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Report: Medicare for All Would Cost $60 Trillion Over First Decade

April 29, 2019

A new report estimates a single-payer health care system in the United States would cost between $54.6 and $60.7 trillion over the first 10 years.

Implementation of Medicare for All (M4A) would require enormous tax increases, report author Charles E. Blahous of the Mercatus Center concludes. Blahous states “the initial federal obligations would be in the ballpark of $10,000 annually per person. Even if M4A fully liberated Americans from all their current health care expenses, … a family of four might still strongly object to having to send an additional $40,000 to Washington each year on top of their current tax burdens.”

Could Be Worse…

“The Unanswered Questions of Medicare for All” expands on the author’s previous cost analysis of M4A and shows the assumptions behind the program could send costs much higher.

In his earlier report, Blahous calculated a cost of $32.6 trillion over the first 10 years and possibly $38.8 trillion based on provider rate and drug price assumptions.

Blahous’ earlier estimate was based on an incremental addition to current spending on federal programs such as Medicare, Medicaid, the Affordable Care Act (ACA), and employer-provided health insurance.

“The aim of my research was purposely narrow, not to opine on the merits or demerits of single-payer health care itself, but to estimate its effect on the federal budget,” wrote Blahous. M4A, however, involves a number of unanswered questions impacting price, such as how much consumers are willing to trade off in an all-encompassing program.

“Without intending it, [my original] study ended up revealing much more,” Blahous wrote. “Policy advocates’ diverse reactions to the cost analysis illuminated a striking lack of national consensus on fundamental value judgements that must be made in the course of crafting future health care policy.” 

Those judgements involve whether the country is ready to eliminate private insurance completely, how it will tax individuals to pay for the program, how it will manage the spike in demand, and what impact provider payment cuts would have on supply. 

‘Further Removed from Reality’

Tim Benson, a policy analyst for The Heartland Institute, which publishes Health Care News, says Medicare for All is unaffordable.

“When Mr. Blahous released his original study for Mercatus last year, many people thought the $32 trillion for 10 years price tag was still too conservative of an estimate of the true cost of a Medicare for All program,” Benson said.

“Turns out Blahous himself was one of them,” Benson said. “The original projection, shared by the left-leaning Urban Institute as well as Mercatus, showed how ludicrously absurd the idea of Medicare for All is. This new analysis shows the concept is even farther removed from reality.”

Benson says M4A would require impossibly huge tax increases.

“The cost of the program is simply too much without dramatic tax increases across the board, which nobody in Washington has any appetite for,” Benson said.

‘Unprecedented Expansion’ of Government

Charles Silver, a professor at the University of Texas School of Law, says M4A would cause a cascade of adverse economic outcomes.

“M4A would require an unprecedented expansion of the size of the federal government, with all that entails: vastly greater taxes, deadweight losses that exceed any savings reasonably to be expected, massively increased corporate lobbying, and bureaucratic decisions regarding who gets paid how much for doing what,” Silver said.

Silver says a federal government takeover of the U.S. health care system, which represents about 18 percent of GDP, would drive health care costs much higher.

“The point that the federal government has no track record of controlling health care spending is also well-taken,” Silver said. “The best predictor of the future is the past, and the past is replete with spending hikes and giveaways to health care interests.”

With those cost increases, M4A will hike federal spending overall, Silver says.

“National spending under M4A is more likely to rise than to fall, … leaving Americans poorer on average,” Silver said.

Expects Access to Decrease

Justin Haskins, a research fellow at The Heartland Institute, says low reimbursement rates to providers, a staple of big government health care programs, are likely to increase provider shortages and decrease access to care.

“Medicare reimbursement rates are much lower than the rates provided in the private market,” Haskins said. “If lawmakers force doctors to take big pay cuts, thousands of doctors might choose to retire, potentially creating a nationwide doctor shortage.” 

Haskins says it is likely M4A will cost far more than its proponents say.

“If lawmakers increase reimbursement rates, then Medicare for All would end up costing significantly more money,” said Haskins. “There’s simply no way Medicare for All would end well for patients, doctors, and taxpayers.” 

No Free Lunch

Sally Pipes, president and CEO of the Pacific Research Institute, says M4A will cause health care demand to increase, which will trigger higher costs over the long term.

“No government program ever costs what it is estimated to cost,” Pipes said.

“When people think something is free, they demand a lot more of it and supply cannot meet demand and the price goes up,” Pipes said. “And that is when wait times and rationing kick in because government cannot afford the cost.” 

 

Chris Talgo (ctalgo@heartland.orgis an editor at The Heartland Institute.

 

Internet info:

Charles Blahous, “The Unanswered Questions of Medicare for All,”American Enterprise Institute, February 15, 2019:  https://www.heartland.org/publications-resources/publications/the-unanswered-questions-of-medicare-for-all

Author
Chris Talgo is editor & research fellow with The Heartland Institute