New study ignites debate over cost of ‘Medicare for all’

A new study that puts an astronomical price tag on a Medicare-for-all proposal has prompted mockery from conservatives and defensive cries from liberals.

The analysis, from the libertarian-leaning Mercatus Center at George Mason University, focuses on legislation introduced by Sen. Bernie Sanders (I-Vt.) and estimates that his proposal to create a national health insurance system would lead to a $32.6 trillion increase in federal spending over a 10-year period.

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The eye-popping figure is tied in large part to the fact that under Medicare for all, the federal government is designed to take on almost all health spending. Which explains why federal spending would go up significantly.

Proponents of Medicare for all, also known as a single-payer system, are quick to note the study also estimates national expenditures on health care would decrease by about $2 trillion by 2031 if the Sanders bill were signed into law.

That means overall health-care spending would decline, but the government’s share of that figure would go up, something small-government Republicans find unsettling.

“People just have to decide what they’re comfortable with,” said Charles Blahous, the study’s author. There won’t be an increase in health spending, but “this would be a transformative change in the size of the federal government.”

National health spending refers to all health spending from any source, whether it’s made by private employers, state Medicaid programs or the federal government. Federal health expenditures refer to health spending from the federal government in particular.

Sanders’s plan aims to provide health insurance for everyone in the country, and to virtually eliminate the uninsured. All those people seeing doctors and going to the hospital will drive up health spending over the years, but the legislation is designed to offset those costs through lower provider payment rates, drug savings and administrative cost savings.

Larry Levitt, a senior vice president at the Kaiser Family Foundation, said the Mercatus study is a good indicator of both the “promise and peril” of Medicare for all.

“You can save money and cover everyone, but it would be a big shift from private payers to the public, and a $32 trillion increase in taxes is going to be scary,” Levitt said, adding that Medicare for all supporters have a tough task ahead of them.

He said they’ll need to convince the public that even though taxes will likely rise, nobody will have to pay premiums or out-of pocket costs.

Sanders has not done a cost analysis of his legislation, but on Monday he criticized the Mercatus study, calling it “grossly misleading and biased.”

“If every major country on earth can guarantee health care to all, achieve better health outcomes, while spending substantially less per capita than we do, it is absurd for anyone to suggest that the United States cannot do the same,” Sanders said.

Blahous, who was a senior economic adviser to former President George W. Bush and a public trustee of Social Security and Medicare during the Obama administration, said none of the critics have found anything fundamentally wrong with his analysis. In fact, a study of Sanders’s 2016 plan by the left-leaning Urban Institute found that it would also cost the federal government $32 trillion over a decade.

“The general ballpark of numbers seem the same, irrespective of where it comes from,” said Blahous.

But not everything in Sanders’s bill can be measured, according to Blahous. He noted that while the legislation says hospitals and doctors will be paid at Medicare rates, he can’t predict how providers will react to what could be a massive pay cut.

Medicare often pays much less than private insurance, but more than Medicaid.

“It sounds good to say you’ll save money and lower prices, but it sounds bad as reducing doctors’ incomes and hospital revenues,” Levitt said.

Republican control of Congress makes Medicare for all a virtual impossibility. Even if Democrats manage to take control of both the House and Senate, a narrow majority with a Republican in the White House would make it difficult to enact this kind of legislation.

Levitt said Sanders’s plan is a good illustration of what Medicare for all could accomplish in theory, but payment levels for providers hasn’t really had a full debate yet.

“These are all questions with enormous dollar implications that haven’t been fully vetted,” Levitt said. “If we were in a full-fledged debate over Medicare for all, lobbying by drug companies, doctors and hospitals would be enormous.”