Our fragmented, dysfunctional health insurance system fails to achieve the fundamental purpose of health insurance: to provide financial security and access to needed medical care. Tens of millions of Americans remain uninsured. Those who do have coverage face the constant threat of losing it if they lose a job, get divorced, or earn a little too much to qualify for Medicaid. And increasingly, insurance is an illusion; with sky-high deductibles and limited provider networks, patients still get stuck with exorbitant bills.

It doesn’t have to be this way. In their thought-provoking book “We’ve Got You Covered,” economists Liran Einav and Amy Finkelstein make a compelling case that the solution to America’s health insurance woes is actually quite simple: universal, government-funded basic coverage for all, with the option to purchase additional private coverage.

Einav and Finkelstein argue that the United States has already made a societal commitment to provide a basic level of medical care to everyone, regardless of ability to pay. This is evident in laws like EMTALA (the Emergency Medical Treatment and Active Labor Act) that mandate emergency treatment, and disease-specific programs that cover anyone with conditions like end-stage kidney disease or breast cancer.

“The reason we have all these patches is that, hard as it is to believe, in the United States there is in fact a strong social norm, an unwritten social contract, that we don’t let people die in the streets,” Finkelstein explains. “When people are in dire medical situations and don’t have resources, we inevitably as a society feel compelled to try to help them.”

The problem is that rather than formalizing this commitment upfront in a rational, comprehensive way, we do it on the back end in the most expensive, least efficient way possible. When uninsured patients show up to the ER, taxpayers foot the bill. When people can’t afford their medical debts, hospitals raise prices for everyone else to compensate. We all end up paying one way or another.

Finkelstein and Einav propose a radically simple alternative: automatic, free basic coverage for all, funded by taxpayers. This basic package would cover essential preventive, chronic, and emergency care the fundamentals required to maintain and restore health. Crucially, it would be provided with no premiums, no deductibles, no co-pays. Supplemental private insurance would allow people to “top up” and pay for additional services or amenities.

The economists estimate that this universal basic coverage could be fully funded without any increase in total health spending. The U.S. already spends about 9% of GDP on taxpayer-financed healthcare, the same amount that countries with universal systems spend. “We’re already paying for universal coverage in the United States, even though we’re not getting it,” Finkelstein notes. “We certainly could do it at the same price tag as all these other countries.”

By replacing our current patchwork of programs with a coherent basic benefit for all, we could eliminate the inefficiencies, gaps, and administrative waste that plague our system. More importantly, we could finally guarantee all Americans access to essential care, free from financial barriers and the fear of devastating medical bills.

Of course, the devil is in the details when it comes to defining the basic benefit package and budget. Einav and Finkelstein propose an independent board, similar to the UK’s National Insitute for Health and Care Excellence (NICE), to make these difficult choices based on evidence of clinical and cost effectiveness. Critically, they argue, having an explicit, fixed healthcare budget would force us to finally grapple with tradeoffs and make rational coverage decisions as a society.

Implementing such sweeping reform would undoubtedly face political hurdles. But Finkelstein believes the argument for universal basic coverage can appeal across the ideological spectrum. Conservatives may appreciate the role of private insurance and the focus on personal responsibility for supplemental services. Liberals could embrace the emphasis on health equity and social solidarity.

As I reflect on the data from Medicaid reviewed in this book, it seems natural to believe that any proposal for achieving universal coverage would likely grow from our existing Medicaid or Medicare systems. Increasingly, many states are attempting to merge Medicaid and Medicare coverage and streamline the integration between the two programs on the pathway to universal healthcare coverage. But the actual experiences of ‘duals’ (those people dually-covered by Medicaid and Medicare currently, by virtue of being both low-income and over 65 years old or having special qualifying conditions) offers some warnings for how implementing universal healthcare may have serious risks given our history of policy choices in the US. In the next section, I argue that the experiences of duals offers a critical lesson for how we can advance the cause of universal healthcare coverage in the US while paying attention to a set of critical risks to meaningful coverage.

