Bernie Sanders Cherry-Picks New and Flawed Study to Advocate for Medicare for All

During the Democratic primary debate last Tuesday, forerunner Bernie Sanders had a rough night because the other candidates were targeting Sanders. As Pete Buttigieg brought up, "Senator Sanders at one point said it was going to be $40 trillion, then it was $30 trillion, then it was $17 trillion. That's an incredible shrinking price tag." Of course, Sanders wants to make Medicare for All (M4A) appear as inexpensive as possible. That is why during the debate, Sanders mentioned a study from Lancet magazine, which is one of the most prestigious medical journals in the world. It is true that such a study exists in Lancet (Galvani et al., 2020), and it is true that the study claims that it would save $450 billion annually in health care expenditures. This study sounds like a win for the Sanders campaign. But is it? Let's forget for a second that the primary co-author, Prof. Alison Galvani, was an unpaid advisor for the Sanders campaign. The study itself is riddled with flaws that make the claim quite spurious. Kaiser Health News (KHN) and Politifact co-authored an analysis of Sanders' claim. I will integrate those findings with other points I found upon research to show why the Lancet study is greatly flawed.

• Estimation of payment rates to hospitals. This is the first flawed assumption made under the Lancet study, which is that it assumes that Sanders' M4A plan can pay hospitals Medicare rates across the board. First, the hospital lobby is a powerful lobby in the United States that has fought off payment reductions in the past, which would put political feasibility into question. Second, this assumption has not played out in the past. As I brought up when analyzing Elizabeth Warren's M4A plan in November, there is one state that has a plan similar to Sanders' M4A plan: Maryland's all-payer system. Under Maryland's system, they could not keep prices down (Pope, 2019). In Washington state, they passed a public option. They could not keep prices down at Medicare rates; they ended up being 174 percent higher than Medicare rates.
• Estimation of utilization rates. As one can imagine, some people skip treatment if they cannot afford it. The authors of the Lancet study assumed that there would be an increase of consumption of health care goods and services for the 24 percent that are uninsured or underinsured. The problem with the assumption that the Lancet study makes is that the remaining 76 percent are not going to increase their utilization as a result of M4A. Harvard health economist Adrianna McIntyre was so critical of this assumption that she wondered how the Lancet study ever made it past the peer review process. And I'm not at all surprised at McIntyre's criticism. Other countries that have implemented single-payer healthcare could not keep down utilization rates, which contributed to single-payer costs.  
• Estimation of administrative costs. By removing the middle man (i.e., the insurance company), certain costs are removed, such as co-pays. There is some intuition to that notion, which is why the Lancet study estimates a savings of $219 billion annually. Medicare has its administrative costs at 2 percent, and the Lancet study assumes that M4A can maintain those rates. I remain skeptical about these cost savings. First, Medicare is partially administered by the IRS [for tax collection] and the Social Security Administration [for collecting premiums]. Also, Medicare's administration is tax-exempt, which cannot be said for private insurers. Second, when you look at cost per beneficiary as opposed to percent of budget, it turns out that Medicare pays more than private insurers (Book, 2018). Third, as brought up in the KHN/Politifact analysis, while M4A would require a smaller back-end staff, it would still not be able to fully reduce the costs at Lancet estimations due to need for such expensive items as electronic health records. This helps explain why Politifact ranked Sanders' "administrative cost savings" claim as half-true.
• Long-term care. Sanders wants to be more comprehensive in M4A than even the Lancet authors assume. Sanders wants to cover for long-term care, which is estimated to cost $4 trillion over a decade. This expenditure is not covered at all in the Lancet study.  

