A recent analysis of Senator Bernie Sanders’ (I-VT) proposed “Medicare For All” (M4A) by the free enterprise think tank Mercatus has the liberals all a-twitter with excitement. Here’s Kevin Drum:
Here’s some good news. The libertarians at the Mercatus Center did a cost breakdown of Bernie Sanders’ Medicare for All plan and concluded that it would save $2 trillion during its first ten years:
Now, as you might guess, this was not the spin the Mercatus folks put on their study. Their headline is “M4A Would Place Unprecedented Strain on the Federal Budget.” This isn’t really true, of course, since M4A would absorb all the costs of our current health care system but would also absorb all the payments we make to support it.
But Mercatus is quite consistent in saying this:
By conservative estimates, this legislation would have the following effects:
- M4A would add approximately $32.6 trillion to federal budget commitments during the first 10 years of its implementation (2022–2031).
- This projected increase in federal healthcare commitments would equal approximately 10.7 percent of GDP in 2022. This amount would rise to nearly 12.7 percent of GDP in 2031 and continue to rise thereafter.
These estimates are conservative because they assume the legislation achieves its sponsors’ goals of dramatically reducing payments to health providers, in addition to substantially reducing drug prices and administrative costs.
And if the legislation fails to reduce payments to health providers? Costs could grow a lot more than projected. Kevin shouldn’t be complacent that Mercatus’ number is less than the projected number.
It’s a nuance worth thinking about, because it leads to more interesting questions, such as whether or not health providers will accept lower payments. That question has more texture to it than you might think. Does the legislation still utilize insurance companies, or is the health insurance industry abolished by this legislation? If not the latter, then does the legislation establish, or propose to establish, a standardized approach to health claims specification? Keep in mind that this one area often consumes one more persons in a doctor’s office, because health insurance claims are just that inconsistent.
Another thought is that a doctor’s office guaranteed a certain amount of business may be willing to accept the legislatively specified discount, much as will suppliers of more tangible objects, also known as the bulk discount.
Speaking of Mercatus, I don’t have time to analyze their result, but I do notice they don’t seem to acknowledge that earlier interventions, which are more likely under M4A, result in lower health care costs. This is another detail simply glossed over. If they calculated for that, it should be well-publicized so that the various interested parties could engage with it, tear it to pieces, and really get a good look at what that might mean for us.
Similarly, questions concerning whether M4A would impact new therapy development are also important. I see Mercatus has a study on how Medicare impacts it, but I can’t read that at the moment.
