Don’t waste the public’s money bailing out private health insurers

While the national stay-at-home policy has saved lives and slowed the spread of the coronavirus, these gains have come at a high cost in economic dislocation. Record setting unemployment has cost millions of Americans health insurance that they now receive through employers, resulting in a loss of coverage not only for themselves but their families, during a deadly pandemic. This is not only personally devastating for those affected, but threatens our ability to contain a communicable disease. 

Our health care system has inadequate means to extend coverage to the newly unemployed. Some may seek to enroll in employment-based health insurance available through a spouse, but this is usually only possible during special enrollment periods. Laid off employees of businesses with over 20 workers can apply for a Continuation of Health Coverage under the Consolidated Omnibus Budget Reconciliation Act (or COBRA), but this requires they pay more than 100 percent of the cost of coverage at a time when their income has fallen because of unemployment. 

Some of the newly uninsured could seek coverage through the Affordable Care Act health insurance market exchanges where income-related subsidies would help with the cost of coverage, but this option is only available in those few states that have reopened the exchanges to the newly unemployed. The Trump administration has refused to allow any special enrollment for the newly unemployed in the 38 states, which rely on federally managed exchanges. One state that runs its own exchange has refused to allow new enrollment.

Finally, the newly unemployed who meet income and wealth guidelines may apply for state administered Medicaid. But this is limited for those with spousal income or wealth holdings and is restricted in those states — like Texas and Florida — that rejected Medicaid expansion and maintain categorical restrictions on Medicaid enrollment.

We could allow the newly unemployed to maintain their existing health insurance coverage giving them the cost of COBRA. But this leaves us paying more for less coverage when we already have a better way: enroll the unemployed automatically in Medicare. This would meet the individual needs of those displaced by national policy and the public-health need to limit the spread of a communicable disease. 

Furthermore, because Medicare has dramatically lower administrative costs and uses its bargaining leverage effectively to negotiate lower prices than those paid by private health insurers, moving people from private health insurance onto Medicare would substantially lower the national cost of healthcare.

Without taking account of the extra administrative expense, new research out of the University of Massachusetts Amherst estimates that covering the newly unemployed through COBRA and private health insurance would cost as much as $275 billion. By contrast, an improved Medicare with comprehensive coverage could be provided for an estimated $195 billion, saving our country approximately $80 billion while still providing better coverage than is available now. To repeat: even without taking account of the extra administrative expense of COBRA, covering the newly unemployed through Medicare would save nearly 30 percent of the cost, while providing better insurance through reduced administrative waste and the reduction in inflated hospital and physician prices.

We owe this to our fellow citizens. The unemployed and their families should be seen as soldiers drafted into a war on the coronavirus. Providing them with health care is not only in our interest to advance public health, it is fair and deserved compensation for their sacrifice. For a fraction of the cost of the recent disaster relief packages, we could provide desperately needed health care to needy Americans who lost work for no reason of their own while saving billions, and we can do this without paying more to subsidize an inefficient and undeserving industry. Unlike virtually every other disaster relief program out there, this one will advance public health while saving money. What is there not to like? 

Gerald Friedman is a professor of Economics at the University of Massachusetts at Amherst. Wendell Potter, a former vice president for corporate communications at Cigna, is president of Business for Medicare for All.