I wanted to comment on Ramesh Ponnuru’s remarks on “Medicare for All” in a recent Washington Post op-ed before it disappeared. In the op-ed Mr. Ponnura sketches four reasons a national single-payer healthcare system modeled on Medicare won’t work. His reason are (in sequence):
- It would require a substantial increase in the taxes paid by people earning middle incomes which might or might not be made up by savings in payments of private healthcare insurance.
- Savings aren’t likely to materialize.
- The systems most similar to “Medicare for All” (Canada’s and Britain’s) have long wait times, particularly for specialists.
- It would require the abandonment of employer-subsidized and private healthcare insurance and Medicare Advantage.
I would like to propose several other issues. First, the costs of such a plan are wildly understated. The graph at the top of the page illustrates the real growth in real Medicare spending from inception to date. That is orders of magnitude faster than was estimated when it was originally enacted far exceeding the original projections, which proved not merely inaccurate but systematically and persistently optimistic. Here’s the real growth in Affordable Care Act subsidies since its inception:
Those, too, have grown considerably faster than estimated at the time.
When healthcare spending comprised 3% or 5% of spending, a five-fold increase would have been painful but, possibly tolerable. Now that it’s 16% of spending a ten-fold increase in healthcare spending, as occurred with Medicare, isn’t arithmetically possible. A five-fold increase is hypothetically possible but absurd. The implication is that for such a plan to work costs must be controlled. Growth on the scale Medicare experienced cannot be repeated without overwhelming the rest of the fiscal system and, indeed, the economy.
The second issue is that Congress has demonstrated that it is unwilling to control healthcare costs. That was proven dispositively by the experience with Medicare SGR, demonstrated repeatedly by Congress.
The third issue is that once implemented such a plan would be irreversible. There would be no alternative system to return to. Once private and employer-based systems are displaced, rebuilding them would be economically and politically prohibitive.
The relevant question is not why Medicare spending exceeded projections. The relevant question is why we should believe that future projections will be more accurate than past ones. Medicare and ACA estimates were produced by serious analysts using the best available data, yet both proved systematically optimistic. That shifts the burden of proof. Proponents of a vastly expanded system must identify concrete, politically sustainable mechanisms that will prevent the recurrence of those errors. Absent that, assurances of cost control are not evidence. They are repetition.
I don’t oppose a national single-payer healthcare system in principle. I oppose it in practice. For any such proposed system to work it must be structured to align the incentives of consumers, providers, and administrators. It is not sufficient to assert savings from administrative simplification or bargaining power. Proponents must identify specific mechanisms that (1) constrain provider behavior, (2) are politically sustainable, and (3) have not historically been reversed under pressure. As the graphs above clearly show more than blithe assurances are required. The problem is not that we lack ideas for controlling healthcare costs. The problem is that every serious attempt to implement them has been reversed when it encountered political reality.
If expanding Medicare for all reduced military spending radically, I would support it for that reason alone.
Trump, the agent of the Epstein Class, is ordering a brigade of the 82nd Airborne to join the two Marine MEU’s being deployed to the Gulf, and rumors that a force of 50,000 troops will be sent to Jordan for an invasion of Iran are rife.
Clearly, we have to take away his military options.
Same rules you propose should be applied to any public spending, however, we are governed by very fallible primates.
What’s your alternative? The costs of private care have advanced faster than Medicare. The more market oriented a medical system the more expensive (in general) it is. In theory it would be better to have markets more involved but no one has figured out to have more markets involved and not have prices go up faster. Plus, even though i misread that one article, Medicare is still per person cheaper than private insurance for equivalent care.
A couple of comments on the methodology that you have chosen. I think it’s more helpful to look at Medicare spending per person covered rather than total spending. When Medicare was enacted we did not expect it to increase this much for another reasons. Life expectancy was 70 back then and about 79 now. We have also had a large demographic bulge in the over 65 age group. So we had more old people than expected and the time that they needed to be covered nearly tripled from 5 years to 14 years. Also, no one really saw that we were going to enter the golden age of innovation. In the 60s when Medicare was enacted we didnt have Cat scans, MRIs, few treatments for cancers and little to ofer those with cardiac disease. Beta blockers had just been invented but weren’t widely available and the early versions had some problems. No Ca channel blockers. Interventions were still pretty new and not so effective.
Having identified why total Medicare spending has increased I think you have a better chance of developing an idea that will decrease the spending.
Steve
I think this is a very good write-up about the issues we are facing with healthcare costs. I think you hit the nail on the head about how bad the government predictions have been. Much of this goes to incentives. We also spend a lot on fraud.
The challenge is how to reduce healthcare costs and improve service. My daughter has POTS which is difficult to treat and many treatments don’t take insurance. One thing she has noticed is that there is a completely different experience when she goes to a place that does not take insurance. The quality of the service is much better. When people pay out of pocket, they care about the entire package of service, costs, and effectiveness of the treatment.
This really shows up in cosmetic surgery that is paid out of pocket. Unlike the rest of healthcare, inflation adjusted costs for cosmetic surgery is dropping while the number of procedures has increased sharply.
https://www.aei.org/carpe-diem/what-economic-lessons-about-health-care-costs-can-we-learn-from-the-competitive-market-for-aesthetic-plastic-surgery-2/
How do you get people to treat it like there own money without bankrupting people due to a bad health diagnosis like cancer? The only way I see to do this is a universal catastrophic insurance program (i.e. a $20,000 deductible). The first $20,000 is the responsibility of the individual. They can choose to buy insurance or pay out of pocket. Insurance costs would be much lower with a $20,000 limit on costs as the big issues would be covered elsewhere. This puts ownership and incentives in the hands of individuals instead of third parties.
