Medicare for All: Why it Can’t Happen … Yet

Print Friendly, PDF & Email


Richard Evans / Scott Hinds

203.901.1631 /.1632

revans@ /


April 23, 2019


Medicare for All: Why it Can’t Happen … Yet

  • President Obama took office with the highest inaugural approval rating since Kennedy, 257 of 425 House seats, and a filibuster-proof 60 seat Senate majority – yet very nearly failed to pass the Affordable Care Act (ACA), a program which is far less ambitious than Medicare for All
  • Assuming unified Republican opposition to Medicare for All in the next (117th, 2021-2023) Congress, then to pass the plan Democrats would need to control the Presidency and the House of Representatives and would need a filibuster-proof 60-seat Senate majority. Winning the Presidency and controlling the House both are feasible, as is a simple Senate majority
  • Nevertheless a 60-seat Senate Democratic majority looks out of reach, at least in 2020. This would require Dems to defend all 12 of the seats they currently hold that are in play in 2020, and to also capture at least 13 of the 21 Republican seats that are open for re-election
  • If we assume Dems can hold all their seats, and that they defeat incumbent Republicans in order of ‘easiest’ (lowest 2014 margin of victory) to ‘hardest’, then the toughest of the 13 seats is Cornyn’s (TX), who won his seat with a 64.2 percent majority. If we more reasonably assume that the Dems lose Jones (AL), then if they can hold the rest of their seats, they’d need 14 Republican seats, the toughest of which is Capito (WV), who won her seat with a 64.3 percent majority (in a state where Trump had a 72.2 percent 2016 majority). This is all but impossible
  • Lacking a filibuster-proof Senate majority, Dems would be trying to pass a far more ambitious plan than the ACA, with a much weaker hand – which means that Medicare for All almost certainly cannot pass
  • Adding to the political challenges, voter support for Medicare for All (currently 56 percent) declines quickly if respondents are told their taxes would be raised (37 percent support), and/or that private health plans would be abolished (support falls to as low as 13 percent)
  • In short, the table simply isn’t set for Medicare for All in the upcoming Congress. This having been said, a greater government role in healthcare seems likely over longer time cycles. As health cost growth exceeds wage growth, households take-home incomes, after health costs, are beginning to decline in terms of real purchasing power – a circumstance very few households will passively accept. We estimate that most households below the 60th income percentile saw falling real non-health income from 2000 to 2019, and that the share of US households with falling non-health incomes will continue growing well into the next decade. We believe this ultimately is the driver of grassroots support for greater government control in healthcare; however, we don’t believe it’s playing out quickly enough to enable passage of Medicare for All, or any program like it, in the next Congress

Investor fears over Medicare for All presumably are behind the sell-off in healthcare equities, relative to the broader market, since last week’s headlines (Exhibit 1)

Voters tend to trust Democrats more than Republicans on healthcare issues (Exhibit 2), so it’s naturally to Democrats’ advantage to push healthcare to the forefront ahead of the 2020 general election. While Medicare for All has clear electoral utility for Democrats, the real question is whether the proposal has any realistic chance of becoming law, thus making investors’ fears a reality

In 2010, the 110th Congress passed the Affordable Care Act (ACA), which aside from stabilizing the post-crisis economy was arguably the Obama administration’s main legislative priority. Recall that Obama came into office with a 67 percent approval rating[1], the highest inaugural rating since JFK (72 percent)[2]; and that the new president enjoyed significant bicameral majorities: 257 out of 435 House seats, and perhaps most important of all, a filibuster-proof 60 out of 100 Senate seats (Exhibits 3,4). Despite these advantages, the ACA passed by razor thin margins, and was a far less ambitious effort – both in its original and final forms – than Medicare for All

Medicare for All is a decidedly Democratic notion (60 percent of Democratic voters support, as compared to 25 percent of Republicans)[3] which Republican legislators almost certainly will oppose in unison, meaning the proposal has no chance unless Democrats can win the White House (feasible), keep control of the House (also feasible), and reach a filibuster-proof 60 seat majority in the Senate (all but impossible)