Postscript: It's no wonder why Sanders picked the Lancet study to make M4A look good: it comes with quite rosy and unrealistic assumptions. Sanders' claims ignore how other countries could not contain their costs. More importantly, he claims that all studies, whether "conservative or progressive" show savings. The truth is that reputable estimates independent of the Sanders campaign put the cost of M4A anywhere from an additional $26 to $35 trillion over a decade, which is significantly higher than his most current estimation of $17 trillion. The centrist Rand Corporation estimated that M4A could increase costs by 9.8 percent in a year. The left-of-center Urban Institute estimated that a) federal spending would increase by $34 trillion over ten years, and b) even factoring in the net spending of private and public spending, it would still cost a net increase of $7 trillion over ten years. Urban's conclusion was that "the increase of spending for people with this generous new coverage would outweigh the savings from lower prices for health care providers and and lower administrative costs." And this says nothing of the libertarian Mercatus Center, provided a high-bound estimate of a net increase of $32 trillion in new costs.

Yes, it is true that there is a study from Lancet claiming how M4A could theoretically save money. Yet it is equally true that it has such flawed assumptions that it ignores the reality that M4A comes with too high of a price tag, far higher than Sanders claims. If Sanders were to confront this reality, he would not only realize that he would have to considerably raise taxes on everyone (and not just the 1 percent), but that he truly does not know how he would pay for it.

Bernie Sanders' Idea That Taiwan's Single-Payer Model Would Be Good for the U.S. Is Misguided

Bernie Sanders really wants Medicare for All to be a reality in the United States. He believes that healthcare should be readily accessible to everyone, and he also believes that the government is the best way to do. I have discussed Medicare for All on this blog in 2016, in 2017, and in 2019. As you can already guess, I am not a fan of government-sponsored healthcare. This week, Sanders made one of his favorite arguments for single-payer healthcare on his Twitter account:

He then links an article from Dylan Matthews over at the Left-leaning Vox that argues how Taiwan's single-payer healthcare system is a success. It makes for a good read if you are looking for an argument in favor of single-payer healthcare and want to use Taiwan as a case study. Essentially, Sanders is arguing that if it can work in Taiwan, it can work here. Let's see a) how well single-payer works in Taiwan, and b) whether we can do it here.

How Well Does Taiwan's Single-Payer System Work?
I actually covered this topic in 2016, but some things merit repeating (not to mention updating for the latest available figures). Let's list some of the merits of the Taiwanese healthcare system first:

• Low cost as percent of GDP. In 2017, Taiwan paid 6.4 percent of its GDP in healthcare. This amount is below the OECD average of 8.8 percent, and certainly below the U.S. amount of 17.2 percent of GDP (OECD). Taiwan has also been able to keep its costs steady in terms of spending as a percent of GDP. 
• High Satisfaction Rate for Patients. Most Taiwanese are satisfied with the NHI, with a record-high amount of 89.7 percent.
• Short Waiting Periods. Unlike its counterparts in Canada and the United Kingdom, Taiwan is known for keeping its waiting periods for procedures short. This surely is an important metric for access to medical care. 
• Comprehensive Coverage. Taiwanese health care provides many services, including inpatient and outpatient care, mental health care, prescription drugs, dental care, Chinese medicine, and dialysis care. 

While these are advantages, the Taiwanese healthcare system does come with its limitations:

• Yes, there is high patient satisfaction. The same cannot be said for the doctors. Less than half of health care providers are satisfied and the burnout from Taiwanese doctors is high. In Singapore, a doctor only sees about 20 patients a day. In Taiwan, that number is 80 to 100. As the centrist Brookings Institution brings up in its 2015 analysis, the system is too generous towards patients.
• One of the major flaws of the single-payer healthcare system is that demand for healthcare exceeds supply. It means that there needs to be a rationing mechanism to deal with the shortage. For Canada, it is longer waiting times. In the United Kingdom, it means limiting healthcare coverage. Taiwan is able to ration healthcare by keeping consultation times shorter than average. 
• As Dylan Matthews brought up in his piece, "Hospitals in Taiwan are crowded. The capacity of health care providers to attend to everyone can be stretched pretty thin." 
• Since its inception, the Taiwanese healthcare system has struggled with sustainable financing. While it was able to get its deficit spending under control, its surpluses have been on the decline (National Health Insurance Statistics, 2018, p. 129). Plus, there has been pressure in Taiwan to increase the copayments that patients pay because its reserves are expected to be depleted in the next couple of years. An aging Taiwanese population and advancing medical technology will only put upward pressure on healthcare costs. 
• The single-payer system causes yet another issue: discouragement of new innovations. This is especially true with pharmaceuticals. The low prices that Taiwan sets with its monopsony power gives drug producers (and indeed all healthcare goods producers) a disincentive to sell their products in Taiwan. Without a reimbursement price, there are delays for innovations to reach the Taiwanese market. 

