Medicare for all would be a fiscal nightmare

Medicare for all would be a fiscal nightmare
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As the 2018 midterm elections approach, growing numbers of progressive candidates have endorsed a single-payer health insurance program that will supposedly cover all Americans and deliver better medical care than our current health care system. However, new research suggests that these promises could cost voters trillions more than they expected.

According to a July 30 study from the Mercatus Center at George Mason University, establishing a single-payer health care program will cost taxpayers $32 trillion over the next 10 years. The author of the report, Senior Research Strategist Charles Blahous, arrived at his estimate by forecasting the cost of Sen. Bernie SandersBernard (Bernie) SandersOvernight Health Care: Azar defends approach on drug rebates | Trump presses Senate to act quickly on opioid crisis | Kentucky governor's Medicaid lawsuit tossed Poll finds Libertarian Senate candidate running ahead of GOP in New Mexico Senate GOP targets musicians Ben Folds, Jason Isbell as 'unhinged left' ahead of rally for Dem candidate MORE’ (I-Vt.) Medicare For All Act. Sanders’ proposal would create a government-run health insurance program that enrolls everyone, regardless of age, income, or health status. It would provide every manner of medical care including doctor's visits, hospital stays, prescription drugs, and nursing home stays. Furthermore, it would deliver all of these services without charging premiums, deductibles, co-pays or any other fees.

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To pay for these enormous promises, the federal government would have to nearly double all the taxes it collects from individuals and corporations each year. This would cost the average American more than $18,000 in additional taxes.

 

Supporters of single-payer health care haven’t balked at the plan’s astronomically high price tag, instead arguing that $32 trillion will be a bargain for taxpayers. Vox wrote that while Americans would pay a lot more taxes to fund health care under Sanders’ plan, they would subsequently pay less out-of-pocket since it would eliminate the thousands in expenses people are currently paying for their private health insurance.

However, single-payer would likely cost even more than Blahous’ study suggests. For instance, the study assumes that moving everyone onto Medicare will reduce overall administrative costs since Medicare spends less on overhead as a share of its budget than private insurance companies.

Unfortunately, Medicare doesn’t actually spend less on administration than private insurers. Medicare’s overhead costs only appear small as a share of its total budget because its recipients are much older than customers with private insurance, and therefore spend a lot more on health care. If you breakdown Medicare’s administrative costs on a per-patient basis, the program actually spends more on overhead than private insurers. As a result, forcing everyone to enroll in Medicare would increase health care administrative costs by more than $12 billion annually.

Sanders’ plan would also cost more for other reasons. Blahous’ study assumes that a Medicare For All plan would dramatically reduce health care spending by slashing compensation to doctors, hospitals, and other providers. According to his estimates, provider reimbursements would fall by 40 percent when patients leave private insurance and enroll in Sanders’ expanded Medicare program.

But this is another questionable assumption. It is true that Medicare currently pays doctors and hospitals significantly less than what private insurers pay. But there is no reason to assume that single-payer advocates could convince Congress to impose Medicare’s low reimbursements across the entire health care system — or that doctors and hospitals would accept such an outcome.

Medical providers are one of the most politically powerful interest groups in the United States. Since 2008, health care associations have contributed over $1 billion in campaign funding to candidates for federal office. And they heavily lobby Congress, the White House, and executive agencies to tilt legislative and regulatory decisions in their favor.

Health-care providers demonstrated their enormous political influence when Republicans proposed limiting the growth of Medicaid spending as part of their reforms to repeal and replace ObamaCare. In response to this modest proposal, health-care associations waged an enormous lobbying and public relations campaign to defeat these reforms. And despite years of promises to fix this program, Republicans ultimately buckled under the pressure of these interest groups.

If Congress can’t muster the votes to slow the spending of a single health program, why would single-payer advocates assume they could enact a whopping 40 percent pay cut across America’s entire health care system? If Sanders’ plan was ever enacted into law, interest groups would ensure they continue to receive high compensation from the new single-payer plan, which will increase costs even further.

So while single-payer supporters are right to want a better health-care system for the United States, they should realize that forcing everyone to enroll in Medicare would only make health care even more expensive and unaffordable.

Charlie Katebi is a state government relations manager at The Heartland Institute, a nonprofit, nonpartisan public policy think tank.