Senators are elected to 6-year terms, so roughly a third of the Senate stands for election every 2 years. One party or the other will hold a majority of the seats up for election each 2 years, and the party with the most seats up for election obviously has the most to lose, and vice versa. In the upcoming 2020 general, Democrats are defending 12 seats to the Republicans’ 21, giving Democrats a clear advantage. However, the Dems are starting from a 47-seat minority, making the path to 60 that much longer. If Democrats can hold all 12 of their 2020 seats, they need to win 3 of 21 Republican seats in order to take control of the Senate with 50 seats[4] – and this is entirely feasible. The toughest[5] Republican to beat in this scenario is Sullivan (AK), who won his seat with just 51.1 percent of the vote (Exhibit 5). More realistically, if we assume the Democrats lose Jones in AL, but hold their remaining seats, they’d need 4 of 21 Republican seats to take control with 50 seats in 2020, which is tougher, but still feasible. In this scenario, the toughest Republican to beat (Perdue, GA) won his seat by a 4.0 percent margin in a state that appears increasingly in-play for Democrats. To get to 60 seats, the challenge is dramatically harder. Again assuming Dems defend all 12 seats up for re-election, they’d have to capture 13 of the 21 Republican seats, and the toughest target in this case is Cornyn (TX) who won his seat with a solid 14.3 percent margin (and the Dems can’t run Beto O’Rourke against Cornyn in TX, unless he abandons his presidential bid). Or if we assume the Dems lose Jones (AL) but keep their other 11 seats, they’d need to win 14 of the 21 Republican seats, with the toughest target being Capito (WV), who won her seat by a convincing 14.4 percent margin, in a state where Trump carried 72.2 percent of the popular vote. The bottom-line is that it’s entirely feasible for Democrats to take control of the Senate in 2020, but very nearly inconceivable that Dems get to a filibuster proof 60-seat majority. On balance, this means that a Democratic president trying to pass Medicare for All in 2021 would be attempting to pass a significantly larger reform than the ACA, with a significantly weaker hand than was held by Obama in 2010

To be fair, the politico-economic context for US healthcare has changed since 2010, and will continue to change going forward. Politically, Medicare for All enjoys a modest majority (56 percent) of support as a general concept[6]; crucially this support fades to 37 percent when respondents are told the program would result in higher taxes[7], and fades still further (to as little as 13 percent) if respondents are told that Medicare for All means that private health plans would be abolished[8]

Economically, health costs have continued to grow relative to wages, pushing more households to a point at which the real value of their wages, after deducting health costs (premiums and out-of-pocket), is falling. This threshold, once crossed, arguably makes a given household more activist in its support of healthcare, or at least health cost, reforms. Exhibit 6 (solid lines) shows real non-healthcare incomes for US households by percentile since 1988. Households in the 60th income percentile have seen their real non-healthcare incomes grow by just one percent (in total, not annualized) since 2000; across the same timeframe households in the 40th and 20th percentiles have seen their real non-healthcare incomes fall by 7 percent and 20 percent, respectively. If we project incomes and health costs into 2027 using assumptions and data embedded in the National Health Expenditures Accounts, Census Bureau Historical Household Income Tables, and the CBO’s Economic Projections, we estimate that real non-healthcare incomes for households at or below the 60th percentile will fall across this period. For reference, the dashed lines in Exhibit 6 show what real non-healthcare incomes would have been if medical inflation had matched inflation in the broader economy since 1988. The simple point is that we’re entering a period in which the majority of US households are likely to see real declines in their consumption of non-healthcare goods and services, simply because of excess growth in health costs. If ever there were a way to eventually build a grassroots consensus in favor of health cost reforms, this is it; however, this potent driver of voter attitudes isn’t moving fast enough to push Medicare for All across the line in 2020

©2019, SSR, LLC, 225 High Ridge Rd, 2nd Floor, Stamford, CT 06905. All rights reserved. The information contained in this report has been obtained from sources believed to be reliable, and its accuracy and completeness is not guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein. The views and other information provided are subject to change without notice. This report is issued without regard to the specific investment objectives, financial situation or particular needs of any specific recipient and is not construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. In the past 12 months, through a wholly-owned subsidiary SSR Health LLC has provided paid advisory services to Amgen (AMGN), BioPharmX (BPMX), Bristol-Myers Squibb (BMY), Celgene (CELG), Gilead Sciences (GILD), GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), Merck (MRK), Pfizer Inc (PFE), Roche (RHHBY), Sanofi (SNY) on both securities-related and non-securities-related topics. One or more of SSR Health’s analysts owns long positions in the following stocks: AIMT, ALDR, ALNY, ALXN, AMAG, ARDX, ASRT, BMY, CRSP, CSSPF, DPLO, EDIT, FOMX, HRTX, ITCI, MDCO, NBRV, NTLA, PFNX, RHHBY, SGMO, SRPT, STML, URGN, VRTX

  3. Hill.TV/HarrisX American Barometer, online survey conducted 10/19 – 10/20/2018, MOE +/- 3.1 percent, data here:!520334&authkey=!AJYw2ozjF4GC2jU
  4. Assuming a Democratic presidency, in which case the Democratic vice president would cast the tie-breaking vote in the Senate, giving Dems control of the Senate agenda, and committee chairmanships
  5. Defined as follows, of the ‘n’ senators you’ve got to beat to take control, assuming the ‘n’ you beat are the ones with the lowest margins of victor in the last election, what’s the highest margin of victory among those Republican targets?
  7. Ibid 6
  8. Ibid 3


Print Friendly, PDF & Email