Posted on August
10, 2018
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Sen. Bernie Sanders
and Alexandria Ocasio-Cortez, the Democratic nominee for New York’s 14th
Congressional District seat, are pointing to a study they say shows
“Medicare-for-all” would save Americans money. But the author of the study says
they are misrepresenting his work.
The study is based on
the language of a “Medicare-for-all” bill proposed by Sanders last year that
makes assumptions about reduced administrative and drug costs, as well as
deeply reduced reimbursement rates to health care providers under a universal
health care system. But the study’s author believes those assumptions about
savings are unrealistic.
Our fact-checking
colleagues at the Washington Post first wrote about
this when, on July 30, Sanders tweeted, “Thank you, Koch brothers, for
accidentally making the case for Medicare for All!”
In the accompanying
video, Sanders says, “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.”
Ocasio-Cortez referenced
the same study when asked by
CNN’s Chris Cuomo on Aug. 8 about the cost of “Medicare-for-all.”
“First of all, the
thing we need to realize is people talk about the sticker shock of
Medicare-for-all. They do not talk about the sticker shock of our existing
system,” Ocasio-Cortez said. “You know in a Koch brothers-funded study – if any
study is going to try to be a little bit slanted it would be one funded by the
Koch brothers – it shows that Medicare-for-all is actually much cheaper than
the current system that we pay right now.”
The
Study
Sanders and
Ocasio-Cortez are referring to a working paper, “The Costs of a
National Single-Payer Healthcare System,” published by the Mercatus
Center at George Mason University. The Mercatus Center gets some of its funding
from the libertarian Koch brothers, but more about that later.
The author of the
paper, Charles Blahous,
a senior research strategist at the Mercatus Center who once was the deputy director
of President Bush’s National Economic Council, says the two proponents of a
universal health care system are distorting the findings of his paper.
The study looked at
the impact of the Medicare for All
Act introduced by Sanders on Sept. 13, 2017. The bill, which
has 16 Democratic cosponsors, would expand Medicare into a universal
health insurance program, phased in over four years. (The bill hasn’t gone
anywhere in a Republican-controlled Senate.)
The top line of the
paper’s abstract says that the bill “would, under conservative estimates,
increase federal budget commitments by approximately $32.6 trillion during its
first 10 years of full implementation.” According to the paper, even doubling
all “currently projected federal individual and corporate income tax
collections would be insufficient to finance the added federal costs of the
plan.”
But Sanders’
spokesman, Josh Miller-Lewis, told us that presenting only the additional
governmental cost of Medicare-for-all — “the scary $32 trillion figure” —
leaves out the larger context. Of course the government would spend more on
health care under a Medicare-for-all system, he said, but the idea is that it
would result in less spending on healthcare in the U.S. overall.
Miller-Lewis referred
to figures not highlighted in the report that show that between 2022 and 2031,
the currently projected cost of health care expenditures in the U.S. of $59.4
trillion would dip to $57.6 trillion under the “Medicare-for-all” plan. That’s
how Sanders arrives at his claim that the study “shows that Medicare for All
would save the American people $2 trillion over a 10 year period.” (See Table
2.)
The
Assumptions
In an email to
FactCheck.org, Blahous said he didn’t highlight that figure because he doesn’t
think it’s realistic.
As Blahous wrote in
the fourth sentence of his abstract, “It is likely that the actual cost of M4A
would be substantially greater than these estimates, which assume significant
administrative and drug cost savings under the plan, and also assume that
health care providers operating under M4A will be reimbursed at rates more than
40 percent lower than those currently paid by private health insurance.”
Blahous used the text
of Sanders’ bill to guide assumptions. For example, he said, the bill says
health care providers will be reimbursed for patients at Medicare payment
rates. Blahous said Medicare payment rates are projected by
the Centers for Medicare and Medicaid Services to be roughly 40 percent lower
than those paid by private insurers, so he built those assumed savings into his
estimate.
But in the report,
Blahous cautions that the assumption is suspect.
Blahous, July 2018: [I]t is not precisely predictable how
hospitals, physicians, and other healthcare providers would respond to a
dramatic reduction in their reimbursements under M4A, well below their costs of
care for all categories of patients combined. The Centers for Medicare and
Medicaid Services (CMS) Office of the Actuary has projected that even upholding
current-law reimbursement rates for treating Medicare beneficiaries alone would
cause nearly half of all hospitals to have negative total facility margins by
2040. The same study found that by 2019, over 80 percent of hospitals will lose
money treating Medicare patients — a situation M4A would extend, to a first approximation,
to all US patients. Perhaps some facilities and physicians would be able to
generate heretofore unachieved cost savings that would enable their continued
functioning without significant disruptions. However, at least some undoubtedly
would not, thereby reducing the supply of healthcare services at the same time
M4A sharply increases healthcare demand. It is impossible to say precisely how
much the confluence of these factors would reduce individuals’ timely access to
healthcare services, but some such access problems almost certainly must arise.