Maria sat in the clinic waiting room, her hands trembling as she clutched a stack of unpaid medical bills. At 68 years old, she had been dually eligible for Medicare and Medicaid for the past three years, ever since a stroke left her partially paralyzed and unable to work. She had thought having both types of insurance would protect her financially, but instead it had become a bureaucratic nightmare.

Last year, Maria had been hospitalized for pneumonia. Medicare covered most of her inpatient stay, but she was shocked to receive a bill for over $10,000 in out-of-pocket expenses. Medicaid was supposed to cover these costs for low-income patients like her, but the two programs kept passing the buck, each insisting the other was responsible for payment. Maria spent countless hours on the phone, trying to navigate the complex web of rules and regulations, but to no avail. The bills kept coming, threatening to consume what little savings she had left.

Maria’s story is all too common among the nearly 13 million Americans who are dually eligible for Medicare and Medicaid. These individuals, by definition, are among the sickest and poorest in our society. Over half have at least three chronic conditions, and nearly all have incomes below $20,000 per year. They rely on these public insurance programs as a vital lifeline. Yet too often, rather than working together to coordinate their care, Medicare and Medicaid engage in a bureaucratic tug-of-war, with patients caught in the middle.

The data paints a grim picture. Compared to other Medicare beneficiaries, dual eligibles have significantly higher rates of hospitalization, emergency department use, and readmissions. They are more likely to receive low-value care and less likely to receive recommended preventive services. One study found that among dual eligibles with diabetes, less than half received appropriate screening for complications. The fragmentation between Medicare and Medicaid creates perverse incentives, with neither program wanting to invest in prevention or care coordination, thinking the other program will bear the cost of complications down the line.

The human toll is even more devastating than the statistics suggest. Behind every number is a patient like Maria, struggling to access the care they need while drowning in paperwork and debt. In one infamous case, a dual eligible patient lost his dentures during a hospital stay, but spent years unable to eat solid food because Medicare wouldn’t cover replacements and Medicaid insisted he get fitted by a Medicare provider first. Another patient with multiple sclerosis was denied coverage for a power wheelchair by both programs, leaving her bedridden and isolated. Even when patients do manage to secure services, they are often left with astronomical copays that Medicaid should cover but doesn’t, leading to a cycle of financial strain and worsening health.

The root of the problem lies in the fact that Medicare and Medicaid were never designed to work together. Medicare, as a federal program, is primarily responsible for covering acute medical services like hospital stays. Medicaid, as a joint federal-state program, focuses more on long-term services and supports, such as nursing home care. Each program has its own complex set of rules and payment structures, with little incentive to coordinate or integrate care across the continuum.

Efforts to better align the two programs, while well-intentioned, have often fallen short. Dual Eligible Special Needs Plans (D-SNPs),for example, were created to provide more coordinated care, but have been hampered by low enrollment and limited integration with both programs’ management systems. Accountable Care Organizations have shown some promise in improving quality and reducing costs for dual eligibles, but their impact has been modest thus far. State demonstrations to integrate financing and delivery of care have been slow to get off the ground, with only a handful of states participating.

The growing number of dual-eligible individuals, those who qualify for both Medicare and Medicaid, presents a significant challenge for the U.S. healthcare system. As the population ages and more baby boomers become eligible for Medicare, many of whom have lower incomes and more complex health needs than previous generations, the strain on already stretched budgets will only intensify.

In 2019, combined Medicare and Medicaid spending on dual eligibles exceeded $440 billion, accounting for more than a third of total spending for both programs. This disproportionate spending highlights the unique challenges in caring for this population, who of ten have multiple chronic conditions, functional limitations, and social needs that require extensive coordination across medical and long-term care services.

The COVID-19 pandemic further exposed the vulnerabilities of dual-eligible individuals, who have been among the hardest hit by the virus due to their age, underlying health conditions, and social risk factors such as poverty and housing instability. The pandemic has also strained state Medicaid budgets, with many states facing revenue shortfalls and increased enrollment as millions of Americans lost jobs and health coverage.

