The problem with single-payer? Eventually, you run out of other people’s money

Democrats have made a complete government takeover of the healthcare system the linchpin of their pitch to voters in this fall’s elections.

Former President Obama, who supported single payer before he was against it when promoting Obamacare, is now for it again. In a September 7 speech at the University of Illinois at Urbana-Champaign, he said, “Democrats are running on some good new ideas this year — like single-payer.”

Gubernatorial candidates in Maryland, Florida, Colorado, and California are calling for single-payer health care in their states. New York congressional candidate Alexandria Ocasio-Cortez, an avowed Democratic Socialist and rising star in the party, has preached the gospel of Medicare for All at rallies all over the country. In Massachusetts, Boston City Councilwoman Ayanna Pressley, a supporter of single-payer, defeated 10-term incumbent Michael Capuano in the Democratic primary for Massachusetts’s 7th congressional district. The Pied Piper of single-payer, Sen. Bernie Sanders, has continued to stump for single-payer on television and at campaign events nationwide.

Free health care is a potent rallying cry. But eventually, single-payer’s champions will run out of other people’s money.

The single-payer plan advocated by Ben Jealous, the Democratic candidate for governor in Maryland, would run $24 billion a year. That would increase the state budget by more than 50 percent. An analysis of the plan from the state’s Department of Legislative Services floated a new 10 percent payroll tax and a $2,800 per-person fee to cover its cost.

In California, Lt. Gov. Gavin Newsom is promising that he’ll deliver universal coverage if voters give him the state’s top job. A single-payer bill cleared the state Senate in June 2017 but has since stalled in the Assembly. It would cost $400 billion a year, according to the state Legislative Analyst’s office.  That’s more than double the state budget.

Those sums pale in comparison to the cost of Sen. Sanders’s Medicare for All Act, which he introduced last year. In a study released last month, Charles Blahous — a scholar at the Mercatus Center at George Mason University and a former trustee for Social Security and Medicare — pegged the bill’s cost at $32.6 trillion between 2022 and 2031.

Doubling the amount of money the federal government collects in individual and corporate income taxes would not be enough to cover that tab.

And Blahous’s estimate may be low. Sanders’s Medicare for All bill posits that making the federal government the country’s sole insurer will deliver $83 billion in administrative savings. Those savings are likely fictitious.

For starters, think of the army of new government employees that would be required to process payments. Health care — brought to you by the folks behind the DMV and the Post Office.

Sanders points to the current Medicare program’s low level of administrative costs, about 4 percent of total spending. But that ratio is so low because overall Medicare spending is so high; after all, seniors use more health care than the general population.

Further, a significant share of private insurers’ administrative costs go toward policing fraud. The federal government seems content to waste taxpayer dollars instead. In 2016, Medicare and Medicaid made $96 billion in improper payments, according to the Government Accountability Office.

The Sanders plan also assumes the government will get away with paying healthcare providers at Medicare’s current rates, which are 40 percent less than those for private insurance. In dollar terms, the plan envisions $385 billion in cuts to doctors and hospitals and $61 billion in cuts to drug makers in the first year.

Doctors are likely to respond to those cuts by working fewer hours, leaving their current practices, or even leaving the profession entirely, whether by retiring early or switching careers.

If Medicare for All’s proposed cuts don’t materialize, Blahous figures the bill’s cost to be about $38 trillion over a decade.

His study is only the latest to detail the fiscal impossibility of Medicare for All. A 2016 Urban Institute study concluded that the version of Medicare for All Sanders touted on the presidential campaign trail would cost $32 trillion between 2017 and 2026.

Emory University health policy professor and former Clinton administration health official Kenneth Thorpe ran his own calculations on the Sanders plan in 2016 — and found that it would cost $25 trillion over that same ten-year period.

The numbers don’t lie. America can’t afford single-payer health care. And, they won’t like the inevitable long waits, rationed care, higher taxes, and shortage of doctors to treat them.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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