Senator Bernie Sanders of Vermont has introduced legislation he calls Medicare For All. This would create a single-payer healthcare system similar to Canada, our northern neighbor. Side-stepping the question of whether or not this is desirable, let’s get to the economic question – Is it affordable?
In response to a recent post that concerned socialized medicine, one reader opined that the cost of such a system would actually be less than our current level of taxes plus healthcare insurance premiums and deductibles. Is there any truth to that statement?
Charles Blahous, well-respected economist at the Mercatus Center of George Mason University and a public representative to the Medicare Trustees, has the answer. Blahous has drawn several conclusions from his study entitled, “The Costs of a National Single-Payer Healthcare System.”
Medicare For all Would Place Unprecedented Strain on the Federal Budget
Blahous concludes this legislation would have the following effects:
- Increase in the Federal Budget of $32.6 Trillion during the first 10 years of implementation (2022-2031)
- Projected increase in federal healthcare commitments would equal 7 percent of GDP in 2022. This would rise to nearly 12.7 percent of GDP in 2031 and continue to rise thereafter.
- These are conservative estimates because they assume the legislation achieves its sponsors’ goals of dramatically reducing payments to health providers, and substantially reducing drug prices and administrative costs – all unproven expectations. If those assumptions are incorrect, the costs would dramatically increase over these projections.
Medicare For All Dramatic Federal Cost Increase Arises from Several Factors
The several factors that cause these dramatic increases in federal spending include:
- The federal government would become responsible for financing nearly all current national health spending, including individual private insurance and state spending.
- This legislation would increase federal health spending on the currently uninsured as well as those who now carry insurance by providing first-dollar coverage of their healthcare expenses across the board, without deductibles or copayments.
- This would expand the range of services covered by federal insurance (ex. dental, vision, and hearing benefits)
- This would dramatically expand the demand for healthcare services, consistent with economics research findings that the more of an individual’s health costs are covered by insurance, the more services they tend to buy, irrespective of the services’ efficacy and value.
We Do Not Know How Much Medicare For All Would Disrupt the Availability and Quality of Health Services
This legislation would dramatically increase the demand for healthcare services while simultaneously cutting payments to doctors and hospitals by more than 40 percent, reducing payments to levels that are lower on average than providers’ current costs of providing care.
Blahous draws this obvious conclusion: “It cannot be known how much providers will react to these losses by reducing the availability of existing health services, the quality of such services, or both.”
Clearly, this would lead to an unknown number of healthcare providers leaving the profession, either by retirement or by switching to non-clinical aspects of medicine. This would undoubtedly lead to a huge shortage in healthcare providers – which would lead to long waiting times to receive healthcare. There is already a serious shortage of doctors in this country and such legislation would hugely exacerbate that problem.
In every other nation where socialized medicine systems have been implemented, these changes have led to the following:
- Long waiting times to receive healthcare treatment
- Restrictions by the government in what treatments are approved
- Poorer healthcare outcomes
The message could not be clearer – Medicare For All is unaffordable – economically and medically.