Efforts to integrate Medicare and Medicaid are often hindered by the underlying fee-for-service payment models that still dominate bothMedicare and Medicaid. Under fee-for-service, providers are reimbursed for each individual service or procedure, creating incentives to increase volume rather than prioritize prevention, care coordination, and population health management. This fragmented approach can lead to duplication of services, conflicting treatment plans, and poor health outcomes, particularly for dual eligibles with complex needs.

Many states have turned to managed care organizations to administer Medicaid benefits, including for dual eligibles. While intended to improve efficiency and care coordination, the profit motives of these entities can sometimes run counter to the goals of patient-centered care. In some cases, managed care plans may focus more on reducing utilization and costs by erecting barriers to care access, rather than investing in preventive services and care management to keep enrollees healthy.

A major challenge in integrating care for dual eligibles is the sheer complexity of billing, reimbursement, and regulatory requirements across Medicare and Medicaid. Providers often struggle to navigate the disparate rules and processes of the two programs, leading to delays in payment, administrative burden, and frustration. This complexity can also make it difficult for patients to understand their benefits and access needed services, exacerbating health disparities.

The complexity of Medicare and Medicaid integration provides a critical lesson on how difficult it can be to push towards a single, universal safety-net healthcare system in the United States. Hence, while we may support the effort to achieve a single, universal safety-net program, getting to that goal from our existing programs remains administratively bewildering.

Could the effort towards universal healthcare be simplified through efficient population-based payment models, such as paying providers more for caring for the highest-risk patients, and leveraging the private sector for efficiency? A warning for advocates who believe this approach would be straightforward has been provided by the case of Medicare Advantage, which illustrates the central challenges of adapting programs in their current forms to achieve universal coverage goals. When Medicare Advantage (MA) was first introduced, policymakers had high hopes that outsourcing the administration of Medicare benefits to private insurance companies would lead to a new era of coordinated, high-quality care for seniors. The theory was that private insurers, unleashed from the constraints of government bureaucracy, would have the flexibility and incentive to innovate new models of care delivery that would keep patients healthier and reduce overall healthcare spending.

At the core of this vision was a novel way of paying plans; instead of the traditional fee-for-service model where Medicare reimburses providers for each individual service, MA plans would receive a fixed monthly payment to manage all of an enrollee’s healthcare needs. That per-member, per-month payment would be risk-adjusted based on each patient’s health conditions, so that plans enrolling sicker patients would receive higher payments to account for their greater medical needs.

The risk-adjusted, capitated payment model was seen as a way to align plans’ financial incentives with the goal of keeping patients healthy. If plans could prevent expensive hospitalizations and emergency room visits through better primary care and disease management, they could pocket the savings as profit. Conversely, if their patients got sicker and racked up higher medical bills, the plans would be on the hook for those costs.

But nearly three decades after MA was created, the reality has failed to live up to the initial promise. While enrollment in MA plans has skyrocketed, such that over 40% of eligible beneficiaries are now in private plans instead of traditional government-administered Medicare, evidence of whether the program has actually improved health outcomes or saved money is decidedly mixed.

Central to the dysfunction is how MA plans have exploited the risk adjustment system to maximize their revenues. Under the current model, plans submit diagnosis codes to Medicare for each enrollee, which are then run through a complex algorithm to assign a “risk score” that determines the monthly payment for that individual. The higher the risk score, the higher the payment. This system was intended to ensure that plans would not shy away from enrolling sicker, more expensive patients. But in practice, it has created a powerful financial incentive for plans to inflate risk scores by aggressively documenting and sometimes exaggerating their members’ health conditions.

The result has been a coding arms race, where plans compete not on the basis of delivering better care, but on who can most thoroughly capture patient diagnoses. Plans employ a variety of strategies to maximize coding, such as sending nurses into patients’ homes to conduct health risk assessments, paying bonuses to physicians for exaggerated documentation, and using sophisticated data mining algorithms to scour patient records for possible additional diagnoses (however questionable).

The impact on Medicare spending has been staggering. One study estimated that between 2008 and 2023, MA plans collected over $140 billion in excess payments by exploiting the risk adjustment system. Another analysis found that the average MA enrollee had a risk score nearly 20% higher than a similar patient in traditional Medicare, a difference attributed almost entirely to coding practices rather than actual health status.

