The Associated Press reports that a study by the libertarian Mercatus Center has found that the cost of “Medicare for all” would be $32 trillion over 10 years:
WASHINGTON (AP) — Sen. Bernie Sanders’ “Medicare for all†plan would boost government health spending by $32.6 trillion over 10 years, requiring historic tax hikes, says a study released Monday by a university-based libertarian policy center.
That’s trillion with a “T.â€
The latest plan from the Vermont independent would deliver significant savings on administration and drug costs, but increased demand for care would drive up spending, according to the analysis by the Mercatus Center at George Mason University in Virginia. Doubling federal individual and corporate income tax receipts would not cover the full cost, the study said.
and that assumes that the savings assumptions of the plan were fully met:
The Mercatus study also takes issue with a key cost-saving feature of the plan — that hospitals and doctors will accept payment based on lower Medicare rates for all their patients. Medicare rates are currently about 40 percent less than private insurance, according to the analysis.
The study found U.S. health care spending under Sanders’ plan would drop over time — about $300 billion lower in 2031.
However, it also found that potential savings would vanish if hospitals and doctors aren’t willing to accept lower fees for patients who are now privately insured. In that case, the U.S. would spend about $400 billion more in 2031.
Fans of such a plan, like the folks at Jacobin, are chortling over the $300 billion in savings.
I’m going to go out on a limb and predict that any assumptions of savings will not be met. There is presently very little if any excess capacity in our health care system. I doubt that people who work in health care will work longer and harder to earn less money. Any belief to the contrary is fanciful.
We have a very bad track record in predicting future costs of publicly-funded health care. The original projections back in 1965 of Medicare spending predicted a small fraction of today’s per patient costs in real terms. They weren’t even close.
I would also point out that every state, even the most progressive, that has considered a single-payer system has found it to be prohibitively expensive. Will making such a system nationwide result in spending less than the sum of spending in state-run plans? Canada’s system is operated by the provinces. Costs in bureaucracies increase faster than linearly.
How do we solve our present problem? We can’t solve it using any method we’re willing to put in place. For the foreseeable future spending will increase beyond our ability to pay, gradually pushing any other priorities aside.
Living wills.
On July 20 my siblings and I buried our mother. She broke her hip May 7, suffered from Alzheimer’s and never recovered her appetite. Because of her prognosis, we made her a no code. She accepted very little food or water but still lasted 9 weeks in a skilled nursing facility. Because my father had been frugal she cost Medicaid nothing. Long term care is expected to be half of Medicaid’s expense within five years.
“Medicaid Spending On Long-Term Care ‘Not Sustainable’ Shots – Health News NPR”
Mercatus has updated the cost savings figure to a little over $2 trillion. They blame a spreadsheet error.
A trillion here and a trillion there and pretty soon you’re starting to talk about real money. Whatever the projection it depends on assumptions which experience tells us will not be met.
Thing about Mercatus is it’s ideologically driven to minimize any gains from MFA just as pro-MFA organization would be driven to maximize their own projections. Almost certainly their analysis is what could be considered a plausible worst-case scenario.
I think that’s excessive. Whatever they produce must stand up to scrutiny so at the very least they will render a minimally fair assessment.
That’s quite a bit different from a worst case scenario. Otherwise under present political conditions they could say it would lose a trillion over ten years, a trillion a year, any number that popped into their head.
I think the likelihood, based on our previous experience with health care reform over the period of the last half century is that costs will be underestimated and savings will be overestimated. IMO the best case scenario is that we’ll spend on system administration a little more than Canada does on a per person basis which won’t nearly pay for the increases in spending.
Ben,
As Vox points out, the left-leaning Urban Institute came up with a similar number. Unsurprisingly, Vox thinks it’s a bargain because overall healthcare spending would supposedly remain about the same.
https://www.vox.com/policy-and-politics/2018/7/30/17631240/medicare-for-all-bernie-sanders-32-trillion-cost-voxcare
And as I have pointed out, they only stay the same if the highly optimistic assumptions about admin costs, increasing costs, and the willingness of providers to accept less money for more work hold true.
