The False Lure of the Sanders Single-Payer Plan

(Photo: AP/Evan Vucci)

Democratic presidential candidate Senator Bernie Sanders speaks during a campaign rally in Cedar Rapids, Iowa, on January 30.

Wouldn’t it be great if we could just go to the doctor and not pay any bills? After all, isn’t that what they do in other countries, and don’t those countries have lower health-care costs than the United States does? And aren’t private insurance companies the only reason we don’t have that kind of system?

This is the appeal of the Bernie Sanders single-payer health plan. Free health care, with none of the frustrating paperwork of today’s insurance, and with taxes that cost less than insurance premiums—what could be better than that? Of course, the single payer in the Sanders plan is the federal government, which implies concentrating payment and therefore power over health care in Washington. But, at least in this area, many Democrats don’t seem worried about that prospect.

Sanders doesn’t just call for incremental steps toward single-payer. He’s proposing to shift all of health care to federal taxes in one fell swoop. That’s one reason for the enormous, sudden increase in taxes the plan would require—$1.38 trillion on top of existing federal spending, according to Sanders’ own estimates. As Harold Pollack has pointed out, that $1.38 trillion is just about equal to total federal income and estate tax collections in 2014—in other words, the plan would require doubling that revenue. Sanders insists that he’s shown how he would pay for it through a 6.2 increase in payroll taxes (which he calls an “income-based premium paid by employers,” though the cost will fall on employees); a 2.2 percent increase in income taxes on everyone; higher estate taxes; taxing capital gains and interest as ordinary income; limiting tax deductions for the rich; and higher income-tax rates on the upper brackets (which, combined with other increased taxes he’s also calling for, would bring the top marginal federal rate to 77 percent, as Dylan Matthews shows at Vox).

But Sanders’s estimate of the needed increase in taxation, despite its whopping size, is too low. The plan would actually cost another $1.1 trillion a year, according to an analysis by Kenneth Thorpe, a health-care economist at Emory University, who has long experience working with single-payer proponents. In 2006, the Vermont legislature hired Thorpe to cost out a single-payer proposal, and in 2014 progressive legislators in Vermont hired him again. So this is not an estimate from an economist generally opposed to universal health care or to single-payer. Thorpe’s estimates indicate that workers would have to pay an additional 20 percent of compensation to pay for Sanders’s plan.

At Vox, Matthews has probed both Thorpe and the Sanders campaign on some of the specific areas where their numbers diverge. Here’s one stunning detail: When the Sanders campaign released its plan, it estimated $324 billion in annual savings on prescription drugs—until Thorpe noted that the United States spent only $305 billion for that purpose in 2014. (If Trump can expect Mexico to pay for a wall on the border, I suppose Sanders can expect drug companies to pay consumers instead of the other way around.) When Matthews pointed out that it was impossible to save $324 billion out of $305 billion, the Sanders camp cut their savings estimate to $241 billion, while conveniently increasing other projected savings to make up the difference. But $241 billion in drug savings are still implausible, and as the entire episode indicates, the Sanders campaign is simply pulling numbers out of the air.

The Sanders’s plan also makes implausible assumptions about health-care spending by the states. While eliminating the Medicaid program, Sanders counts on states to continue spending what they now spend on Medicaid, even though the Supreme Court has ruled that the federal government cannot require the states to spend money on a program—especially one that no longer exists.

Why does the Sanders plan cost so much? Among other reasons, the plan calls for eliminating all patient cost-sharing. I’m not a fan of high co-pays and deductibles, but eliminating them altogether will increase health spending more than Sanders acknowledges. His plan also includes no limits on the scope of coverage. “Bernie’s plan,” the campaign says, “will cover the entire continuum of health care, from inpatient to outpatient care; preventive to emergency care; primary care to specialty care, including long-term and palliative care; vision, hearing and oral healthcare; mental health and substance abuse services; as well as prescription medications, medical equipment, supplies, diagnostics and treatments.” This is an extraordinary list; long-term care alone is spectacularly expensive. Although Sanders refers to his plan as “Medicare for all,” it is far bigger than Medicare, which has never eliminated cost-sharing or covered all these services.

