U.S. Sen. Bernie Sanders of Vermont unveiled a new version of his “Medicare-for-all” plan on Wednesday, sparking renewed discussion about what such a plan would cost and how it might affect the many different stakeholders in the health care space.
Sanders’s proposal would create a single-payer health care system where a government-run plan guaranteeing coverage for all would replace the current job-based and individual private health insurance system. The plan would have minimal copays and do away entirely with premiums and deductibles.
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This new version of Sanders’s Medicare-for-all plan comes at a time when the health-care sector has been significantly underperforming the S&P 500 SPX, +0.00% .The Health Care Select Sector SPDR Fund ETF XLV, -1.23% has gained 4.4% in the year to date, while the S&P 500 has gained 15%. On Thursday, shares of UnitedHealth Group Inc. UNH, -4.31% , Walgreens Boots Alliance Inc. WBA, -1.96% , Merck & Co. Inc MRK, -1.21% and Pfizer Inc. PFE, -1.08% led the Dow Jones Industrial Average’s DJIA, -0.05% losers.
Sanders’s bill has 14 Democratic co-sponsors, including 2020 presidential hopefuls and fellow senators Elizabeth Warren, Kamala Harris, Cory Booker and Kirsten Gillibrand. If implemented, the proposal would upend the health care industry, drastically altering the business landscape for health insurers, pharmaceutical companies and providers.
Drug manufacturers would have to pare prices down considerably under a single-payer system, said analysts at Raymond James, who published an analysis on Thursday looking at how a single-payer system would affect the health-care sector. The single payer — in this case, the government — would have substantial negotiating power and could “claw back patents” if companies refused to pay the government its desired rate, Raymond James health-care policy analyst Chris Meekins wrote in a note to clients.
“We believe this would reduce prices at least 30%,” he wrote.
Hospitals would face a similar issue, depending on how they’re currently paid, said John McDonough, a professor of the practice of public health at the Harvard T.H. Chan School of Public Health.
Private payers pay hospitals significantly higher rates than Medicare or Medicaid, so the impact on a hospital would depend on how much of its current business comes from private insurers versus the government, he said. A hospital whose revenue base is mostly coming from private insurers would see a significant reduction in revenue, but a hospital that is currently more dependent on government reimbursement might do better.
A study published last month by the American Hospital Association and Federation for American Hospitals — both opposed to a single-payer system — looked at how even a less extensive Medicare-like health plan offered on the individual exchange might affect hospitals’ bottom lines. The study found that hospitals could lose $774 billion over a decade from lower reimbursement rates.
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But the largest impact by far would be on health insurers, McDonough told MarketWatch.
“Their business would be dramatically de-escalated,” he said, adding there could still be a role for private insurance as a supplement to primary government-funded health coverage.
Meekins of Raymond James saw a similarly bleak future for private insurers. “Given that the fundamental piece of this proposed legislation is to move all patients to Medicare, the private insurance industry would be largely outlawed overnight,” he wrote in his note.
Despite the heightened buzz around Sanders’ proposal, Wall Street seems to doubt lawmakers will pass a Medicare-for-all bill anytime soon.
Chatter around the single-payer proposal appears to be "more sound bite than threatening, at least over any near term duration,” said Jared Holz, a health-care trading desk strategist at Jefferies, in a note to clients on Thursday.
Mizuho Securities analyst Salim Syed was more blunt: The Medicare-for-all proposal “doesn’t even hit the radar with biotech investors in my discussions with industry,” he told MarketWatch in an email.