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Does Bernie Sanders’s health plan cost $33 trillion — or save $2 trillion?

By Jeff Stein
The Washington Post, July 31, 2018

Congressional Republicans seized on a new study Monday estimating that a universal health-care plan by Sen. Bernie Sanders (I-Vt.) would cost the federal government $33 trillion by 2031, arguing that it proves Democrats have moved too far left.

Sanders, looking at the same study, says it shows his “Medicare for All” proposal would save Americans $2 trillion.

What’s going on here?

Republicans such as House Speaker Paul D. Ryan (R-Wis.) are correct that enacting Sanders’s single-payer plan would add trillions to government books, by placing all Americans on one government health insurer, according to both the study’s author and Sanders himself.

But Sanders is right that the study concludes that his plan would reduce overall spending on health care in the United States. Most U.S. spending on health care is done through the private sector. Sanders’s plan would transition virtually all of that spending to the public sector, dramatically increasing government expenditures on health care while also reducing national health-care spending overall, according to the report.

Sanders’s plan would also give health insurance to about 30 million Americans who lack it, while eliminating deductibles and premiums charged through private insurance.

“A Medicare-for-All health-care system would save the average family significant sums of money,” Sanders said in an email to The Washington Post. “Yes, an individual may pay more in taxes, but that family of four that is spending $28,000 a year for health care today will no longer pay premiums, co-pays or deductibles to private insurance companies.”

From 2019 to 2028, the federal government would spend an average of 2.8 trillion more per year on health care if Sanders’s plan were fully in place, according to the study, published by the Mercatus Center, a libertarian-leaning think tank. The study — written by Charles Blahous, a former official in President George W. Bush’s administration — notes that this price tag would not be covered by doubling what the government currently takes in through individual and corporate taxes.

Sanders’s plan calls for transitioning everyone in the United States onto the government health plan over the course of four years. In the first year, the federal government would drop the Medicare eligibility age from 65 to 55 — a proposal also backed by many centrist Senate Democrats — as well as enrolling everyone currently on Medicare and everyone younger than 18. It would then slowly add the rest of the population over the next three years, while offering insurance that charges no premiums or deductibles.

These changes would lead the U.S. government to control virtually all health spending in the United States — Sanders’s plan would also cover dental care and vision care — in what may be the biggest increase in federal expenditures in history, according to Blahous.

“The primary effect here is the expansion of the federal government,” Blahous said. His report questions whether it would be “desirable or practicable” for the federal government to so dramatically increase its spending on health care, given that the increase would dwarf many of the government’s other spending priorities.

But to single-payer advocates, there is no obvious difference to the average American between sending their money to a private insurer through premiums and sending it to the government through higher taxes.

And, they say, putting all Americans on one insurer would create a large-enough pool to force private health-care providers to charge less, while eliminating private insurers’ spending on marketing and administrative overhead that do not improve health outcomes.

On its current trajectory, the United States is projected to spend $7.65 trillion annually on health care by 2031, according to the Mercatus study. That number would drop to $7.35 trillion if Sanders’s plan were implemented, the study found. Over time, that adds up to a net savings of about $2.1 trillion.

“It’s a surprisingly positive view of Medicare for All from a very conservative research institute,” Larry Levitt, a health-care expert at the Kaiser Family Foundation, said of the Mercatus report. “According to the analysis, you could provide universal coverage with no patient cost-sharing and actually spend less on health care than we would under the status quo.”

Asked about the projected drop in national health spending, Blahous said the rise in government health-care spending was the significant finding of his report, not the change in overall national health spending. He also said that long-term pricing projections are inherently volatile and that he made generous assumptions about Sanders’s cost savings, also noting that in some other scenarios he analyzed, net health spending would go up.

“I’ve made all the favorable assumptions with respect to the author’s intent,” Blahous said in an interview. “The striking number people have to grapple with is whether the federal government could take on something of this magnitude.”

But Adam Gaffney, an expert at the Harvard Medical School who supports single payer, said Blahous is underestimating by billions of dollars the savings Sanders’s plan would create, by reducing spending on prescription drugs and administrative overhead.

Whether the U.S. political system could stomach the scale of these changes is another question altogether. Single-payer systems in many European countries demonstrate that they can reduce overall national health spending, but that does not mean that a Democratic administration could implement one without incurring an immense political backlash, said Harold Pollack, a health-care expert at the University of Chicago.

“I don’t look at this report and say it is a partisan hack job: The basic idea the Sanders plan would require a substantial increase in federal budget outlays is correct,” Pollack said. “But over the long run, the Sanders people are very correct that you could implement a system like this that would be more disciplined, more economical and more fair than the current U.S. health system.”

https://www.washingtonpost.com...