Why Single-Payer Wouldn't Work Here
Let's assume that you are okay with a depleting reserve fund, lagging behind in medical advancements, overcrowded hospitals, and disgruntled healthcare providers. For argument's sake, let's assume that the benefits of the Taiwanese system outweigh the costs. The single-payer would not work in the United States, certainly in the Pollyannish view that Sanders is looking at single-payer with his rose-colored glasses.

I took coursework on comparative politics in college, and one of the main lessons was that "what might work in one country might not work in another country." This is showing to be the case with something as complicated and interconnected as healthcare. Taiwan is a small, ethnically homogenous island nation that does not have the geographic size or socioeconomic disparities to contend with that the United States does.

Here is another major difference. Taiwan was still not a democracy in the 1980s. It took some willpower of the people to reach this stage, especially since the healthcare system in Taiwan was so broken. When Taiwan implemented its single-payer system in the 1990s, it was practically starting with a blank slate. It did not have to contend with the interactions and interweaving between the private and public sectors that has created the leviathan of U.S. healthcare.

This leads to another interesting point. Uwe Reinhardt, the economist who helped Taiwan create its single-payer system, said that single-payer should not happen in the United States. The reason is that the doctors have such lobbying power that single-payer could never work in the United States. Taiwan instituted its single-payer when costs were low and the government was able to keep prices artificially low by fiat. It is inconceivable to see the U.S. hospital and insurance lobbies relinquish that sort of power.

If Dylan Matthews' article illustrates anything, it is that a single-payer system comes with great sacrifice and considerable drawbacks. And to think this was in a country that had relatively favorable conditions!

There are issues with the United States healthcare system, and I don't just mean Obamacare. I think about the United States and how there is excessive testing and underutilization of preventative care that is brought on by employer-sponsored insurance, a feature that does not exist in other countries. As I brought up last May, there are a lot of painstaking questions that proponents would have to answer, and that is without considering how the Taiwanese system is so different from the U.S. system.

As much as I think there are issues with the current U.S. healthcare system, I do not think that emulating Taiwan is the way to go when our systems are so different. I can at least take some solace that there is not enough traction for single-payer in this country. What does worry me is that popular opinion is trending in a direction that could bring this unmitigated disaster to the United States. 

Warren's "Medicare for All" Math: A Lot of Wishful Thinking Plus Avoiding Her Tax on the Middle Class

There has been a major push for single-payer healthcare vis-à-vis Medicare for All (M4A), one that was most prominently started by Senator Bernie Sanders (I-VT). Other Democrats have followed suit, especially Senator Elizabeth Warren (D-MA). Much like so many proponents of single-payer healthcare in the United States, Warren has not able to answer the ever-elusive question of "How to pay for it?" Warren has been so evasive of the question that Saturday Night Live made fun of it this past weekend.