While plans have become experts at playing the risk score game, there is little evidence that all this extra documentation is translating into better care or outcomes for patients. In fact, research on MA’s impact on quality and utilization has yielded mixed and often concern-ing results.

Some studies have found modest improvements in certain process measures like cancer screening rates and medication adherence among MA enrollees compared to traditional Medicare. But other research has raised red flags about MA plans erecting barriers to care, particularly for higher-cost services and sicker patients.

One analysis found that MA enrollees had significantly higher rates of emergency room visits and hospital readmissions compared to similar patients in traditional Medicare, suggesting serious gaps in care coordination and management. Another study revealed that MA plans denied coverage for medically necessary services like skilled nursing and rehabilitation at far higher rates than traditional Medicare.

Reports abound of MA enrollees facing onerous prior authorization requirements, limited specialist networks, and surprise medical bills. Many seniors have complained of being aggressively marketed to join MA plans without a full understanding of the restricted provider net-works and potential out-of-pocket costs.

Even more troubling, there is evidence that MA plans are using risk scores not just to boost payments, but to avoid covering high-cost patients altogether. A recent study found that MA plans were far more likely to disenroll patients in their last year of life compared to traditional Medicare, suggesting plans may be encouraging expensive patients to switch back to traditional Medicare to avoid the cost of their care.

Taken together, the picture that emerges is one of a program that has strayed far from its original intent. The capitated, risk-adjusted payment model—while conceptually appealing—has in practice created perverse incentives for plans to upcode patients’ health status while limiting their access to care. The result is a system that is producing record economic gains for insurers or provider groups who have optimized for billing, but failing to deliver clear improvements in health outcomes or spending for Medicare overall.

As policymakers debate the future of MA and contemplate expanding the model to the entire Medicare program through the controversial Direct Contracting program, it’s critical to take a hard look at the lessons learned from MA’s track record.

The allure of outsourcing risk and responsibility to private plans is understandable, particularly as Medicare faces dire long-term solvency challenges. But the experience of MA should give serious pause to those who believe that simply handing over the reins to private entities will magically solve the woes of America’s fragmented, fee-for-service healthcare system.

At its core, the MA experience exposes the limits and dangers of relying on financial incentives alone to drive improvements in care delivery. Yes, plans have become very adept at maximizing revenues through coding and risk selection strategies. But there is little indication that they are truly innovating new models of care or investing those extra dollars into the hard work of better coordinating care, managing chronic conditions, and keeping patients out of the hospital. Instead, the evidence suggests that MA plans are largely gaming a system that was not designed with sufficient guardrails or oversight. The risk adjustment model, while well-intentioned, has proven far too easy to exploit. And the quality bonus program, which was meant to reward plans for superior performance, has instead devolved into an easily-gamed farce where almost every plan now receives a bonus and there is little correlation between bonus size and any meaningful measures of quality.

Meanwhile, the traditional Medicare program continues to chug along, hamstrung by its antiquated fee-for-service chassis but still beloved by millions of beneficiaries for its simplicity, flexibility, and reliability. While far from perfect, the program has made strides in recent years to adopt value-based payment models like Accountable Care Organizations that seek to reward providers for better outcomes and lower spending.

Rather than blindly expanding the MA model or handing over even more of Medicare to private plans through Direct Contracting, policymakers should be looking to build on what has worked in both traditional Medicare and MA while addressing the glaring flaws and loopholes.

That means first and foremost reforming the MA payment system to clamp down on abusive coding practices and ensure plans are being paid accurately for the health status of their enrollees. It means tightening oversight of marketing practices, network adequacy, and claims denials to protect beneficiaries from being misled or denied necessary care. And it means rethinking quality bonuses to actually reward meaningful improvements in patient outcomes and experience rather than easily-manipulated process measures (like whether a form was completed). More broadly, it means recognizing that there are no easy solutions or silver bullets to reining in healthcare costs and improving quality in Medicare or Medicaid or the broader health system. Private plans, for all their supposed innovation and efficiency, have not proven to be a panacea. Nor has the fee-for-service system, with its perverse incentives for volume over value.

