This commentary was adapted from episode 243 of the Health & Veritas podcast. Subscribe for weekly doses of expert insight on health and the healthcare industry.
We are taping this the week before an important election, the midterms of 2026. One of the common themes has been healthcare costs, and one of the most talked-about strategies is to introduce Medicare for All—the idea of covering all Americans through a single payer like Medicare.
Before we get there, I want to speak to how well Medicare works for the people already in it and offer some real proposals for how to fix it. Because there are big challenges with the system we have today. Traditional Medicare, also called fee-for-service Medicare, is a government-run insurance program primarily for 62 million people over 65 and another 7 million non-elderly with disabilities. Here’s what traditional Medicare asks of a beneficiary in 2026: Get admitted to the hospital and you owe a $1,736 deductible. That’s per benefit period, which can reset in as little as 60 days, not per year, so a second admission a few months later can trigger it again. See a doctor, pay a $283 deductible, then 20% of every bill with no ceiling on what you have to pay out-of-pocket. Fill a prescription, pay a deductible of up to $615.
That’s $2,634 in deductibles alone, and you’ll still be paying that 20% of every bill after that. Add a year of Part B premiums, which is about $2,435, and you’re past $5,000 before a single co-insurance bill. Half of beneficiaries live on less than $43,200 per person. Deductibles and premiums alone are closing in on 12% of their income. Importantly, that’s the floor, not the ceiling. A lengthy hospitalization or illness can make it cost much, much more. The Medicare prescription drug benefit, which passed in 2003, currently caps out-of-pocket costs for prescriptions at $2,100 a year. Hospital and physician care, the pieces that date back to 1965, still have no cap at all.
Medicare is just not working the way that many younger people imagine it does right now. Fix it first and then let’s talk about using it as a model for expansion.
Almost nobody uses traditional Medicare as it was designed. Among people in fee-for-service Medicare, 87% also carry some additional form of insurance, whether Medigap, retiree health coverage, or Medicaid. The simple government option is really three or four separate products. Medigap—which is private insurance to help cover some of those expenses I described—also has a trap: In most states, insurers must take you, regardless of your health, only in your first year. Wait, and you may be locked out.
More than half of beneficiaries are now in Medicare Advantage. That’s Medicare delivered by private insurance plans. And that is very distinct from fee-for-service Medicare.
Here’s the irony. MedPAC, the Medicare Payment Advisory Commission, estimates that Medicare pays about 14% more for those enrollees than it would for traditional Medicare, amounting to roughly $76 billion a year. The industry disputes that, but some of that money funds the very perks that make Medicare Advantage look cheaper. Meanwhile, the Part A trust fund, which pays for hospital care, is projected to run short in 2033.
The fixes to these structural and funding problems aren’t mysterious. Let’s get one deductible instead of three; let’s have uniform co-insurance so there is more predictability to your spending; and let’s have a real out-of-pocket cap on hospital and physician spending, so there is less of a risk of bankrupting people. Researchers at Brown estimate a $5,000 cap would cost about $16 billion a year. To pay for the cap, bring Medicare Advantage payments in line with traditional Medicare. Separately, to shore up the hospital trust fund, direct the 3.8% investment income tax that was included in Obamacare to the trust fund, and raise the payroll tax about a quarter point each for workers and employers. That’s $28 more per $10,000 in wages.
Some people, especially Medicare Advantage enrollees who like their extras, would lose things they value. That’s a downside to doing something like this.
And maybe, just maybe, we could also cover some critical needs for the elderly and disabled, like dental care, hearing aids, and eyeglasses. This first step will still not address the catastrophic costs of long-term care, but we can leave that to another day.
Bottom line, if Medicare is going to be the model for everyone, it has to work first for the people already in it. It is just not working the way that many younger people imagine it does right now. Fix it first and then let’s talk about using it as a model for expansion.
Fail to fix it and you’re compounding problems on problems.
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