This past week, Warren finally released a response as to how she would pay for M4A. As the memorandum points out, Warren anticipates six forms of funding for M4A:

1. Employer Medicare Contribution. Instead of making employer-sponsored healthcare contributions, Warren would have employers make the contributions to the government for M4A. Total amount: $8.9 trillion
2. Additional Take-Home Pay. Employees would no longer pay their part of salary to their health care premiums or health savings accounts (HSAs), hence the additional take-home pay. Total amount: $1.4 trillion
3. Taxing the 1%. Combine taxes on financial firms, on corporations, and 1% of individuals. Total amount: $6.8 trillion
4. Improved Tax Enforcement. Attempts to fight tax evasion and improve tax compliance. Total amount: $2.3 trillion
5. Immigration reform. Under a Warren presidency, she would allow for greater immigration, which would mean more taxpayers. Total amount: $400 billion
6. Eliminate the Overseas Contingency Operation Fund. Total amount: $800 billion

In total, Warren expects these six policy prescriptions to generate $20.5 trillion over the next decade to fund M4A. Much like I have criticized Sanders' math when he made his proposal in 2016, I am now going to do the same for Warren.

• Warren underestimates the costs of M4A. Warren estimates that M4A is going to cost an additional $20.5 trillion over the next decade. According to the bipartisan Committee for a Responsible Fiscal Budget (CRFB), ten-year estimates of M4A range from $13.5 trillion to $36 trillion. The tricky part of the range is that the rosy $13.5 trillion estimate was conducted for the Sanders campaign. Independent estimates put the amount ranging from $25 trillion to $36 trillion, with the most recent estimate (coming from the Left-leaning Urban Institute) at $34 trillion. What this means is that even if her calculations are correct (which they are not...see below), Warren's estimation is still about $10 trillion short of being able to pay for M4A.
• Warren's plan includes a middle-class tax. What Warren calls an "employer Medicare contribution" is in fact a tax. What else would you call a payment to the government to finance government programs? That's what a tax definitionally is. More to the point, this "contribution" would be a payroll tax. Much to Warren's dismay, general economic consensus is that incidence of the current payroll tax for Medicare is largely borne by the employee, which means that the "employer Medicare contribution" is de facto a multi-trillion-dollar tax on the middle class. The Biden campaign is taking a shot at Warren for this exact reason.
• Warren has rosy projections for improved tax enforcement. Through increased tax enforcement, Warren calculates she could acquire an additional $2.3 trillion over the next decade. This is in considerable distinction to previous estimates. The Congressional Budget Office (CBO) calculated what would happen if the IRS increased appropriations for enforcement initiatives by 35 percent. The CBO calculated that this policy alternative would generate $55 billion over the next decade. Warren's calculations are whimsical enough where she thinks she could get 40 times CBO estimates.  
• Savings from "comprehensive payment reform." Warren credits itself for $2.9 trillion in savings from comprehensive payment reform relative to the Urban Institute study. As former public trustee for Social Security and Medicare Charles Blahous points out in his analysis on Warren's Medicare for All calculations, has already taken credit for these credits, which makes it tantamount to double-counting the savings. 
• Warren's wealth tax is impractical. Warren would like to impose a 6 percent wealth tax on billionaires, and estimates that it would generate $3 trillion in revenue over 10 years. Forgetting the constitutional barriers, a wealth tax would be impractical (see my past analysis on the wealth tax here). No country has ever imposed a wealth tax that high. Countries that had lower wealth taxes repealed them because, as the OECD states, "[the repeals were] justified by efficiency and administrative concerns and by the observation that next wealth taxes have frequently failed to meet their redistributive goals (OECD, 2018, Executive Summary)."
• Warren has already stated that she plans on using wealth tax revenue for other initiatives.
• Warren's previous wealth tax estimate had overstated what it would acquire in revenue. Per OECD data, the average European wealth tax raised 0.27 percent of GDP, with Switzerland raising 0.98 percent. Warren thinks she can pull off 1.4 percent of GDP. How is Warren going to succeed where so many other countries have failed? 
• Skepticism on Warren's payment cuts to providers. One of the ways that Warren attempts to keep costs low is to pay physicians at Medicare rates and hospitals at 110 percent of Medicare rates. Per Warren's calculations, it would save $4.2 trillion over ten years. The closest system that the U.S. has is Maryland's all-payer system, which means that every price is the same, whether private or public. While private systems are 13 percent lower, the public-sector hospitals are 40 percent higher for inpatient services and 60 percent higher for outpatient services. The rates under this system are much higher than average Medicare costs (Pope, 2019). Additionally, the state of Washington could not handle smaller provider payment cuts with its public option. The federal government also could not overrode Medicare physician payment cuts, and eventually did away with the Sustainable Growth Formula (SGF) [see Congressional Research Service report here]. Combined with other countries' inability to keep costs down once single-payer was implemented, it provides enough reason to pause and wonder if Warren could actually implement such payment cuts.
• Warren is going to need to impose additional taxes, including taxes on the middle class. Shortly before Warren released her calculations, CRFB released their findings on whether funding M4A would require a tax on the middle class. Even with high taxes on the 1 percent, financial institutions, corporations, and other policies not included in Warren's calculations (e.g., closing corporate tax loopholes), CRFB calculated that the government could raise $11 trillion over a decade. The CRFB makes caveats with this $11 trillion estimate, the foremost being these are aggressive policy prescriptions that might not be technically or politically feasible. A wealth tax would have constitutional challenges. Additionally, these aggressive policies would likely reduce incentive to work and save, thereby stifling economic growth, which would also have indirect effects on tax revenue. CRFB's conclusion was that we would need to increase taxes on the middle class. 

