By Peter Sullivan - 02/18/16 06:00 AM EST
Democratic presidential candidate Bernie SandersBernie SandersSunday shows preview: Next steps after Trump upheaval Bernie fights for relevance Sanders shares star power with NY House hopeful MORE’s healthcare plan has set off a fierce debate among economists about whether his numbers add up.
The senator has made his “Medicare for all” healthcare proposal a central plank in his presidential platform, drawing attacks from rival Hillary ClintonHillary Rodham ClintonClinton camp blasts Trump over Brexit response: 'He patted himself on the back' Clinton camp raffling 'Hamilton' with Hillary Sunday shows preview: Next steps after Trump upheaval MORE, who has portrayed him as an advocate of bigger, costlier government.
The question of how much Sanders’s proposals would cost has set off a “war of the wonks,” with liberal economists on the front lines.
Sanders’s plan already has essentially no chance of passing Congress, given that Republicans are expected to control at least one chamber in 2017, but there are questions about the policy as well as the politics.
The main challenge to Sanders’s math comes from Kenneth Thorpe, a well-respected health economist at Emory University who advised Vermont on its efforts to create a state-level single-payer system.
Thorpe says Sanders’s plan would cost about $1 trillion per year more than Sanders says it would: $2.5 trillion per year versus $1.38 trillion per year. The resulting funding shortfall would mean that Sanders would have to hike taxes even more to pay for his plan, he says.
Thorpe also argues that Sanders’s proposed 8.4 percent in extra payroll and income taxes would instead have to rise to a 20 percent combined extra tax.
Sanders argues that middle class families would save thousands of dollars under his proposal because they would no longer have to pay health insurance premiums. But the higher taxes envisioned under Thorpe’s analysis would flip the script for many people: He found that 71 percent of workers and their families currently with private insurance would end up paying more, not less, under Sanders’s plan.
The Sanders campaign and Gerald Friedman, the University of Massachusetts economist who conducted the analysis that Sanders touts, have pushed back on Thorpe.
“Every major country on earth, whether it’s the [United Kingdom], whether it’s France, whether it’s Canada, has managed to provide healthcare to all people as a right and they are spending significantly less per capita on healthcare than we are,” Sanders said at a debate this month. “So I do not accept the belief that the United States of America can’t do that.”
Still, a range of left-leaning economists have sided against Friedman and Sanders.
Four former chairs of the White House Council of Economic Advisers, including three who served under President Obama, wrote an open letter on Wednesday saying Friedman’s analysis of Sanders’s economic proposals (not just his healthcare plan) is not supported by evidence.
They wrote that Sanders’s claims “undermine the credibility of the progressive economic agenda and make it that much more difficult to challenge the unrealistic claims made by Republican candidates.”
Much of the dispute among the experts, and the $1 trillion difference in cost estimates, centers on how much savings would be achieved from switching to a single-payer healthcare system.
Both Thorpe and Sanders say there would be some savings on administrative costs because healthcare providers would no longer have to deal with billing processes from multiple private insurance companies. But Sanders’s plan estimates far more savings: 13 percent of health spending versus 4.7 percent of health spending in Thorpe’s analysis.
Austan Goolsbee, a former Chairman of the Council of Economic Advisers for President Obama and one of the signers of the Wednesday letter, said Sanders is “being unrealistic about what the cost savings are.”
Sherry Glied, a New York University professor who was a top health economist in the Obama administration, said Sanders’s savings estimate is “probably too high” and a more realistic number for savings on administrative costs is around 5 percent.
The real issue, many experts said, is not just the savings on what can be portrayed as fat in the system — such as administrative costs — but the possibility that doctors and hospitals would be paid less, as they are in Europe and Canada.
“It's actually not mostly administrative costs, it’s the fact that everyone gets paid less in the Canadian healthcare system,” Glied said.
Cutting payments to hospitals and reducing doctors’ salaries would be much more fraught than slashing administrative costs.
Friedman’s analysis of Sanders’s plan assumes all healthcare providers would be paid at Medicare rates, which are significantly lower than what private insurance companies pay.
Some hospitals and home health agencies could also struggle from being paid only at significantly lower Medicare rates.
Sanders’s campaign has not said whether people could buy supplemental private insurance to give wealthier people a higher level of coverage, as many European countries allow.
Some of the countries that now have a single-payer system also have long wait times for medical treatment.
“Are you going to be able to force all the billionaires in New York City to stand in line with everyone else for their healthcare?” Glied said.
However, David Himmelstein and Steffie Woolhandler, two doctors and Harvard Medical School lecturers who co-founded a group pushing for single-payer healthcare, wrote a Huffington Post op-ed defending Sanders against Thorpe.
On the question of administrative costs, they say Thorpe’s estimates are too low.
“The correct way to estimate administrative savings is to use actual data from real world experience with single-payer systems such as that in Canada or Scotland,” they write.
They cited a study showing administrative costs were 14.3 percentage points higher in the U.S. than in Canada.
Sanders’s plan also assumes huge savings from lower payments for drugs.
Friedman’s original estimate for Sanders’s campaign factored in $324 billion in savings on drugs, which is more than the U.S. now spends, making the estimate nonsensical. Friedman said in an interview that he made a “mistake” with that estimate, and his new estimate is $211 billion.
Thorpe said even the lower, $211 billion estimate would mean eliminating almost all spending on drugs. “You’d basically be eliminating the entire brand drug industry,” he said.
There are also concerns about the 6.2 percent payroll tax on employers that Sanders has proposed to help pay for his plan. Economists say the effects of that tax would be passed on to workers.
Companies that currently pay high health costs for their workers would see huge savings by no longer having to pay for healthcare, but smaller companies that don’t offer much coverage would now be hit with a new tax, said Henry Aaron, a health expert at the Brookings Institution.
“You are going to be spreading across the American industrial landscape huge amounts of income redistribution,” Aaron said.
Friedman contests this skepticism, saying other advanced countries with single-payer systems are able to provide good care at much lower costs.
“I don't really see why we couldn’t be as efficient as they are,” he said.