This also gets at one of the things I hate about our current system. My health insurance provider does not work for me. They work for my employer. As such, I can’t choose another insurance company. They don’t care about my quality of service and treatment. If you aren’t the customer, and you are not the supplier, then you are the product.
steve:
The reason I chose total spending is because that’s what’s relevant fiscally. What Medicare was created in 1965 the legislators were well aware of the bulge. If you’re arguing that the legislation should have taken that into account, I agree. If it had, we wouldn’t be facing the some of the problems we face now. Re: “golden age of innovation”. Yes, it’s amazing what effects over-investing in something can have. The same would apply to practically any other area.
Back in 1965 I favored a different plan, a chain of federal clinics modeled on the VA in which physicians were retained on salary. The secondary effects of that would have been completely different. Sadly, you can’t go back in time.
I have proposed my present alternative multiple times. I recognize that everyone would hate it.
Here in Illinois “Medicare for All” is a policy supported by nearly all of the Democratic candidates that won in the primaries. It’s up to them to explain how they plan to make it work. There’s a reason that no state has put its own plan into force. It won’t work.
There are a number of problems with comparing elective cosmetic surgery with regular medical care. First, it is truly elective unlike most medical care. When the economy is weak spending can slow down as people can wait. You really cant wait very long for most medical care. So for elective cosmetic surgery (ecstasy) you can essentially wait forever which means that you have a near perfect substitution. In recent years when the economy is strong spending on eco has grown faster than regular medical care. Anyway, maybe for regular medical care that is not needed and for which you have perfect substitutions Perry’s ideas might work. (In case it’s not clear this is sarcasm as it largely doesnt exist.)
On the issue of transparency economists think they are smarter than everyone else so they seem to truly think that no one in medicine thought of it. In fact multiple studies have been done using transparency to try to effect spending. They all failed unless you added in 2nd or 3rd incentives. So having transparency plus having a penalty above paying more for the more expensive care produced some results. Of note, my own network tried making costs for nearly all its procedures transparent by publishing them on a website. Didnt gain us much if any in the way of new patients.
Other issues that should be noted, if ecs has complications then the pt’s regular medical insurance if they are severe ie costly. Next, there are secondary ways to check these claims. Look at the salary of plastic surgeons. It remains among the highest for surgeons. Next, he cherry picks a few cases where prices dropped. That is also true for some procedures like cataract surgery (about $3300 in 2010 and $2700 not adjusted for inflation), some transplant surgeries and gallbladder surgery (laparoscopic surgeries in general cost about 20% less than the older open surgeries.)
Finally, I looked at the “data” he (Perry provides) and it is not apples to apples. He is not comparing the prices of ECS procedures vs regular surgical procedures. He is comparing it to, at least as I read it, the total increase in medical spending. If he wants to compare per procedure costs he should be consistent.
https://resources.healthgrades.com/pro/highest-and-lowest-physician-salaries-by-specialty
Steve
Dave- They knew there would be a demographic bulge. What they did not know was that the bulge would be accompanied by a tripling in the number of years people would need to be covered.
Your plan might have held down costs, but medical care would be significantly worse. The iron triangle remains costs, quality, access. However, let’s assume Europe picks up the slack and does all the R&D and medicine advances just as fast. If your clinics were going to cover old people in the same numbers we would still need to pay market rates for the new meds/therapies. I would also point out that docs salaried VA style are generally much less productive. So maybe your plan was to have lower quality care and less of it?
Steve
That’s what I advocated 60 years ago. What I’d advocate now is a system somewhat like Italy’s. That’s a capitation system.
For such a system to work we’d need to reform immigration, too. There are actually two problems with “Medicare for All”:
1. What’s Medicare?
2. Who’s “all”?
Medicare is pretty easy to define. It’s a single-payer healthcare system with optional private insurance that covers the healthcare of people over 65 for which the beneficiaries pay below market.
Defining “all” is politically fraught. It either means anybody who needs care or citizens and legal residents. If the former it’s unworkable. The latter doesn’t actually solve the problem.
Very long, very detailed look at how and why medical spending slowed so much from 2010-2024. Too long to summarize but some interesting tidbits. Medicaid spending per capita did not increase at all during that period. Prices broadly increased at a slower rate and in some cases decreased. Technology changes tied towards controlling costs were important. Cardiovascular care costs in particular slowed down and much of that was due to lower hospitalization and intervention rates due to better medical (drugs) treatment.
https://www.brookings.edu/wp-content/uploads/2026/03/5_Cutler-Klarnet_unembargoed.pdf
Steve
Steve, I agree that there are a lot of cases where you can’t shop around for healthcare. If you have a gunshot wound, you aren’t calling Emergency Rooms to check their prices. Unlike these cases, I think much of our healthcare falls under the important, but not urgent category. When the pandemic hit, non-COVID admissions dropped by about half with even higher numbers among the Medicare eligible part of the population. This tells me that a large chunk of our healthcare spending can have market forces applied to them.