Postscript: Not only is Warren making unreasonable assumptions about her cost savings, but she is also imposing a tax on the middle class without being honest about the nature of her "employer Medicare contribution." Additionally, she is using an unrealistically low cost estimate to avoid the criticism that single-payer critics are all too right about: single-payer health care is an insolvent payment mechanism and something the people of the United States can ill afford.


11-7-2019 Addendum: If you want another good read on Warren's budgetary manipulation, read this piece from the Federalist. 

CBO Report on Single-Payer Healthcare Shows How Complicated and Painstaking Implementation Would Be

Health care costs have been skyrocketing in the United States, well beyond overall inflation. Going to the hospital should not be an experience that bankrupts American citizens, yet it has become increasingly commonplace. One solution proposed, particularly by those on the Far Left, is that of single-payer health care. In short, single-payer healthcare is a mechanism in which taxes cover essential health care needs for its citizens. It is one way that can bring about universal health care. Senator Bernie Sanders (I-VT) has really been clamoring for it since his presidential campaign (see my analyses on Sanders' previous proposals here and here). More recent was Congresswoman Pramila Jayapal's (D-WA) single-payer proposal, which is even more extreme that Sanders' proposals.

To weigh in on the conversation is the Congressional Budget Office (CBO), an entity that is often seen as the gold standard of estimating the effects of U.S. legislation. Last week, the CBO released a report last week entitled "Key Design Components and Considerations for Establishing a Single-Payer Health Care System." This CBO report is not an analysis on specific proposals, such as those from Sanders or Jayapal. The report details features of the single-payer system, as well as questions that would need to be answered (see below).




I am sure that proponents liked this report in part because it provides a blueprint of making single-payer a reality. I read the CBO report this weekend, and what I realized is that proponents of single-payer health care would have to answer a lot of practical questions before making it a reality. Officially speaking, CBO is not taking a position on the merits of single-payer healthcare. Even so, it implicitly provided a fair amount of criticism of single-payer health care. Here are the highlights from the report.....

