Single Payer IQ Test – Question 5: How much will it cost?

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Answer: $32 trillion over 10 years is one guess. Actually, it will devour every dollar that can be taken from taxpayers or creditors and diverted to the system.

Bernie Sanders himself pegged the price of his “Medicare for All” single-payer plan at $1.38 trillion per year. This is about the same amount that the federal government already spends, including Medicare, Medicaid, tax deductions for health insurance, ObamaCare subsidies, CHIP, and veterans’ care, according to PolitiFact. [1]

“As a patient, all you need to do is go to the doctor and show your insurance card,” says a Sanders website. “Bernie’s plan means no more copays, no more deductibles and no more fighting with insurance companies when they fail to pay for charges.”

This magic is supposed to be accomplished by doing away with insurer profits and advertising costs, “negotiating” lower prices from vendors (wage and price controls), purported administrative efficiency, and more cost-effective care.

Federal health-related expenditures, according to other estimates, would increase by about $32 trillion (233%) between 2017 and 2026, as private and state spending shifted to the federal government. This would almost double the entire current federal budget.

As the graph below [2] shows, the expansion of third-party payment and the involvement of the federal government in health–single-payer for the elderly and the disabled (Medicare)—marks the beginning of the spending escalation. In 1965, medical spending consumed less than 6% of GDP. It is now greater than 18%.

Between 1960 and 1965, medical spending increased by an average of 8.9% a year. That’s because health insurance expanded and as it covered more people, the demand for medical services rose. After Medicare, from 1966 to 1973, the rate of increase was an average of 11.9% per year. In 1965, households paid out-of-pocket for 44% of all medical expenses, and health insurance paid for 24%. Now, about 90% of spending passes through a third party.

The hidden costs of Medicare-for-all include:

  • Deadweight losses of additional taxes ($625 billion – $1.1 trillion/yr)
  • Additional waste, as from moral hazard ($453 billion – $626 billion/yr)
  • The impact of rationing ($152 billion – $914 billion/yr)
  • Social costs from reduced innovation ($23 billion to $152 billion).

Of course, it is impossible to provide every conceivable medical service to everyone. There will be priorities, and queues, described by a Canadian physician on the Bernie Sanders show.

The reason for inadequacies and waiting is always “underfunding.” The system is always underfunded because of competing demands from law enforcement, defense, education, infrastructure, welfare, etc.—and resistance to tax increases.

There is a limit to how much the federal government can tax and borrow, even if Congress eliminates the debt ceiling. At the end of fiscal year 2016, the federal government had about $84.3 trillion ($84,306,000,000,000) net in debts, liabilities, and unfunded obligations, including obligations of Medicare and Social Security but not other current policies. This is 451% of the GDP.

Take-home Lessons:

  • Adopting Medicare and greater third-party payment was associated with a tremendous increase in spending. More of the same is not going to have the opposite effect.
  • There is not “plenty of money” in the economy to fund government “healthcare for all.”

References:

  1. Jacobson L. How expensive would a single-payer system be? Politifact, July 21, 2017. Available at: http://www.politifact.com/truth-o-meter/article/2017/jul/21/how-expensive-would-single-payer-system-be/.
  2. Roehrig C. A brief history of health spending since 1965. HealthAffairsBlog; Sep 19, 2011. Available at: http://healthaffairs.org/blog/2011/09/19/a-brief-history-of-health-spending-since-1965/.

Printable PDF of Question #5: https://goo.gl/vf1Gua

Single Payer IQ Test Question Archive: https://aapsonline.org/category/hcriq/

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