The hard truth is that truly transforming healthcare insurance to achieve universal healthcare will not be as simple as expanding Medicaid or Medicare, or integrating the two, under the current environment of multiple private ventures in the space. It will require us both reform payment incentives and invest in the unglamorous but critical work of primary care, care coordination, and addressing social determinants of health. It will require a greater focus on prevention, early intervention, and patient engagement rather than just reactively treating sickness. And it will require a willingness to take on entrenched interests, from hospital systems to drugmakers to insurers, who have gained handsomely from the status quo.

None of this will be easy, fast, or politically painless. But the alternative—continuing to funnel billions of dollars into a broken system that enriches middlemen while failing patients—is simply unsustainable.The experience of Medicare Advantage, for all its promise and pitfalls, should serve as a cautionary tale and a catalyst for charting a new path forward.

The two opposing challenges—(1) the bureaucratic complexity at the heart of Medicare-Medicaid integration efforts and (2) the perverse incentives that led to gaming of the MA system—offer crucial insights for the future of Medicaid and the pursuit of a universal healthcare safety net in the US.

First, as the nation’s largest health insurance program, Medicaid plays one of the most meaningful roles among other healthcare safety net programs. But the “universal” moniker of the universal healthcare coverage effort remains elusive due to Medicaid’s complexity. At the heart of Medicaid’s challenges lies its labyrinthine structure, a complex web of federal and state responsibilities, varying eligibility criteria, and a patchwork of delivery models. Navigating this bureaucratic maze can be daunting for patients, providers, and administrators alike, leading to confusion, delays, and gaps in care. The result is a system that too often fails to deliver on its promise of accessible, high-quality health-care for our most vulnerable populations.

Across the program, patients and providers alike often struggle to navigate a bewildering array of plans, benefits, and requirements that vary widely from state to state and sometimes county to county. This lack of standardization not only creates administrative headaches, but can lead to real gaps in care as patients move or change circumstances and suddenly find themselves without coverage.

Compounding these challenges is the growing role of managed care organizations in Medicaid. What began as an effort to control costs and improve care coordination has too often devolved into a race to the bottom, with plans competing to attract healthier enrollees while skimping on care for those with greater needs. In many states, Medicaid managed care plans have been plagued by reports of inadequate provider networks, denied services, and poor quality, even as they siphon off billions in taxpayer dollars for administrative costs and private gains. Just as MA plans have exploited risk adjustment loopholes to inflate payments while erecting barriers to care, some Medicaid managed care plans have been accused of cherry-picking patients, denying necessary treatments, and gaming quality metrics. And just as MA has failed to deliver clear improvements in health outcomes or spending despite its hefty price tag, the evidence on Medicaid managed care’s impact is mixed at best.

To be sure, managed care done right can offer valuable tools for states to improve care coordination, address social determinants of health, and pay for value over volume. But the lesson from Medicare Advantage is clear: without robust oversight, transparency, and accountability, perverse incentives of healthcare organizations can all too easily trump patient care.

As Medicaid faces an uncertain future, with looming budget short-falls and political attacks, it is more critical than ever to heed these warnings and chart a new course. Rather than doubling down on complex and opaque models, we must simplify and streamline Medicaid to serve its core mission better.

This starts with a renewed focus on administrative simplification. Policymakers should work to standardize eligibility, benefits, and reporting requirements across states and programs to the greatest extent possible. Patients and providers should have clear, concise information on what services are covered and how to access them. And investments should be made in modernizing Medicaid’s outdated IT infrastructure to enable seamless data-sharing and care coordination.