Anticipating these
difficulties, some other studies have assumed that M4A payment rates must
exceed current-law Medicare payment rates to avoid sending facilities into
deficit on average or to avoid triggering unacceptable reductions in the
provision and quality of healthcare services. These alternative payment rate
assumptions substantially increase the total projected costs of M4A.
Or, as Blahous told us
via email, achieving a 40 percent reduction in reimbursement rates is an
“unlikely outcome” and “actual costs are likely to be substantially greater.”
“To argue that we can
get to that level of savings by getting rid of the health insurance middleman
is inconsistent with my study,” Blahous said. “To lend credibility to the $2
trillion savings number specifically, one would have to argue that we can make
those 40 percent cuts to providers at the same time as increasing demand by
about 11 percent, without triggering disruptions of access to care that
lawmakers and the public find unacceptable.”
The report similarly
uses assumptions in the Sanders bill about savings on administrative costs and
on the cost of prescription drugs. Blahous describes these assumptions as
“aggressive” and his report includes arguments that suggest they are unlikely.
Said Blahous: “If you
ask somebody ‘How much would something cost?’ and if they responded with,
‘Well, if you assume X the cost would be Y, but that’s an unrealistic
assumption, actual costs would be higher’ – it’s not accurate to say ‘He says
the cost is Y!’ When I wrote that ‘actual costs’ would be higher, I meant it.
And I haven’t simply said that in response to comments like the candidate’s – I
had previously put it front and center on the study itself.”
In his report, Blahous
provided an alternative-scenario estimate, one that assumed instead that
payments to health care providers would “remain equal on average to the
current-law blend of higher private and lower public reimbursement rates.”
Under that scenario, there would be a net increase in health
care spending.
Sanders’ spokesman,
Miller-Lewis, argues that the initial assumptions used in the report — the ones
based on Sanders’ Medicare for All Act — are legitimate.
The buying power
associated with a system that represents all Americans would allow the
government to negotiate significant savings in payments to health care
providers, as well as on drug prices, Miller-Lewis said.
“The whole point of
universal health care is that you’ll get these cost-savings,” he said.
“It’s done everywhere
in the world,” he said. “I don’t think we’re making any wrong assumptions.”
There is a certain
amount of guesswork in estimating the cost of something as complicated as the
health care system, and all of those estimates rely on a multitude of
assumptions. We’re not suggesting the assumptions made in the Sanders bill are
wrong, only that they aren’t Blahous’ assumptions.
“Proponents are
perfectly free to argue for those provider cuts and to say that THEY believe
M4A will therefore lower national health spending, — and also to cite whatever
data they want in support of their arguments, from any study they find
credible,” Blahous told us. “What they shouldn’t say is that I also reached
that conclusion, because that’s incorrect. That finding should not be
attributed to me or to my study.”
Koch
Brothers’ Connection
Both Sanders and
Ocasio-Cortez referred to the Mercatus Center report as a “Koch brothers-funded
study.” They are referring, of course, to the billionaire brothers, Charles and
David Koch, who spend hundreds of millions of dollars in
support of Republican candidates that support their conservative/libertarian
agenda.
The Koch brothers
have donated millions of
dollars to George Mason University’s Mercatus Center, and Charles Koch sits on
the center’s board of
directors.
Documents published earlier
this year show the Koch brothers, at one point at least, used their donations
to gain influence over the hiring and firing of professors at the Mercatus
Center. An Associated Press story about
the donor agreement with the school noted, “The Koch Foundation issued a
statement saying the agreements with Mason are ‘old and inactive’ and that
newer agreements contain no such provisions.”
Blahous told us his
work is not influenced by any donors to the Mercatus Center.
“All I’d say is that
my research is totally my own,” Blahous said. “It’s academic research, it goes
through a blind review process, and it represents my own work. I choose my own
research subjects and follow the facts where they lead. You’d have to ask
someone else about where funding comes from, I don’t follow that and it doesn’t
affect me.”
We take no position on
“Medicare-for-all” and we can’t say if Blahous’ study is or is not influenced
by donors to the Mercatus Center. But we can say that Sanders
and Ocasio-Cortez are misrepresenting the study’s conclusions.
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