Two Memes that Undercut Medicare-for-All: Managed Care and Competition

Two Theologies Have Blocked Medicare-For-All

By Theodore Marmor and Kip Sullivan
Health Affairs Blog, December 11, 2014

In the 50 years since Medicare was enacted, Congress has never seriously considered extending Medicare to all Americans, nor even lowering Medicare’s eligibility age below 65. This pattern persisted even during those periods when national health insurance was at the top of the national agenda. This is not what the original advocates of Medicare anticipated when Medicare was enacted in 1965. They saw Medicare as the cornerstone of a national system of health insurance that would eventually cover all Americans.

Two Myths that Undercut Medicare-for-All: Managed Care and Competition

In the paper we presented at the Yale conference (Yale Law School, November 6 & 7) , we reviewed short- and long-term factors affecting the debate about Medicare over its lifetime, and then turned to a discussion of two long-term factors: the rise of what came to be called the managed care movement, and the resurgence of a longstanding campaign promoting the idea that competition can right the wrongs of American medicine.

The managed care movement helped marginalize support for Medicare’s expansion primarily through its influence on the proponents of national health insurance. It did so by persuading many potential proponents of Medicare expansion to pursue a different reform strategy.  Insurance companies practicing managed care, the rhetoric claimed, were more efficient than Medicare.  Managed care kept Medicare-for-all off the congressional agenda primarily by inducing potential proponents of Medicare expansion to support managed care rather the expansion of the traditional Medicare program.

The rise of the pro-competition movement constituted another significant impediment to Medicare expansion. It did so by strengthening the belief that market competition among private health insurance firms could be invigorated, largely by eliminating tax subsidies for insurance and shifting more costs onto patients, and that vigorous competition would make the health care sector much more efficient than Medicare could ever be. But because this movement appealed primarily to conservatives who did not support universal coverage in the first place, its impact on the debate about Medicare’s expansion, although powerful, was less direct.

To sum up, the pro-competition movement contributed to keeping the expansion of Medicare off the national agenda by keeping national health insurance off the national agenda throughout most of Medicare’s 50 years. And the managed care movement contributed by persuading liberals to endorse managed care proposals, not the expansion of Medicare, during those infrequent periods when universal coverage was at the top of the national agenda.

Why have the Managed Care and Competition Movements been Politically Successful?

The answer, in our view, is two-fold. First, both movements acquired immense economic power compared with supporters of Medicare expansion. Second, both movements clothed their diagnoses of and solutions to the health care crisis in rhetoric that induces listeners to overlook unproven assumptions that underlie those diagnoses and solutions. This permitted both movements to present their solutions in idealized, oversimplified forms, and to compare their idealized forms to real-world Medicare. Over the years both movements have developed cultures which resist acknowledging the discrepancy between their assumptions and the evidence.

In the first few months of 1970, Paul Ellwood and representatives of the Nixon administration agreed to promote an unproven diagnosis of the health care crisis and an unproven solution. The unproven diagnosis was overuse of the health care system induced by the fee-for-service method of paying doctors. The unproven solution was a new form of insurance company they called the “health maintenance organization” (HMO).

Ellwood and Nixon administration officials made the deliberate decision to refrain from describing how HMOs were supposed to achieve the powers attributed to them. As assistant HEW secretary Lewis Butler put it, “Let’s specify what we want it to do…. Let’s describe the thing by what we want it to do, not how it’s formed.”

This convention – describing an entity that will supposedly alleviate the health care crisis according to what “we want it to do” – was quickly adopted by Democrats. The convention encouraged, and to some degree forced, HMO advocates to explain their support for the concept in highly abstract terms. It also encouraged the use of opinion and wishful thinking as substitutes for evidence and scientific discourse.

The tendency to adopt abstract concepts defined only by the aspirations of their proponents, to give these abstract concepts labels designed to influence rather than illuminate, and to ignore or downplay evidence contradicting claims made for these concepts has persisted within the managed care movement ever since. These habits of thought can be seen in the movement’s support for other managed care proposals, including “pay-for-performance” and “accountable care organizations.”

The pro-competition movement has exhibited similar traits – a tendency not to examine fundamental assumptions and to gloss over evidence contradicting them. Like the managed care movement, the pro-competition movement rests its diagnosis on the unproven assumption that financial incentives are the single greatest cause of health care inflation. Unlike the managed care movement, which sees physician incentives as paramount, the pro-competition movement claims patient financial incentives are the fundamental cause of high medical costs. Like the managed care movement, the pro-competition movement bases its solution on unproven assumptions, the most important of which is that patients can shop for medical care just as they do for food and other commodities.

The willingness of the two movements to compare real-world Medicare with their idealized proposals has contributed significantly to their ability to keep the expansion of Medicare off the table. It has also contributed significantly to their inability to address the problems that bedevil the American health care system – a chronically unacceptable rate of uninsured, barriers to care even for the insured, and rising costs.


By Don McCanne, MD

The dream of expanding Medicare to cover all of us has failed to materialize in a large part because of the nation’s obsession with marketplace concepts of health care financing. On the supply side, health care providers are responding to financial incentives that maximize their revenue. On the demand side, patient-consumers are responding to financial incentives that minimize their out-of-pocket spending. In both instances, health care access is compromised - in managed care by erecting structural barriers to care (“managing” the care), and in competition by erecting financial barriers to care (buying competitively-priced plans with lower premiums that have higher deductibles and other cost sharing).

Where did this obsession come from? Gilens and Page have shown that the very wealthy and large business interests have control over major legislation. These interests benefit from marketplace approaches to health care through investments in for-profit insurance companies and in health care delivery organizations, including for-profit hospitals. In contrast, their tax burden in publicly-financed health programs is greater when taxes are progressive. Also many other important government programs are financed through progressive taxes, so the moneyed interests benefit by privatizing government functions to the maximum extent possible.

These interests, along with ideologues, have made a meme of the concept that private markets are always more efficient than massive government bureaucracies, when the evidence is almost always to the contrary. Unfortunately, much of the media have accepted this meme as a given. Since everyone “knows,” based on a lifetime of exposure to these memes, that the private sector can always do it better, they are quite willing to support private solutions to problems such as the financing of health care.

Whenever proposals such as expanding Medicare come up, the insurance industry pulls the puppet strings in Congress, and the public is reminded how well UnitedHealth and the other for-profit insurers are doing in creating private products that have lower out-of-pocket costs than Medicare (not mentioning that they are doing that with one-third of the overpayments they receive while keeping the other two thirds for profits and to pay for the excessive administrative services that they are selling us - a bad deal for taxpayers).

So those who support the intrusive managed care organizations and who support shifting more costs directly to patients under the false banner of marketplace competition (see Kenneth Arrow) have been effective in suppressing any serious consideration of improving Medicare and expanding it to cover everyone. As long as the public continues to buy their meme, there is little likelihood of change.

We need to continue to inform the public on the legitimate findings of health policy science (national health programs that include everyone while providing higher quality at a lower cost), but that is a daunting task considering how difficult it is to communicate complex policies to a population blunted by unfounded memes.