A plan to bring single-payer health care to the United States by expanding Medicare to cover nearly all Americans would cost more than $32 trillion over the first 10 years—and paying for it would require a doubling of current tax revenues, plus some.
That's the bottom line in a new study released Monday by the Mercatus Center at George Mason University, a free market think tank. The analysis attempts to apply a price tag to the single-payer proposal backed by Sen. Bernie Sanders (I-Vt.), otherwise known as the "Medicare-for-all" plan. Sanders' plan would see the federal government replace private health insurance that Americans currently receive as a benefit of employment or purchase independently, and would have the federal government become responsible for current state-level health care spending.
Even with conservative cost estimates—conservative because the estimate assumes, as Sanders does, that the single-payer plan would deliver savings in administrative costs and drug prices—the Medicare-for-all plan would require an "unprecedented" increase in government spending, writes Charles Blahous, the study's author.
"Doubling all federal individual and corporate income taxes going forward would be insufficient to fully finance the plan, even under the assumption that provider payment rates are reduced by over 40 percent," says Blahous, who was a health policy advisor to President George W. Bush and served as a Medicare trustee during the Obama administration. "Such an increase in the scope of federal government operations would precipitate a correspondingly large increase in federal taxation or debt and would be unprecedented if undertaken as an enduring federal commitment."
Instead of responding to the details of the Mercatus analysis, Sanders attacked the think tank's connections to the Koch Brothers. In a statement to the Associated Press, Sanders called the report "grossly misleading and biased."
But the Mercatus study is roughly in line with other assessments of how much it would cost to implement a single-payer health care program in America. A 2016 study from the Center for Health and Economy, a centrist health policy think tank, said Sanders' Medicare-for-all plan would add $27 trillion* to the federal budget deficit over the first decade. An Emory University analysis of Sanders' plan estimated that it would require $25 trillion in new federal funding.
It also fits with what some states have found as they have explored the idea of state-level single-payer plans.
Vermont experimented with single-payer health care a few years ago, but ultimately abandoned the project in 2014 because it was too costly. In Colorado, voters rejected a proposed single-payer system in 2016 when faced with the prospect of increasing payroll taxes by 10 percent to meet the estimated $25 billion annual price tag.
More recently, lawmakers in both California and New York have passed legislation to create single-payer health care at the state level, but both ran into difficulties when it came to figuring out how to pay for them. New York's single-payer plan would have required doubling (and possibly quadrupling, depending on which projection you believe) the state's tax burden, while California's single-payer legislation would cost an estimated $400 billion—more than twice the size of the entire state budget of $180 billion.
Figuring out how to pay for a single-payer system remains a serious problem for supporters of the idea. With more than $21 trillion already on the national credit card, it would be beyond irresponsible to pass a wildly expensive overhaul of the health care system without adequately funding it. Supporters of single-payer will have to convince Americans that it is worth paying twice (or more) as much in taxes in order to get "free" health care (and abolish premiums, co-pays, and deductibles).
Progressives seem prepared to make that sales pitch. Writing at the People's Policy Project, a progressive think tank in favor of single-payer, Matt Bruenig makes the case that reducing health spending is a trade-off worth making. "Rather than paying premiums, deductibles, and co-pays for health care, people will instead pay a tax that is, on average, a bit less than they currently pay into the healthcare system and, for those on lower incomes, a lot less," he argues.
While Bruenig is right that the Mercatus study shows that national health expenditures would fall*, Blahous is merely accepting Sanders' projected savings there. And it's probably right to be skeptical of those assumptions. Even though single-payer advocates point to potential administrative savings by having the government step-in to replace health insurance companies, but those numbers usually require a degree of deception—for example, not counting current Medicare costs as "administrative costs" of the existing health care system.
Beyond that, Blahous notes that increased demand for health care—eliminating co-pays and deductibles means people will get treatments they otherwise wouldn't—wipes out the savings achieved by reducing drug prices.
Moving to a single-payer system also comes with costs that aren't captured by a balance sheet. Much of the outcry over the implementation of the Affordable Care Act revolved around the disruption of health care coverage in the individual market. But Obamacare caused a few million Americans to move from their existing health insurance plans. Moving to single-payer means a disruption for literally everyone.
Single-payer health care may very well be an improvement on some aspects of the current American health insurance system, which is a weird mish-mash of overlapping programs, subsidies, mandates, and highly regulated markets that often makes little coherent sense. At the very least, a debate over a robust overhaul of the system is badly needed.
But part of that debate has to be about paying for it. So far, that's been a stumbling block for progressives. In polls, support for single-payer health care declines substantially after respondents are told about the associated costs.
Those trade-offs must be fully understood—not just by health care policy wonks, but by average Americans—before single-payer proposals can be seriously considered. Abolishing the disaster that is the American health insurance system sounds great, but government-run health insurance will be one of the costliest undertakings in the nation's history.
CORRECTION: This post has been updated to correct the amount that the Center for Health and Economy estimates Sanders' Medicare-for-all plan would add to the federal budget deficit over the first decade. It is $27 trillion, not $27 billion. This post has been updated to reflect an update in Bruenig's own post.
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