I’m more confused as I read more and more about Medicare for All. Who is telling the truth? Diane Archer, founder and former president of the Medicare Rights Center and president of JustCareUSA.org. recently wrote that something interesting is happening in the age of Trump: 63 percent of Americans support a national health insurance plan, or Medicare for All, in which the federal government would guarantee health insurance for everyone in the country.
Mounting support for Medicare for All has left conservatives hyperventilating. Commercial insurers and their Republican allies are working overtime to convince Congress and the electorate that we simply can’t “afford” Medicare for All. A report by the Mercatus Center’s Charles Blahous, who spearheaded President George W. Bush’s attempt to privatize Social Security, is the latest entry in this fuzzy math sweepstakes.
Happily, for those of us who seek health-care security for all Americans, Blahous and his friends miss the point. Our commercial health insurance system is crazy and unsustainable, and Medicare for All is the only realistic path to reduce national health spending and improve the quality of our health-care system.
Sen. Bernie Sanders’s Medicare for All proposal improves and expands the current Medicare program, replacing commercial health insurance with federally administered coverage for all Americans. The proposal eliminates premiums, deductibles, and co-pays, and includes new coverage for vision, hearing and dental care. It allows everyone to use the doctors and hospitals they know and trust, anywhere in the country, without the restrictive networks, arbitrary denials and high out-of-pocket costs that go hand in hand with commercial insurance.
Medicare for All, like Social Security, is social insurance, designed to pool and broadly distribute the costs of care across the entire population. At its core, Medicare for All gives doctors and hospitals the freedom to compete for patients without insurers getting in the way.
Blahous writes that Medicare for All is expensive. That’s correct, but it’s the wrong starting point. The current commercial health insurance system is much more expensive than Medicare for All and is unsustainable by any measure.
We spend more than $3.3 trillion a year on health care — about 18 percent of the gross domestic product. That’s twice as much per capita on health care as the average of other high-income countries. In return, we get health-care outcomes that rank dead last among our peers. Health-care costs in this country are projected to increase by 5.5 percent a year over the next eight years. You do the math: The status quo doesn’t work. Period.
Medicare for All, by contrast, provides a compelling path to keeping health-care costs in check. To begin with, Medicare for All would eliminate the administrative waste and profit margins created by the commercial insurance system with hundreds of insurers negotiating different agreements with thousands of health-care providers. Total annual savings on administrative costs under Medicare for All are estimated as high as $500 billion a year (far more than Blahous estimates in his report).
Most important, Medicare for All would empower the federal government to use the collective bargaining power of 330 million Americans to reduce the cost of health care, something that commercial insurers have been unable to do. Blahous himself estimates that the extension of current Medicare rates to all health-care services coupled with lower prescription drug prices under Medicare for All would eliminate $445 billion in annual costs in 2022.
In all, Blahous concedes that Medicare for All would reduce national health spending by $2 trillion over 10 years; even after accounting for the cost of guaranteeing everyone coverage and offering better benefits. (And again, many health economists would say Medicare for All would drive far greater savings.)
Blahous’s concern is that Medicare for All will transfer the rest of the cost of health care from the private sector to the federal government. Okay. So how will we pay for Medicare for All? The same way we pay for the defense budget and everything else: through taxes. Does that mean that ordinary Americans will pay more under Medicare for All that they pay for healthcare today? No.
Think about it. Today, the typical family of four spends more than $28,000 on health care a year. Individuals pay that cost indirectly through lower wages (which fund the employer’s share of health insurance) and directly through out-of-pocket costs. Under Medicare for All, the typical family will see higher wages and lower expenses and spend much less on health care than it does today.
To be sure, the transition to Medicare for All will disrupt the health-care marketplace. Insurers will wind down. Pharmaceutical companies and medical device manufacturers likely will see their profits drop. Hospitals and doctors will need to work smarter and more efficiently; they will see an overall reduction in their rates, but they will save on administrative costs and their bills will all be paid.
There are always winners and losers in policy reform. Today, commercial insurers and other corporate interests in the health-care industry are the winners, and the American people are the losers. Medicare for All flips that paradigm. We can’t afford to live without it.
But at what cost to patient and caregiver?
Bernie Sanders Supporters Admit His Socialized Medicine Plan Will Ration Care
If Bernie Sanders wants to take a ‘victory lap’ for a study arguing that millions of health workers will receive the same amount of money for more work, I have four words: Good luck with that.
Christopher Jacobs noted that the move to enact single-payer health care in the United States always suffered from major math problems. This week, it revived another: Common sense.
On Monday, the Mercatus Center published an analysis of single-payer legislation like that promoted by socialist Sen. Bernie Sanders (I-VT). While conservatives highlighted the estimated $32.6 trillion price tag for the legislation, liberals rejoiced.
Sanders even released a video thanking Mercatus for its study, claiming that it showed how his bill would reduce overall national health expenditures by $2 trillion. In other words, Sanders claims his bill will provide more health care coverage to more Americans, and at less cost.
