What’s Wrong With Medicare For All? – Part III

 

In Part I of this series, we talked about the Democratic claims for a new healthcare system called Medicare for All, introduced by Senator Bernie Sanders. All of the following claims have been made about this idea:

  • Universal access to healthcare
  • Elimination of insurance company approvals for treatment
  • Increased taxes will be no more than current expenses for healthcare
  • Lowered healthcare costs for patients and the government
  • Improved healthcare quality for all Americans
  • Americans will love this “free healthcare”

 

Part I began a discussion of the impact of Medicare for All on access to healthcare.

As I discussed in Part I, having insurance coverage does not necessarily mean having increased access to healthcare. If you can’t get into a doctor’s office for treatment because your coverage doesn’t pay the doctor enough to cover his expenses, you still don’t have access to healthcare. This is often the case with those currently enrolled on Medicaid. Even though they have “coverage” by the expansion of Medicaid, their accessto healthcare has not improved.

In Part II I continued the discussion of access to healthcare and showed how eliminating private health insurance, as Medicare for All would do, will not eliminate the need for government approval for all healthcare treatments. In fact, it will surely lead to healthcare rationing, to control costs, as every other country with similar single-payer healthcare has experienced.

Increased Taxes

Everyone concedes that Medicare for All will require a massive tax increase. But supporters of this idea rationalize this increase in several ways:

  • They believe the rich will pay for most of the tax increases
  • They believe the overall cost of increased taxes will be offset by lower overall healthcare expenses
  • They believe low-income Americans will be unaffected

 

Economist Charles Blahous of the Mercatus Center has estimated the cost of Medicare for All at $32.6 Trillion over the first ten years. That’s a cost of $3.26 Trillion each year. To put that number into perspective, the current cost of our military for defense each year is only about $681 Billion ($0.68 Trillion) or about 20% of the estimated cost of Medicare for All. The current expense of Medicare is $579 Billion and for Medicaid is $350 Billion or a combined $829 Billion ($0.82 Trillion). So we’re talking about four times current Medicare and Medicaid spendingand nearly five times current defense spending.

Economist John C. Goodman says this would necessitate a minimum of a 25% payroll tax – but only if it is assumed doctors and hospitals provide the same amount of care they provide today. Since Medicare rates are 40% or more below private rates, a realistic assumption is that doctors and hospitals would increase the amount of care to make up the difference. This would then require at least a 30% payroll tax.

Don’t confuse payroll taxes with income taxes. Payroll taxes are taken out of your paycheck before you ever receive your pay and are paid by every worker. Just as every worker must pay social security and Medicare taxes up to certain income limits, every workerwould be required to pay this increased Medicare for All payroll tax. It wouldn’t be paid for “by the rich” as supporters claim.

Higher Costs for Patients and the Government

It gets worse. Blahous also estimates that the administrative cost of private insurance is 13%, more than twice the 6% it costs to administer Medicare. Single-payer advocates often use this administrative cost comparison to argue that universal Medicare would reduce healthcare costs. But this estimate ignores the hidden costs Medicare shifts to the providers of care, doctors and hospitals, including the enormous amount of paperwork required in order to get paid.

The Obama administration forced doctors and hospitals to implement electronic medical record systems – a costly change that appears to have failed to deliver promised increases in quality or reduction in costs or medical errors. In fact, it has made it easier for doctors to “up code” and bill the government for more money. Also to be considered are the costs of collecting more taxes to fund Medicare. Some estimates put these costs as high as 25 cents on every dollar.

A Milliman  & Robertson study estimates that when all these costs are included, Medicare and Medicaid spend two-thirds moreon administration than private insurance spends. Using the most conservative estimate of the social cost of collecting taxes, economist Benjamin Zycher calculates that the excess burden of a universal Medicare program would be twice as highas the administrative costs of universal private coverage. That means the administrative cost of Medicare for All would be about 26 percent!

To off-set these higher administrative costs, the government would either raise taxes even higher or lower payments to providers even lower or increase rationing of healthcare even more than expected. The first solution would further decrease take-home pay. Both of the latter solutions would restrict access to healthcare  – even more! This was supposed to improve access, not make it worse.

Supporters of Medicare for All are delusional to think the cost of this legislation would not increase overall spending for healthcare for consumers. And the tax increases necessary would affect everyone. It is unaffordable.

(More on Medicare for All in Part IV of this series.)