• Big Picture: "The transition toward a single-payer system could be complicated, challenging, and potentially disruptive (p. 3)." 
• Costs and Ambiguity About Cost Savings: Regarding costs, CBO said that "shifting such a large amount of expenditures from private to public sources would significantly increase government spending and require substantial additional government resources (p. 6)." What is more intriguing is that CBO remains agnostic on whether single-payer will save money: "Total national health care spending under a single-payer system might be higher or lower than under the current system depending on the key features of the new system (p. 6)." This part is significant because the cost savings is one of the primary arguments used by single-payer proponents. 
• Increased Waiting Times and/or Reduced Access: Since single-payer healthcare would increase demand for healthcare, it would put pressure on the supply of healthcare: "If the number of suppliers was not sufficient to meet demand, patients might face increased wait times and reduced access to care (p. 6)." This isn't mere theory. This already happens in other countries. Canada is notorious for its waiting times, and the United Kingdom reduces access since demand for medical services exceeds supply. 
• Issues with Fewer Choices and Lack of Customization: The CBO states that "compared with the options available under the current system, the benefits provided by the public plan might not address the needs for some people," as well as "the public plan might not be as quick to meet patients' needs, such as covering new treatments (p. 8)."
• Tradeoff with Greater Access: "Although covering a wide range of services under a single-payer system would provide greater protection to enrollees, it would increase costs to the government (p. 9)." This is especially true with long-term services and supports [LTSS]: "Public spending would increase substantially relative to current spending if everyone received LTSS benefits."
• Potential Issues with Paying Providers and Setting Payment Rates: There are different methods to pay providers and setting their payment rates. Both of these factor affect government spending and providers' revenues, the latter of which could affect providers' incentives to deliver services (p. 18).
• Potential Issues with Drug Pricing: Under a single-payer system, the government acts as a single buyer, also known as a monopsony. Depending on whether the government uses negotiated pricing, value-based pricing, reference pricing, or administered pricing, the government could affect the profits of drug manufacturers, thereby affecting their incentive to produce new drugs (p. 23). 

Postscript
As we see, the extent of the effects of single-payer depend on multiple factors, including administration, eligibility, cost-sharing, the role of private insurance, provider participation, provider rates, and system financing. The CBO report might provide a blueprint for single-payer proponents, but the it also provides the single-payer skeptic with plenty of ammunition because the report shows the sheer number of obstacles facing single-payer implementation, as well as tradeoffs. With the policy discussion surrounding single-payer healthcare in recent months, it is amazing how many unanswered questions there are surrounding the specifics.

If I were to take an educated guess, single-payer proponents are delaying answering such questions because it would be a repeat of trying to implement Obamacare. The politicians advocating for Obamacare made such promises as lower premiums, greater competition, and the ability to keep one's current provider. Because Obamacare proponents were more concerned with pushing their legislation through than answering some basic questions about implementation and other considerations, Obamacare ended up being a downright disaster. I hope that the U.S. legislature does not reach the point of seriously enacting a single-payer system into law because in theory and in practice, it is policy that does not do favors in the healthcare market. However, if we reach the point where single-payer healthcare has actual potential to become enacted policy, the burden of proof will be on proponents to answer the questions that are laid out in the CBO report. In either case, the CBO report illustrates that there are more questions than answers in the single-payer healthcare debate.

Latest "Medicare for All" Bill Is More Extreme Than Other Single-Payer Systems

The Democrats are gearing up for the 2020 elections by pitching new ideas to excite its more Left-leaning base, whether those ideas are a wealth tax, an increased marginal tax rate, or the Green New Deal. Last week, House representative Pramila Jayapal (D-WA) introduced Medicare for All (H.R. 1384). This is not the first time that the Democrats have tried to persuade the American people of "Medicare for All." Bernie Sanders (I-VT) made "Medicare for All" a part of his 2016 presidential campaign. After taking a look at his 2016 plan, my conclusion was that it would not be feasible. I came to the same conclusion when looking at his 2017 version. What makes this bill different than past versions of "Medicare for All?" The official legislative text hasn't been released, but certain details have been made public knowledge.