Riiiiiigggggggghhhhhhhhhttttt. As the old saying goes, if something sounds too good to be true, it usually is. Given that even single-payer supporters have now admitted that the plan will lead to rationing of health care, the public shouldn’t just walk away from Sanders’ plan—they should run.
National Versus Federal Health Spending
Sanders’ claim arises because of two different terms the Mercatus paper uses. While Mercatus emphasized the way the bill would increase federal health spending, Sanders chose to focus on the study’s estimates about national health spending.
Essentially, the $32.6 trillion figure—the amount of taxes that a single-payer bill must raise over its first decade—represents the cost of bringing the entire health-care system on to the federal government’s books. While bringing the health-care system on-budget will obviously require massive tax increases, the Mercatus paper assumes that doing so will cause overall national health spending to drop slightly.
Although it sounds large in absolute terms, the Mercatus paper assumes only a slight drop in health spending in relative terms. It estimates a total of $2.05 trillion in lower national health expenditures over a decade from single-payer. But national health expenditures would total $59.7 trillion over the same time span—meaning that, if Mercatus’ assumptions prove correct, single-payer would reduce national health expenditures by roughly 3.4 percent.
Four Favorable Assumptions Skew the Results
However, to arrive at their estimate that single-payer would reduce overall health spending, the Mercatus paper relies on four highly favorable assumptions. Removing any one of these assumptions could mean that instead of lowering health care spending, the single-payer legislation would instead raise it.
First, Mercatus adjusted projected health spending upward, to reflect that single-payer health care would cover all Americans. Because the Sanders plan would also abolish deductibles and co-payments for most procedures, study author Chuck Blahous added an additional factor reflecting induced demand by the currently insured, because patients will see the doctor more when they face no co-payments for doing so.
But the Mercatus study did not consider whether providing completely free health care to all U.S. residents will induce additional migration, adding even more costs to the system. As Hillary Clinton testified before Congress in 1993: “We do not think the comprehensive health care benefits should be extended to those who are undocumented workers and illegal aliens. We do not want to do anything to encourage more illegal immigration into this country. We know now that too many people come in for medical care, as it is.”
Second, the Mercatus study assumes that a single-payer plan can successfully use Medicare reimbursement rates. However, the non-partisan Medicare actuary has concluded that those rates already will cause half of the hospitals to have overall negative total facility margins by 2040, jeopardizing access to care for seniors.
Expanding these lower payment rates to all patients would jeopardize even more hospitals’ financial solvency. But paying doctors and hospitals market-level reimbursement rates for patients would raise the cost of a single-payer system by $5.4 trillion over ten years—more than wiping away any supposed “savings” from the bill.
Third, by its own admission, Mercatus assumes “virtually perfect success” for a single-payer system in replacing brand-name drug usage with generics. If the government cannot achieve “virtually perfect success” in increasing generic drug utilization—and a cynic might ask whether the government has achieved even imperfect success in anything—or greater government “negotiating” power has little effect in jawboning down prices, then the estimated costs of single-payer will rise.
Finally, the Mercatus paper “assumes substantial administrative cost savings,” relying on “an aggressive estimate” that replacing private insurance with one single-payer system will lower health spending. Mercatus made such an assumption even though spending on administrative costs increased by nearly $26 billion, or more than 12.3 percent, in 2014, Obamacare’s first year of full implementation.
Likewise, government programs, unlike private insurance, have less incentive to fight fraud, as only the latter face financial ruin from it. The $60 billion problem of fraud in Medicare provides more than enough reason to doubt many administrative savings from a single-payer system.
Apply the Common Sense Test
But put all the technical arguments aside for a moment. As I noted above, whether a single-payer health-care system will reduce overall health expenses rests on a relatively simple question: Will doctors and hospitals agree to provide more care to more patients for the same amount of money?
Whether single-payer will lead to less paperwork for doctors remains an open question. Given the amount of time people spend filing their taxes every year, I have my doubts that a fully government-run system would generate major improvements.
But regardless of whether providers get any paperwork relief from single-payer, the additional patients will come to their doors seeking care, and existing patients will demand more services once the government provides them for “free.” Yet doctors and hospitals won’t get paid any more for providing those additional services. The Mercatus study estimates that spending reductions due to the application of Medicare’s price controls to the entire population will all but wipe out the increase in spending from new patient demand.
If Sanders wants to take a “victory lap” for a study arguing that millions of health care workers will receive the same amount of money for doing more work, I have four words for him: Good luck with that.
Also, consider the health care workers, especially the physicians. Libertarian think tank: Providers would pay for Medicare for All Susannah Luthi reviewed libertarian take on the Medicare for All concept further and found that the Medicare for All plan backed by Sen. Bernie Sanders would put the brunt of the proposal‘s costs on provider pay cuts.
In a white paper released Monday by the Mercatus Center of George Mason University, senior research strategist Charles Blahous claimed healthcare spending constraints laid out in the plan from the Vermont independent senator fall almost totally on providers. The plan could save the U.S. more than $2 trillion over 10 years in national health care spending but could increase the federal government’s costs to nearly $33 trillion above current levels, according to Blahous’ calculations.
