By Louis Jacobson on Friday, August 3rd, 2018 at
11:07 a.m.
When a free-market think tank published its analysis of Sen. Bernie Sanders’ single-payer
health care plan, Republicans took to social media to tout the report’s most eye-popping
finding.
Sanders’ Medicare for All would cost $32.6 trillion over 10
years, an amount they framed as crushingly large.
$32.6 trillion dollars.
That’s how much Washington Democrats’ single-payer healthcare proposal would
cost over 10 years. Even doubling all federal individual and corporate income
taxes wouldn’t cover this cost. It is just absurd. https://abcnews.go.com/Health/wireStory/study-medicare-bill-estimated-326-trillion-56906940 …
Sanders, however, found good news for his idea in the generally
skeptical report.
In a video he shared on social media July 30, he
pointed out one of the report’s findings that others had overlooked. Sanders
tweaked the Koch brothers, the conservative donor family that has supported the
Mercatus Center at George Mason University in Virginia.
Sanders said, "Let me thank the Koch Brothers of all people
for sponsoring a study that shows that Medicare for All would save the American
people $2 trillion over a 10-year period. … That is what is in the study of the
Mercatus Center."
Sanders’ plan would essentially expand Medicare to cover
everyone, rather than just those older than 65. Individuals (and their
employers) would no longer need to shoulder co-pays for medical care or
premiums for private insurance coverage. Instead, the government would pay
everyone’s medical bills.
Sanders and his allies say this would end up saving money,
because it would remove the middle-man of insurance companies, which drive up
administrative costs, and and enable the government to use new bargaining power
to rein in costs by providers.
Skeptics counter that those savings are not guaranteed, and the
lack of a monetary incentive for patients to hold back on services could lead
to increased use of the system, adding to the overall cost. In addition, with
the government having to raise revenue to pay everyone’s bills, taxes and the
federal debt could go dangerously high, potentially canceling out or exceeding
the money that individuals and families would save in higher take-home pay and
lower health-care expenses.
In this article, we’ll look at something much more narrow:
whether Sanders is right that the Mercatus report says that single-payer would
save the United States $2 trillion in health care outlays.
In a way, Sanders is right, though his assertion glosses over
some caveats.
Where
the $2 trillion estimate comes from
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The Mercatus report included a table summarizing the financial
effects of Sanders’ bill. With a minimum of arithmetic, it’s not hard to find
the $2 trillion in question.
It’s the difference between the Department of Health and Human Services’ projection of
the amount of total health care spending in the United States, and what
Mercatus thinks that number would be under Sanders’ Medicare for All proposal.
(See Table 2.)
Under Mercatus’ projection for Medicare for All, the total
amount of health expenditures would actually fall compared to what is expected
under a continuation of the current system.
Specifically, total health care expenditures would fall by
$2.054 trillion over 10 years, according to Mercatus.
So there’s definitely something to what Sanders said.
Some
reasons for pause
The Mercatus report’s author took issue with Sanders’ focus on
that figure.
Charles Blahous said that to come up with that estimate,
Mercatus used a relatively generous assumption about how well Sanders’ plan
will end up controlling health care costs. It assumes that provider payment
will be reduced to Medicare levels, that negotiation with prescription
drugmakers will generate significant savings, and that administrative costs
will be cut from 13 to 6 percent.
However, in an alternative scenario in which cost-control works
less effectively (see Table 4) Mercatus found that over the same 10-year
period, national health expenditures would actually increase by $3.252 trillion
compared to current law.
So while the number Sanders chose really does appear in the
report, he’s cherry-picked the more flattering of two estimates.
Sanders’ bill "indicates that health providers would be
paid at Medicare’s payment rates, which are about 40 percent lower than those
paid by private insurance," Blahous said. "Obviously, immediately
cutting payments to health care providers by roughly 40 percent would lower
national health spending."
But would cuts that large actually occur (and without other
negative consequences, such as mass retirements of doctors unwilling to accept
lower fees)? This is where independent experts express caution.
Sustained cuts as deep as those projected in the Mercatus model
Sanders pointed to are "not likely feasible," said John Holahan, a
fellow in the health policy center at the Urban Institute. His Urban Institute
colleague, Linda Blumberg, agreed, saying it’s a "pretty heroic assumption
to say that you can dial payment rates down to those levels system-wide
politically."
In addition, even if the switch to Medicare for All does end up
cutting the total amount of money spent on health care in the United States,
the legislation places more of those costs on the federal budget. In an era of
rising debt and an aging Baby Boom generation, that could be a problem.
Josh Miller-Lewis, a spokesman for Sanders, focused instead on
the impact on individuals, many of whom will end up ahead. "Under Medicare
for All with a progressive tax system, the vast majority of people will save
money on health care," he said.
Our
ruling
In cheekily thanking the Koch brothers, Sanders said a study
they indirectly sponsored "shows that Medicare for All would save the
American people $2 trillion over a 10-year period."
The $2 trillion figure can be traced back to the Mercatus
report. But it is one of two scenarios the report offers, so Sanders’ use of
the term "would" is too strong. The alternative figure, which assumes
that a Medicare for All plan isn’t as successful in controlling costs as its
sponsors hope it will be, would lead to an increase of almost $3.3 trillion in
national health care expenditures, not a decline. Independent experts say the
alternative scenario of weaker cost control is at least as plausible.
We rate the statement Half True.
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