply of care,” the report said.

Sanders, I-Vt., pushed back, telling reporters that what’s really disruptive is that millions of Americans remain uninsured while others can’t afford high co-pays and drug prices. “That is disruptive,” said Sanders. “What is not disruptive is expanding Medicare, which is a very popular and cost-effective program to guarantee health care for every man, woman and child.”

The Democratic presidential candidate’s single-payer proposal is coloring the nomination fight and is likely to be a significant theme in the 2020 elections. President Donald Trump derides it as “socialism.”

Employers now cover more than 160 million people, roughly half the U.S. population. Medicare covers seniors and disabled people. Medicaid covers low-income people and many nursing home residents. Other government programs serve children or military veterans.

Health
The CBO report was prepared for the House Budget Committee, which is expected to hold hearings but does not write health care legislation. VOA

Proponents of Medicare for All say the complexity of the U.S. system wastes billions in administrative costs and enables hospitals and drugmakers to charge much higher prices than providers get in other economically advanced countries. Critics acknowledge the U.S. has a serious cost problem, but they point out that patients don’t usually have to wait for treatment and that new drugs are generally available much more rapidly than in other countries.

While a government-run system could improve the overall health profile of the U.S., pressure on providers to curb costs could reduce the quality of care by “by causing providers to supply less care to patients covered by the public plan.”

Other potentially difficult choices flagged in the report included:

– Coverage for people living in the country without legal permission, which CBO called “a key design issue.” Sanders’ bill and its House counterpart would cover all U.S. residents, leaving it to a future administration to define that term.

– Payment for long-term care services, which CBO said could substantially increase government costs. Sanders and House counterparts would cover long-term care.

– Use of a government-set “global budget” to control cost, a strategy CBO said is “barely used” in the U.S. Programs like Medicare and Medicaid rely on other approaches.

Private payments from employers and individuals currently cover close to half of the nation’s annual $3.5 trillion health care bill. A government-run system would entail new taxes, including income taxes, payroll taxes, or consumption taxes, said CBO. Or lawmakers could borrow, adding to the overhang of national debt.

Several independent studies of Sanders’ plan have estimated it would dramatically increase government spending, from $25 trillion to $35 trillion or more over 10 years. But supporters say the expense could be much lower if expected savings are factored in.

Single-payer health care doesn’t have a path to advance in Congress for now.

Donald Trump
The Democratic presidential candidate’s single-payer proposal is coloring the nomination fight and is likely to be a significant theme in the 2020 elections. President Donald Trump derides it as “socialism.” VOA

It has zero chances in the Republican-led Senate. In the Democratic-controlled House, key committees that would put such legislation together have not scheduled hearings. They’re instead crafting bills to lower prescription drug costs and stabilize and expand coverage under the Affordable Care Act.

The CBO report was prepared for the House Budget Committee, which is expected to hold hearings but does not write health care legislation.

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Within the health care industry, groups including hospitals, insurers, drugmakers and doctors have formed a coalition to battle a government-run system. Major employers are likely allies.

Polls show that Americans are open to single-payer, but it’s far from a clamor. Support is concentrated mostly among Democrats. (VOA)

Next Story

Here are the Growth, Monetary Policy, and Bond Market Aspects of Unexpected Corporate Tax Cuts

Further, it has resisted an easy consumption stimulus which may have had very little multiplier effects and possibly may have eventually contributed

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Growth, Monetary, Policy
With this the government has shown a clear commitment to shore up growth even with its back against the wall, fiscally speaking. Pixabay

The unexpected corporate tax cuts alongside previous measures announced over the last few days by the government amount to a total fiscal expansion of around 0.8 per cent of GDP at face value. That said, private estimates in this regard are between 0.2 – 0.4 per cent shy of the governments estimate.

Here are the growth, monetary policy, and bond market aspects of the move:

Growth
With this the government has shown a clear commitment to shore up growth even with its back against the wall, fiscally speaking. Further, it has resisted an easy consumption stimulus which may have had very little multiplier effects and possibly may have eventually contributed to some macro-economic imbalances. Rather, the tax cuts will help improve corporate profits and hopefully improve our global competitiveness. Further, incentives for new units announced may also help with attracting some of the global supply chains reallocations that are underway given escalating trade tensions.

Growth, Monetary, Policy
The unexpected corporate tax cuts alongside previous measures announced over the last few days by the government amount to a total fiscal expansion of around 0.8 per cent of GDP at face value. Pixabay

This may, however, not necessarily be a substantial shot in the arm for near-term growth prospects. The tax cuts may be used in a variety of ways, including stepping up investments, reducing debt, cutting product prices, increasing salaries, buyback and dividends, among others.

All told, the immediate pass-through and growth impulses created may be not as strong and thus the tax buoyancy hoped for on the back of stronger growth may have to wait for a while. This is especially true as general competitiveness in an increasingly challenging world requires other aspects of factor input efficiencies to fall in place as well.

Monetary policy
Prima facie, if, unlike earlier expectation of limited further space, fiscal policy has indeed chosen to step up to the plate, then monetary policy need not be as aggressive, all else being equal. That said, the global and local context is weak enough to argue for yet some (though not substantial) incremental role for monetary easing. This is especially true because RBI Governor Das doesn’t appear to be as large a fiscal hawk, currently (indeed welcoming the bold step from the government, after observing one day prior that fiscal space seemed limited).

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We would hence look for monetary “teasing” incrementally, as opposed to “easing” that we were expecting before and would expect the repo rate to bottom out in the 5 to 5.25 per cent area. The one caveat to this view is of further global growth deterioration which would then open up room for further easing, whereas liquidity policy is expected to remain one of substantial surplus.

Bonds
As noted, before term spreads have been quite wide for this part of the cycle, largely reflecting the inadequate availability of risk capital versus the supply of bonds (the same inadequacy is being reflected as higher credit spreads in the loan and credit market).

Despite more than adequate liquidity now, risk capital has been cautious possibly due to lack of confidence on market risk, given the fiscal and bond supply overhang. Since a large term premium has already existed, we wouldn’t expect a significant further expansion just because the risk has now materialized.

Growth, Monetary, Policy
That said, private estimates in this regard are between 0.2 – 0.4 per cent shy of the governments estimate. Pixabay

Further we don’t expect the entire expansion to manifest in the Centre’s fiscal deficit. After sharing this with states and accounting for other levers built in, we are looking for a final fiscal deficit of 3.7 nper cent versus the 3.3 per cent budgeted. This will entail some additional bond supply eventually, but with the cushion that the Centre’s net bond supply was slated to fall substantially in the second half of the year versus the first.

Portfolio Strategy
With the prospects of monetary easing somewhat diminishing in incremental intensity, and accounting for the somewhat higher bond supply, we may expect some amount of curve steepening going forward. This may likely happen as market participants anchor themselves to 3 thoughts: One, liquidity will remain abundantly surplus. Two, repo rate is here or modestly lower. Three, prospects of a very large bond rally are somewhat diminished (although this view will evolve going forward depending also on how much net additional supply actually manifests for local absorption) . This will likely increase appeal for the front end of the curve versus the longer duration, hence creating steepening pressure.

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Reflecting the above thought, we have cut our recent duration elongation into the 10-14 year segment and are now refocussing on being overweight 5-7 year for government bonds in our active duration funds. For AAA corporate bonds, the relative value continues in up to 5 years. These segments could better align to what remains an environment of abundant surplus liquidity, a very attractive term spread, still general lack of credit growth, and continued global monetary easing. (IANS)