Nearly all the savings for national health spending come from across-the-board Medicare rate cuts, which Blahous projects would reduce provider payments by $384 billion in the first year, and by nearly $660 billion in 2030.
This analysis will likely push single-payer advocates to hone their message on healthcare pricing to make their proposal viable, said Benedict Ippolito, a health economist with the right-leaning American Enterprise Institute.
“Provider payment cuts are doing a lot of heavy lifting here,” Ippolito said. “Changes to provider payments, whether you love them or not, have real consequences. And those real consequences extend beyond a budgetary score.”
While the U.S. healthcare system does need to grapple with the “right price to pay for healthcare,” Ippolito said, proponents of the Sanders plan and others like it need to determine what the right rate could be and how it will impact provider behavior, which determines major components of the healthcare system—investments in equipment and buildings, patient access and health outcomes.
“It’s easy to think about prices as one piece of a broader market, but the thing that’s special about prices is that it’s the key that unlocks the whole thing,” he added. “Whatever price you set will be highly consequential for the entire market. The decision you make for good or bad is extremely consequential, and you can’t get around that.”
Single-payer advocates lauded the paper’s findings that the projected provider cuts would roughly pay for universal coverage. The Mercatus analysis also estimated the health care system would save billions every year on drug spending since the Sanders Medicare for All plan allows the HHS secretary to negotiate prescription drug prices with the manufacturers—and presumably refuse to buy certain high-priced drugs.
But Blahous warned that the Sanders blueprint for coverage would likely lead to a huge spike in overall healthcare utilization, not only because more people would automatically be covered for services like dental and vision care but also because it bans any co-pays or deductibles.
“As a general rule, the greater the percentage of an individual’s health care that is paid by insurance … the more healthcare services an individual tends to buy,” Blahous wrote.
Blahous maintained that the jury is still out on whether MACRA effectively reins in provider costs, warning that the Medicare for All transition could disrupt access to health care as universal coverage goes into effect. He also noted that while some Medicaid-dependent providers would see a pay boost in the early years as their traditionally much-lower Medicaid reimbursements would rise to Medicare rates, they would start losing money soon after.
To back up his warning, Blahous cited the CMS’ Office of the Actuary’s projections that current payments would lead to negative operating margins for nearly half of hospitals by 2040. By 2019, over 80% of hospitals will lose money treating Medicare patients. A dramatic structural change to reimbursement structure could shutter many provider doors, Blahous wrote.
The paper acknowledged that phasing out employer-sponsored health care would translate into a huge increase in taxable wages, as it would free individuals, families, and employers from hefty healthcare spending. States would also no longer have to fund Medicaid, consistently their largest budget item.
“These offsetting effects should be considered when weighing the implications of requiring federal taxpayers to finance the enormous federal expenditure increases under M4A,” Blahous wrote. “These estimates should be understood as projecting the added federal cost commitments under M4A, as distinct from its net effect on the federal deficit. To the extent that the cost of M4A is financed by new payroll taxes, premium collections, or other revenue increases, the net effect on the federal budget deficit would be substantially less.”
The picture the Mercatus study paints for utilization in the healthcare system runs counter to the latest House Republican push to leverage health savings accounts to cut spending on superfluous services.
Last week, the House passed a packet of bills originally projected to cost more than $90 billion to expand the use of HSAs. In a subsequent speech before the conservative Heritage Foundation, HHS Secretary Alex Azar praised HSAs as a way to lower unnecessary spending, saying that from his own behavior when he had an HSA he was much more cautious about the number and manner of services on which he was willing to spend a limited number of dollars.
The Democratic Party at large is keeping Sanders’ Medicare for All plan at arm’s length, but its principles are gaining traction within the party. Prominent Democratic senators including Elizabeth Warren of Massachusetts, Kamala Harris of California and New Jersey’s Cory Booker have signed onto Sanders’ bill.
In the House, progressive Washington Democrat Pramila Jayapal founded a Medicare for All caucus to try to hammer out a comprehensive, streamlined platform over the next conference. More than 60 House Democrats have joined Jayapal’s group.
But Ippolito said the new paper highlights that single-payer proponents will need to acknowledge the political fight on their hands.
“In my time of listening to these single-payer proposals, a lot of emphases is on administrative savings—they appeal to that because they don’t rile up constituencies,” he said. “But going after provider payment rates means taking on one of the most well-organized constituencies in domestic policy. When I read this, it struck me as: this really wants to pick a fight. It promises the moon, but it does set up, surely, that something’s got to give here.” Health Care Rationing Ahead I’ll give the last word too, of all things, a “socialist perspective.” One blog post yesterday actually claimed the Mercatus study underestimated the potential savings under single-payer: “[The study] assumes utilization of health services will increase by 11 percent, but aggregate health service utilization is ultimately dependent on the capacity to provide services, meaning utilization could hit a hard limit below the level [it] projects” (emphasis mine). In other words, spending will fall because so many will demand “free” health care that the government will have to ration it. To socialists who yearningly long to exercise such power over their fellow citizens, such rationing sounds like their utopian dream. But therein lies their logic problem, for any American with common sense.
More to follow next week as we get closer to the truth.