Could Bernie Sanders’ “Medicare for all” proposal – national health insurance – be as good as he says? It’s doubtful.
No one claims that today’s system is ideal. It’s complex, confusing, costly and incomplete. Even after the Affordable Care Act, about 30 million people remain uninsured. For decades, rapid spending increased health care’s share of the economy, estimated at 17.5 percent in 2014. And on many health outcomes – say, infant mortality – the United States does worse than some other advanced societies.
To hear Sanders tell it, his single-payer plan (the government pays for most health care) would cure these ailments. Everyone would have coverage. People would go to doctors, hospitals and clinics as needed. There would be no deductibles or co-payments to discourage them. Workers would not be locked into jobs they dislike because they fear losing employer-provided insurance.
As for costs, the government would negotiate price cuts on drugs and eliminate private insurers’ high overhead costs. To be sure, paying for the plan would require new taxes. But for many middle-class families, these taxes would be less than today’s out-of-pocket expenses and their share of premiums for employer-provided insurance. A family of four with $50,000 of income could save nearly $5,800 a year, Sanders says.
It sounds too good to be true, because it is.
For starters, even if Sanders became president, the prospect for his plan being enacted would be slim. That’s not a conservative wish but the view of many liberals. It’s politically unrealistic, they argue, to think that nearly a fifth of the economy could be totally remade. “As the old joke goes, ‘You can’t get there from here,’” writes economist Henry Aaron of the liberal-leaning Brookings Institution in Newsweek. There would be too much opposition and uncertainty.
Hospitals, doctors and drug companies would lobby for favored treatment – or resist punitive policies. Insurance companies would fight to survive. Americans with good insurance would worry that they’d lose their privileged position.
Billions of dollars would be at stake. Most employer-provided health insurance would disappear, saving companies (Aaron says) about $700 billion. Some of that would be drained by a new 6.2 percent payroll tax to pay for government insurance. But what would happen to any remainder? Would it fatten workers’ wages or shareholders’ profits?
Especially controversial would be cost savings. The Sanders campaign estimates that his plan would lower costs by about $1 trillion annually, but how this would occur isn’t clear. Controlling the “administrative costs (of insurers and providers) and drug prices,” as the campaign suggests, may not yield huge savings.
Drugs are only 10 percent of total health costs, according to the Centers for Medicare and Medicaid Services. Similarly, insurance companies’ profit and overhead represent about 6 percent of all health costs: equal to about one year’s growth in total spending. Even large cuts to both (say 20 percent) would represent relatively modest reductions in overall health costs.
The paradox is that the Sanders plan assumes major cost savings when it also creates huge pressures for higher – not lower – health spending. More people would be insured; coverage would probably be expanded (better vision and dental benefits?); Medicare premiums would be eliminated; and traditional cost-control tools – deductibles and copayments – would be abandoned.
If savings are overestimated, then the taxes needed to pay for the plan are underestimated – perhaps dramatically. Already, one major health scholar, Kenneth Thorpe of Emory University, says that the campaign has understated the plan’s costs by about $1 trillion annually. Covering that extra spending would require an income-based tax of 20 percent, not the 8.4 percent proposed by Sanders.
Of course, Sanders could control costs with cuts in reimbursement rates to doctors, hospitals and other providers. (If government pays for most health care, it presumably would – as with Medicare – set reimbursements.) But this might trigger protests that patients would suffer. With time, stingy reimbursement might also lead to longer waits, as shortages of doctors, nurses and hospitals emerged.
It is the complexity and the contentiousness of the health care system that frustrates any sweeping overhaul, as Aaron argues. Changes tend to be incremental.
On examination, the single-payer proposal is a better campaign slogan than it is a realistic panacea for the nation’s health care problems. It can’t escape a stubborn dilemma: How can we control spending for something that most Americans consider – as Sanders says – an open-ended “right”?