Whenever Republicans released a healthcare proposal during their ill-fated attempt to repeal and replace Obamacare, the plan was immediately frisked by members of the policy community, who pointed out the myriad of problems raised by the various legislative drafts. It's only fair that we're just as brutally honest about the latest single-payer proposal from socialist Sen. Bernie Sanders, I-Vt. Simply put: it is a complete joke.
The Sanders bill would add hundreds of millions of people into an already financially-strapped program while making it more generous -- within four years. At no point in the legislation does he describe how he would expect to pay for this ambitious idea or deal with massive disruption it would mean for businesses, workers, and those trying to access care.
Some people who are ideologically sympathetic to Sanders are willing to give him a free pass on the details, arguing that Democrats are not in power and thus his bill is not likely to become law anytime soon. But this is a lousy excuse. Sanders, as he often boasts, has spent decades fighting to make single-payer healthcare a reality. The major challenges of costs and disruption are well known, and have crippled efforts to push single-payer at the federal level and in states such as California and Sanders' home state of Vermont. If Sanders wanted to demonstrate that single-payer is closer to reality, he would have grappled with the real obstacles to his vision. Instead, he released a bill that is nothing more than liberal fan service. We already know that liberals want free healthcare for all. The mystery is how they will handle the costs and tradeoffs. Sanders offers little in the way of clues.
It's worth starting with a reminder of the current finances of Medicare, the program that Sanders wants to use as the vehicle for his vision of socialized medicine. According to the program's trustees in their most recent report, Medicare, which is expected to cost $700 billion this year, "faces a substantial financial shortfall that will need to be addressed with further legislation." Its hospital program barely has enough dedicated revenue to break even, and within five years, it's expected to be running deficits. Within 12 years, the program benefits will have to be slashed because there won't be any money left in its trust fund. Its programs that cover physician visits and prescription drugs rely on premiums charged to beneficiaries to supplement the bulk of the funding, which comes from general tax revenues.
The Sanders plan would exacerbate all of these financial problems. In its first year, it would increase benefits to current Medicare enrollees, adding dental, vision, and hearing-aid coverage. It would get rid of any deductibles incurred by enrollees, bring down the current eligibility age to 55, and allow any children under 18 to obtain free care through Medicare. There are 120 million Americans within those age ranges, representing roughly 40 percent of the U.S. population. To provide some context, the current Medicare program has about 57 million enrollees. Within four years, the Sanders plan would offer Medicare to Americans of all age groups. So, to sum up, Sanders not only envisions taking a financially-strapped federal program and adding hundreds of millions of people to it, but he also wants to offer more generous benefits.
This would obviously cost a colossal amount of money. Though Sanders did not release a cost estimate, an analysis of the plan Sanders released during his campaign from the liberal Urban Institute estimated the federal price tag at $32 trillion over the next decade. Since it's hard for most people to comprehend that large of a number, let's put it in context, using the latest projections from the Congressional Budget Office. That would represent more than a year and a half of U.S. economic output; roughly all federal tax revenue projected to be collected between next month and 2025; more than the 10-year cost of Social Security, Medicare, Medicaid and Obamacare combined; and more than four times the projected defense budget over that time.
Given the historic magnitude of this sort of spending, you might think that the idea of how to pay for it would take up a pretty substantial part of the bill. But you'd be wrong. The legislative text of the Sanders bill doesn't contain any mention of funding sources. All reporters were treated to was a separate document listing potential options -- including possible taxes on middle-class households, employers, and the financial industry. Taken together, even if all of the options were pursued and raised as much revenue as Sanders claims they would, it would get him to about $16 trillion. Though that would be a record obliterating tax increase, it would barely cover half of the projected federal burden, if the Urban Institute estimate is taken as a decent approximation. This doesn't even get into the major economic consequences of such a massive tax increase, which even the liberal policy crowd would be hard-pressed to ignore.
Sanders claims that his single-payer plan will result in massive savings that will help offset the new costs. Moving away from private insurance, he argues, would mean lower administrative costs and less money going to profits. The federal government, he says, could use its negotiating power to bring down drug prices and payment rates for medical services. It also should be noted that the same Urban Institute estimate saying federal spending would increase $32 trillion over 10 years under his proposal also estimated that because Washington would be absorbing more of the burden, spending by states and local governments, households, and employers could be $26 trillion less.