• The bill pushes for a single-payer, government-funded healthcare system in which the government attempts to control prices, so that's not new. 
• One thing that is new is how much Jayapal's plan covers. She is looking to cover vision, dental, prescription drugs, rehabilitative services, substance abuse treatment, and home health services. Not even Canada's single-payer system is that generous! As a side note, Obamacare had to remove its long-term care provision because it was too costly. 
• Jayapal's plan does not require any out-of-pocket spending aside from prescription drugs. This is significant because other countries that have single-payer systems (e.g., Canada, U.K., Norway, Taiwan) require at least some payment for seeking most services. 
• In terms of payments made to providers, Jayapal's plan shifts from individual service-based payments to global budgeting, which puts a gap on total spending and allocates that amount to providers accordingly. You can read about the pros and cons about global budgeting in this Urban Institute policy brief here.
• The bill includes a compulsory licensing provision, which would allow the government to negotiate prices with pharmaceutical companies, as well as take away and reissue drug patents if the companies didn't cooperate. 
• Jayapal's version has a transition period to eliminate private insurance in two years, whereas Sanders had a four-year transition period.
• One thing that is not in the bill, as CNBC points out, is that it does not provide methods to pay for this bill. Jayapal mentions the possibility of higher taxes on the wealthy or contributions from employers. The bill provides much detail on coverage, and next to nothing on cost. 

Essentially, it is single-payer with unprecedented amount of coverage and government covering the cost. This might seem like a great rallying point for the Democrats, but allow me to express my skepticism I have for this bill.

The cost of "Medicare for All." There has yet to be a cost estimate of Jayapal's bill. However, we do have cost estimates from previous "Medicare for All" attempts, which mostly range from $26T to $32T over the next decade (see CRFB figures below).

It is reasonable to assume that it will be more expensive than previous "Medicare for All" bills. Why? The Left-leaning Vox says that "by covering a more comprehensive set of benefits and asking no cost sharing of enrollees, it is likely to cost the government significantly more than programs other countries have adopted." If a cost estimate is conducted for this "Medicare for All," it should not come as a shock if the amount exceeded $36T over the next decade.

How to pay for "Medicare for All?" Former public trustee for Social Security and Medicare Charles Blahous, the one who received attention for his 2018 report on "Medicare for All," released another analysis on "Medicare for All" the same day Jayapal released her "Medicare for All."  Blahous' main takeaway was that "cost is M4A's existential issue, because if federal lawmakers are not willing to impose M4A's cost on taxpayers, no other aspect of the framework will enable its enactment (Blahous, 2019, p. 2)." Dealing with cost is what caused single-payer to fail in Vermont, and it was the main obstacle in passing the 2016 single-payer referendum in Colorado. California had to put single-payer on hold in 2017, as did North Carolina in 2018, due to cost issues.

The increasingly popular solution on the populist Left is to soak the rich with taxes. The reality is that the rich would not be the only ones paying taxes; everyone would. If you wonder how the Scandinavians pay for their government programs, it is through high taxation on everyone. In Denmark, if you make over 50,000 DKK (about $7,600), you pay a 40 percent income tax. And then there are the value-added taxes that are 20-plus percent, which have a regressive effect on the poor.

Looking at this through a more U.S.-based lens, Elizabeth Warren's wealth tax is supposed to bring in $2.75T over the next decade. If we go with a rosy estimate of Ocasio-Cortez's idea to raise the marginal tax rate to 70 percent, that would mean $700 billion over the next decade. I'm sure that the Democrats could come up with other ways to use the tax code to disproportionately tax the rich (e.g., increased estate tax). Nevertheless, soaking the rich would only cover a small fraction of the costs of "Medicare for All." Sanders tried with his 2016 plan, and the math didn't work in his favor. Considering that Jayapal is looking to cover more (see below), the ability to pay for "Medicare for All" seems more out of reach. This does not take into account that various Democrats are looking to implement other large and costly programs, such as the Green New Deal. The burden of proof would have to be on the proponents to prove that "Medicare for All" is not cost-prohibitive.

Cost containment. Jeffrey Sachs, a Left-leaning economist and policy analyst who supports "Medicare for All," says that it comes down to whether Medicare for All could contain costs. I agree with Sachs' sentiment, which is also why I think "Medicare for All" will not work. Name me one country in which they implemented single-payer healthcare and were able to contain costs. You can't because it doesn't exist. Given that Jayapal is looking to unprecedentedly provide such comprehensive services without having out-of-pocket costs, it becomes all the more unbelievable that costs would be contained.