Gray
Condolences, obviously. My mother also chose the no extreme measures route. Lung cancer. Six weeks, start to finish. If she chose extreme measures, probably six months, and $$$$$. As a society we have to deal with this issue.
G. Thank you an condolences to you as well.
Andy,
I think it’s a stretch to call the Urban Institute “left-leaning.” Also, I can’t be the only one who remembers how much fire their estimate came under in 2016. Their assumptions were all to the downside, as many pointed out.
They assumed administrative cost savings would be minimal. They assumed Medicare would not negotiate prices and a 50% increase in drug costs. They assumed there would be a massive surge in utilization and an exodus of doctors. Mercatus did the same thing.
I think there will be a larger surge than some may expect because that’s what happened 1965-1970. I doubt there will be an exodus of doctors. Where else would they go? What will happen is that many people will experience very long wait times. The health care system does not have a lot of excess capacity so that’s just about what must happen if there’s an increase in utilization.
Could a massive surge in utilization happen? Sure. But a serious problem with both the UI and Mercatus studies is that they appear to totally ignore the experience in other countries that have switched from a quasi-private system and instead assume zero optimization and adaptation in service delivery, and a level of increase in visits per patient that well exceeds what happened in those systems.
This from the OECD claims Americans have an extremely low number of visits per capita compared to other OECD members:
https://data.oecd.org/healthcare/doctors-consultations.htm
9% of Americans are presently uninsured. The medical bills that most insured people get are their copayments. Those are completely eliminated under the M4A plans being circulated. We would be increasing the number of people eligible and decreasing the price they would pay. Of course there will be increased utilization.
Dear Ben:
It makes little sense to compare the experience of the U. S. with the UK, France, and Germany for two reasons. And we won’t even talk about comparing us to Denmark, Luxembourg, or Switzerland. The first is that it’s like comparing kumquats to watermelons. They are, by comparison with the U. S., small in population and geography and have much stronger social cohesion which they have built over centuries and go to substantial efforts to maintain. The question is not what their experience in establishing their plans was, it’s whether they would have established their plans if their countries were what they are now.
Second, we are solving a much different problem than they. Their plans gave people benefits they did not have before. Our problem is convincing people who already have health care insurance to pay for the health care insurance of those who do not or at least wouldn’t without substantial subsidy and, by the way, may reduce the coverage of people who already have health care insurance.
And that description is from someone who does does not a phobia about socialized medicine. Nearly 60 years ago I thought we should establish a network of clinics based on the VA that offered a limited repertory of health care services at low or no cost to anyone who came in the door. No Medicare. No Medicaid. Just the network of clinics. Do you know who opposed that plan? Physicians and insurance companies.
What kinds of things wouldn’t it do? Organ transplants, plastic surgery, maybe obstetrics, extraordinary interventions at end-life, the like. For those people would have private insurance.
That’s impossible now. People who have private healthcare insurance would reject it. People who want a UK-style national health system would reject it. People on Medicare or Medicaid would reject it.
There’s an endlessly repeated dialogue.
Speaker 1: We need a health care system like Canada’s.
Speaker 2: So, run by the states.
Speaker 1: No, run by the federal government.
Speaker 2: So, not like Canada’s.
There’s a difference between twenty million additional visits to care providers and one hundred million as both UI and Mercatus assume (in fact I’m beginning to wonder if Mercatus did much more than copy-and-paste.)
If the OECD data are correct then we simply can’t blame Americans for overuse of medical care, even when they have insurance. In fact they may well be underusing and suffering worse health as a result. I have yet to see evidence that Americans with insurance are particularly eager to make use of it.
If people really, really want to stay with Aetna, we can simply lower Medicare eligibility to age zero and see whether Americans take the offer.