Such a dramatic shift in spending toward the federal government would reduce the control that individuals have over their healthcare. Even if some offsetting savings were obtainable, making such a major shift so suddenly would create a number of problems for individuals and have implications for their access to care. When maybe a few million individuals lost their existing coverage under Obamacare, it was a major crisis for the administration. About half of the country, or 155 million people, currently have coverage through their employers and most are satisfied with it. Meaning, lots of people are going to be forced to give up doctors and plans that they like, and enroll in a Medicare plan that doesn't provide as much care.
This also doesn't take into account broader effects to the healthcare sector that would occur in the event that such massive change were to be implemented within one presidential term. In reality, there's a clear tradeoff: to the extent that the federal government tries to extract savings by driving a hard bargain with medical providers, it will reduce access. The reason is that hospitals and doctors won't be able to earn money if the price the government pays lags their costs of doing business -- hospitals will close down and doctors will retire early, and the pipeline of new doctors will dry up as medical careers become less financially rewarding relative to the level of work involved. Some doctors will set up "concierge" practices that don't accept any insurance, and instead cater to the super rich -- the dreaded "one-percenters" that are among Sanders' favorite rhetorical targets.
As it is, current Medicare payment rates for doctors and hospitals are not expected to keep up with medical inflation, likely making it harder for seniors to be able to access care. Without big changes, the trustees warned in their report, "the availability and quality of health care received by Medicare beneficiaries would, under current law, fall over time." Under the current system, providers can make up for what they aren't charging Medicare beneficiaries by shifting costs onto those paying privately. That would not be the case under Sanders' plan, which aims to put private health insurers out of business.
Thus, in a system whose capacity is already strained, Sanders wants to extend more generous government benefits to hundreds of millions of people, and help make the numbers work by driving down how much actual medical providers are paid. To the extent that he doesn't reduce payments to medical providers, which has proven historically difficult, his already astronomically expensive plan will just cost even more.
Meanwhile, Sanders wants the government to negotiate with drug makers, citing other countries that do the same and pay less for drugs. What he leaves out is the fact that American consumers are effectively subsidizing pharmaceuticals for the rest of the world. It's because drug companies can charge more in the U.S. that they are able to cut deals with foreign countries. In a world in which the U.S. federal government fixed prices, medical innovation would inevitably suffer.
Either way, the Sanders proposal does not deal in a serious way with these any of these inevitable access problems.
One comeback that single-payer supporters resort to when faced with the real-world challenges of implementing such a program is to point to other countries with single-payer systems that spend less money and cover more people than the United States. But even putting aside criticisms of how those systems actually function in practice, it simply doesn't make sense to assume that experiences overseas can easily be imported.
European nations adopted single-payer systems decades ago, when the healthcare sector was relatively small and then built their systems around that framework. Their citizens' expectations were tempered accordingly. Pointing to surveys showing satisfaction in other countries with single-payer systems isn't a relevant question, because people who grew up overseas know no other systems. The more operative question is how satisfied Americans who grew up in the U.S. system would be if treated to the same government-directed care that is administered elsewhere.
In a country with a single-payer system, for instance, the government may limit screening for certain illnesses based on the likelihood a given individual may be at risk. On net, this may be cost effective. And people who grew up within a single-payer system may not question why there isn't more screening. But in the U.S. a lot of people are willing to spend more money to be screened for the peace of mind, and in some cases, this does lead to catching diseases earlier. This may not be cost effective on net, but it can give people improved satisfaction. Quickly moving to a single-payer system in which the government is making a lot more of these decisions and imposing cost controls would represent a dramatic cultural shift for Americans. It isn't as easy as taking another country's healthcare system, plopping it in the U.S., -- and voila! -- healthcare as a percentage of GDP gets cut in half!
Most of the challenges of creating a single-payer system in the U.S. are well known, even among those sympathetic to the idea. As a proponent of free market healthcare closely observing the spreading single-payer fever among Democrats, I might have started to get scared if the Sanders plan represented any real breakthrough, or in any way showed that the idea had progressed beyond the level of college dorm-room arguments. But the plan Sanders released was not much more sophisticated than if he had simply pasted "Medicare for All" bumper stickers onto 96 pages. Until he grapples with the very real obstacles to rapidly transitioning to a single-payer system, he does not deserve to be taken seriously.