In the fall of 2017, when Senator Bernie Sanders unveiled his vision for the future of the U.S. healthcare system (Medicare for All), I wrote a piece for the Center for Vision and Values titled, “Medicare for All is Good for None.” In the piece, I argued that using the Medicare template as a model capable of absorbing quadruple the number of current enrollees was flawed from the start. Obviously, Senator Sanders did not read my piece.
Now, in the fall of 2018, Medicare for All has become the litmus test for the early field of potential Democratic presidential nominees and a key policy platform among progressives. In addition, a recent Reuters poll showed a majority of Americans, 70% in fact, in favor of Medicare for All. Receiving “free” healthcare from the government sounds promising until one digs into the details related to the impact the plan would have from a dollars-and-sense perspective.
Over the past year, the cost of Sanders’ proposed socialization of the American healthcare system, representing nearly 18% of the total U.S. economy, has been extensively studied. Both left-leaning and right-leaning estimates price the plan at approximately $30 trillion. A recent study by the Mercatus Center at George Mason University estimates Medicare for All will cost the federal government at least $32 trillion over 10 years.
For some sobering perspective, the total of all individual and corporate taxes collected by the federal government over the next 10 years is projected to be approximately $30 trillion. The federal government would have to more than double its tax revenue in the next 10 years to pay for Medicare for All.
In order to cover just a portion of Medicare for All, Senator Sanders’ plan would mean an increase in the top marginal tax rate to 52% and a dramatic increase in the tax on capital gains and dividends. Even if that’s the case, a significant gap in funding still exists. Where does the rest of the nearly $32 trillion come from?
Supporters of a socialized healthcare system like Medicare for All point to the administrative cost savings a single-payer system would generate as a means to help cover the approximate $32 trillion dollar price tag. Unfortunately, on a per-patient basis, Medicare administrative costs are no better than those of private insurance.
This despite a greater number of private insurance providers, variability in their administrative efficiency, and higher marketing and promotion costs. Is it even feasible that the bureaucratic machinery in Washington could come close to being able to drive down costs via administrative efficiency?
Another means of paying for Medicare for All according to its backers is to reduce provider fees. Currently, Medicare pays providers significantly less than they receive from private insurance. According to estimates in the Mercatus study, Sanders’ plan would reduce provider reimbursements by nearly 40%.
Payments below the cost of doing business would likely result in fewer providers and limits on access to care as physicians and hospitals are forced out of business. It would also mean fewer new providers entering the market.
Providers that remain would essentially become government employees with little say in their business. From a patient perspective this also would mean longer wait times and less control over healthcare decisions.
Related to the dramatic reduction of provider fees, Medicare for All would also seek to negotiate a significant reduction in the prices of prescription drugs, essentially amounting to price controls across the pharmaceutical industry. While drug pricing is a key cost-driver of the U.S. healthcare system, and should be addressed in a responsible way, implementing price controls across the entire sector would stifle innovation and new drug discovery.
The above rationale for why Medicare for All is unrealistic and impracticable from a dollars-and-sense perspective doesn’t even take into account the actual experiences of patients in socialized healthcare systems around the world. In many countries, an increasingly strained national healthcare budget has to be addressed by increasing revenues via higher taxation or decreasing costs via the rationing of care. It also doesn’t address the fundamental point about the degree of control that should be ceded to the federal government in any area of our lives, especially one as important and personal as healthcare.
The methods by which Medicare for All proposes to pay its bills all have unintended consequences or downstream effects that would do more harm than good to the U.S. economy, the individual taxpayer, and the patients within the system. Americans want, and deserve, a cure for a sick U.S. healthcare system but Medicare for All is the wrong prescription.
Editor’s note: Richard D. Kocur is an assistant professor of business at Grove City College. He specializes in marketing and business strategy and has over 25 years of experience in the healthcare industry.