Simplification must also extend to payment models. The Byzantine web of fee-for-service, managed care, and waiver programs that currently characterizes Medicaid is ripe for reform. In its place, policymakers should champion a move toward simpler value-based, population-level payments that reward providers for keeping patients healthy and out of costly institutional settings. This could take the form of global budgets for safety-net hospitals and community health centers, allowing them the flexibility to invest in primary care, care coordination, and social services. It could mean expanding successful models like those reviewed extensively in the previous chapters that can be considered explicitly in Medicaid funding and reform bills. And it could entail risk-adjusting payments not just for medical acuity (which can be manipulated by coding behaviors), but for social factors measured by independent data systems that are harder to manipulate, like income and debt verification systems to directly assess patient poverty levels, or census data collection systems that increasingly offer details that cannot be gamed easily by private entities.

Critically, any move toward further value-based payment in Medicaid must be accompanied by robust quality measurement and accountability. Rather than relying on easily-gamed process measures, quality metrics should prioritize patient access, outcomes, experience of care, and health equity. Payments should be tied to meaningful improvements on measures like preventable hospitalizations, maternal morbidity, and childhood asthma control, with particular attention to closing racial and socioeconomic disparities.

To truly move the needle on health equity, Medicaid must also invest in diversifying the health care workforce to better reflect the communities it serves. This means not only recruiting and retaining more providers of color, but also expanding the roles of community health workers, doulas, and other professionals who can bridge clinical and social services. These frontline workers, often drawn from the same neighborhoods as their patients, can be powerful allies in building trust, addressing social needs, improving outcomes, and enabling the expansion of Medicaid.

Critically, all of these reforms must be underpinned by a steadfast commitment to public administration and oversight of Medicaid. While private entities can play valuable roles in delivering care and services, their motives must be subordinate to the public interest. Medicaid’s complexity and vulnerability to gaming make it all the more essential that the program remain firmly in public hands, accountable to democratically-elected officials and the taxpayers who fund it.

This is not to say that Medicaid should be immune from scrutiny or reform. As stewards of public dollars, Medicaid administrators have a duty to ensure that funds are spent wisely and efficiently. But this imperative must be balanced with a recognition that Medicaid is not just another line item in a budget, but a lifeline for millions of Americans who would otherwise go without care.

Indeed, for all its flaws and challenges, Medicaid remains a cornerstone of our nation’s safety net, a bulwark against the devastating health and financial consequences of poverty, disability, and discrimination. Its impact is felt not just in doctor’s offices and hospitals, but in classrooms, workplaces, and communities across the country.

Research has shown that Medicaid coverage improves access to preventive care, reduces financial strain, and even saves lives. Children covered by Medicaid have better educational outcomes and higher earnings as adults than those without Medicaid. Pregnant women with Medicaid have healthier babies and lower rates of maternal mortality than those without medicaid. And seniors and people with disabilities who rely on Medicaid for long-term care can remain in their homes and communities rather than being forced into institutions. In short, Medicaid is not just a health insurance program, but an investment in the health, dignity, and potential of our most vulnerable neighbors. And like any investment, it requires careful stewardship, evidence-based decision-making, and a long-term perspective.

As the nation emerges from a once-in-a-century pandemic that has laid bare the deep inequities in our healthcare system, the urgency of strengthening Medicaid has never been greater. The program has served as a critical safety net during the crisis, absorbing millions of Americans who lost jobs and health coverage. But it has also been strained to the breaking point, with many states facing budget short-falls and provider networks stretched thin.

The road ahead will not be easy. Medicaid will continue to face political headwinds, competing priorities, and fiscal pressures. But the lessons of the past, from the failed promise of Medicare Advantage to the human costs of fragmented care for dual eligibles, light the way forward.

By embracing simplicity, transparency, and public accountability, Medicaid can be a model for a healthcare system that truly puts patients first. By investing in primary care, community health, and equity, it can help to dismantle the deep-seated disparities that have plagued our nation for too long. And by remaining true to its core mission of serving those most in need, it can be a beacon of hope and healing in a time of crisis and division.

In the end, the future of Medicaid is inextricably linked to the future of our nation. It is a reflection of our values, our priorities, and our commitment to one another. And it is a test of our willingness to build a society that leaves no one behind, that recognizes healthcare as a fundamental human right, and that measures its progress not by the wealth of a few, but by the well-being of all.