Let’s leave aside whether even a Democratic Congress could pass tax increases of the magnitude Sanders’s plan would require. There’s also a question of priorities: Should Democrats—should anyone—support devoting so much federal revenue to health care? The country has a lot of other needs. Transferring all private health spending to the federal treasury is not necessarily the best use of federal tax capacity. Sanders’s health plan is so costly it would make it impossible to do much else.

It’s not just private insurers that would stand in the way of this plan. Thorpe estimates that 70 percent of people with private insurance would end up paying more than they do today.

But what about other countries that Sanders often cites? Don’t those examples show that a system of national health insurance is cheaper and better than one with private insurance?

Here’s where I agree with that argument: If we could wind back the clock to the 1940s, when health care was just 4 percent of GDP and private insurance was just beginning to develop, we might well be able to design a national insurance program—as Harry Truman proposed—that would have kept down the growth of costs. But we can’t wind back the clock. In the mid-to-late 20th century, a very different system developed with the rise of both private, employer-based insurance and the adoption of public programs that accommodated the interests of physicians and hospitals.

This is a story I’ve told in two books—The Social Transformation of American Medicine (1983) and Remedy and Reaction (revised edition, 2013). The financing arrangements that emerged in the United States had two complementary effects: They created incentives for high-cost specialized care and protected much of the public from the full, direct cost of that system. As a result, starting from 4 percent of GDP, health care grew to 17.5 percent, far more than in any other country. That level of costs is reflected in investments in medical technology, the physical infrastructure of hospitals and other facilities, the patterns of medical training and specialization, and the size and structure of the health-care labor force. Adopting a government insurance plan won't undo a system that's been built up over decades, though it would certainly alter its future evolution.

While having the federal government take over all private health expenditures (and state and local government spending too, unless Sanders can also appoint new justices to the Supreme Court), the Sanders plan attempts to squeeze per capita health expenditures down to Canadian levels. The plan doesn’t explain how it is going to bring this about, and Thorpe’s analysis says it won’t. But if the federal government did impose sufficient controls, the results would be to bankrupt many institutions that are counting on future streams of revenue to cover debt payments, meet payroll, and satisfy other obligations. 

The Affordable Care Act does not try to roll back spending levels to the share of GDP that health care represented decades ago. It has the limited, uninspiring, but ultimately more sensible goal of “bending the cost curve”—slowing the rate of growth of health-care costs, which has actually happened in the years since the law’s passage.

The ACA is far more in keeping with the lesson to be drawn from the history of health policy in other countries. Most countries have built on their existing institutions as they have pursued universal coverage and sought to control costs. The governments that instituted unified national insurance systems generally did so before private insurance had developed on a large scale. Many countries that had multiple insurance funds have maintained them; rather than centralizing all payment, they have created regulatory and negotiating arrangements that keep costs in check. This is the direction we can and should take.

In the wake of the adoption of the ACA—if it isn’t repealed by Republicans—the United States could adopt additional reforms to improve coverage and control costs, including measures opening Medicare to wider enrollment. One possibility is to provide a basis for 55-to-64-year-olds to buy into Medicare. The idea of a Medicare buy-in was supported by Bill Clinton in the late 1990s and by Al Gore in the 2000 election campaign. It is even more practical now as a result of the ACA’s individual mandate, which reduces the likelihood of adverse selection (higher enrollment by those with high medical costs). A Medicare buy-in came up late in the 2009 Senate debate about the ACA as an alternative version of the “public option,” but it died as a result of Joe Lieberman’s objections and worries among other Democrats about its impact on the financial stability of hospitals in their states—a concern that would have to be dealt with in any effort to revive the idea.

I mention a Medicare buy-in for people in the decade before full Medicare eligibility only to illustrate the kind of incremental measure that is both practical and consistent with the aspirations of many progressives. It would be difficult to enact, but it wouldn’t require a Sanderista revolution and heroic assumptions about Americans’ support for increased taxation.

Sanders’s single-payer plan is not a practical or carefully thought-out proposal. It’s a symbolic gesture, representative of the kind of socialism he supports. The question that Democratic primary voters will have to answer is whether they want their party to go into a general election with a gesture of this kind.

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