Study: ‘Medicare for All’ Would Cost $32.6 Trillion Over First 10 Years
Sen. Bernie Sanders’ (I–VT) plan for a national, single-payer health insurance system, known as “Medicare for All,” would cost $32.6 trillion over its first 10 years, according to a new study by George Mason University’s Mercatus Center.
The study, titled “The Costs of a National Single-Payer Health Care System,” states even if Congress were to double individual and corporate income taxes, it would still not be able to collect enough tax money to finance the costs of Sanders’ plan. The program would require a historic tax increase to have government replace what employers and taxpayers now pay for health care, the study finds.
The program would create fiscal chaos, study author Charles Blahous, a senior research strategist at the Mercatus Center, told Health Care News.
“I did a topline estimate that, if you just read the text of the bill literally in every respect, it would add $32.6 trillion to federal spending over its first 10 years,” Blahous said. “Obviously, it’s enormous. The addition to federal spending would be more than all currently projected federal individual income and corporate income taxes. So, even if you doubled those, you still wouldn’t be able to fully finance it.
“Obviously, that would be a qualitative, transformative change in the size of the federal government, and it would have very traumatic effects on federal finances,” Blahous said.
Pay Cuts for Providers
Blahous’ study notes Medicare for All assumes it would cut all health care provider payments down to Medicare’s current reimbursement rates, which are more than 40 percent below what private insurance pays pro- viders. Blahous’ finds Medicare for All would require an unprecedented rise in federal health care subsidies, which are currently equal to about 6.6 percent of national gross domestic product (GDP). The plan would expand federal taxpayers’ obligations by 10.7 percent of GDP immediately, the study finds.
‘Enormous Financial Strain’
Effectively transforming the federal government into a giant health insurance company would require a huge increase in taxes, borrowing, or both, Blahous says.
“One has to make assumptions about how the federal government would deal with this enormous financial strain,” Blahous told Health Care News. “Would they immediately tax everyone enough to pay for it, or would they not be willing to do that, and would they add it to federal deficits?
“The bad news is that [$32.6 trillion is] probably an underestimate,” Blahous said. “The specifications of the bill indicate that health care providers would be paid at Medicare’s payment rates, which are about 40 percent lower than they are in private health insurance. So that $32.6 trillion assumes that those big 40 percent cuts would happen immediately. That’s probably not going to happen, and so if it doesn’t happen and you assume that we continue to pay providers something close to their current levels on a national aver- age, then the cost estimate goes up to about $38 trillion over 10 years.”
Huge Regulation, Compliance Burdens
Hadley Heath Manning, director of policy at the Independent Women’s Forum, says she “largely blames government involvement” for the low level of health care competition and lack of price competition.
“It takes a lot of resources just to stay compliant with regulations, and that’s not to say there is no place for basic regulations that maintain some sense of law and order,” Manning said. “When it becomes so burdensome to process bill- ing and get payment for your services, when it becomes so onerous to be sure you’re insured against various types of liability, then those practitioners end up saying, ‘Let’s just sell out to a larger group, and that way we’ll have their resources and their protections when it comes to human resources, billing, and liability.’”
Obamacare paved the way for proposals such as Medicare for All, Manning says.
“The Affordable Care Act model is to move everything in the direction of having insurers and Medicare and Medicaid be the ultimate payers in our health care system, rather than giving individual patients some skin in the game,” Manning said.
Manning says a lack of price transparency and consumer choice are what keep health care costs unnecessarily high, which Medicaid for All would only intensify.
“It’s hard for people who are providing the service to give a straight answer when it comes to costs,” Manning said. “And that makes it hard for consumers to consider costs when they’re making a value judgement. Should I consume this good or service, or should I consume it from this hospital or that hospital? First of all, lack of prices means we don’t have the information to make the right decisions. We can be making decisions on behalf of other people when it comes to health care, and certainly not everyone is trained enough in medicine to know the value of certain screenings or the value of certain treatments versus others, but I believe that armed with the right information—both the right medical information from providers and the right price—that we can make decisions about what matters to us and where it makes sense to spend money.”
Charles Blahous, “The Costs of a National Single-Payer System,” Mercatus Center, July 2018: https:// www.mercatus.org/publications/ federal-fiscal-policy/costs- national-single-payer-healthcare- system?utm_source=bridge&utm_ medium=bridgepost&utm_ campaign=medicareforall
Sen. Bernie Sanders (I-VT): https://www.sanders.senate.gov