Incapability of providing such comprehensive services. Jayapal would love to provide an exhaustive list of health care goods and services. The problem with this goal is economic reality. One of the most fundamental concepts in economics is that we live in a world of scarcity. What single-payer healthcare does is that it shifts the demand curve so high that demand for healthcare greatly exceeds supply. When demand exceeds supply, there is a shortage, which is not at all shocking since single-payer does not address supply. As we see in other countries, it means implementing a rationing mechanism of some short. In Canada, it means longer waiting times. The United Kingdom limits what is offered to patients. Taiwan rations by keeping its consultation times shorter than average. Plus, as the Iron Triangle of Health Care suggests, increasing comprehensiveness would mean sacrificing quality and/or cost.

Political Feasibility. When looking at polling, most people are in support for "Medicare for All," at least in concept. When you start discussing details, it changes the story. A Morning Consult/Politico poll shows that support for "Medicare for All" drops by about half if it means eliminating private insurance. The Kaiser Family Foundation also found through its survey work that support drops considerably if "Medicare for All" would entail higher taxes and longer waiting times, which it would. I imagine as more details come to light, support for "Medicare for All" will continue to drop.

There is also the matter of gearing up for 2020 elections. The Democrats were able to regain the House in 2018 in large part being able to snag districts in which the GOP was more divided. Something like "Medicare for All" might energize the Democrat's more Left-leaning base, but it will likely not get larger voting blocs. This is why Democratic leadership is skeptical of a single-payer push, and would rather focus on smaller goals (e.g., fixing Obamacare, dealing with prescription costs).

Why Trust the Government with Single-Payer? I ask this question not simply as a self-identified libertarian. I ask this as a citizen of the United States. The U.S. government passed Medicare in 1965, and it is a fiscally unsustainable program that has a penchant for making improper payments. And then there was Obamacare, the program that was supposed to provide universal care while keeping costs down. Unsurprisingly, it ended up being the disaster critics predicted because it increased premiums and deductibles, provide less choice in insurance and in doctors, increased taxes for working-class Americans, and increased the deficit. If the U.S. government couldn't get it right with past programs, why should I trust something such as "Medicare for All?"

Postscript. Single-payer healthcare is a very costly payment mechanism that diminishes healthcare quality and raises healthcare costs. The 100-plus Democrats who co-sponsored this bill made it clear that they support a single-payer plan that is more disruptive, more costly, less popular, and less efficient than even previous single-payer plans. However, they do not want to make that clear to its constituents because vagueness better advances the path towards single-payer healthcare than actually discussing details. This bill goes beyond being impractical. It would be financially ruinous for the healthcare market, as well as the typical American citizen. I hope the Democratic leadership can rein in the Far Left for something more attainable and less damaging.

Another "Medicare for All" Bill From Bernie Sanders, Another Attempt at Single-Payer Failure

Insanity is doing the same thing over and over and expecting different results. That quote is commonly attributed to Albert Einstein, but today, I would like to apply the content of the quote to Bernie Sanders. Sanders loves clinging to the failed idea of socialism. He wants to provide free college. He thinks that breaking up big banks will help (it won't). He even mistakenly believes that Denmark is socialist when in fact it is even more of a free-market nation than the United States. But there is one idea of his that doesn't want to die: single-payer healthcare. Last week, Sanders introduced the Medicare for All Act of 2017. Unlike his failed attempt to introduce a single-payer healthcare bill back in 2013, this Act received the backing of 15 Democratic Senators. Single-payer healthcare is gaining traction in this country, and seeing how the fight over Obamacare has gone, it is not difficult to see why. Plus, there are those on the Left who think that if we centralize the buying power into the federal government, we can bring healthcare costs down and improve the quality of healthcare.

This should be a shorter blog entry because this is not the first time I covered the topic of single-payer healthcare. In 2013, I looked at single-payer through an economic theory lens and it wasn't flattering. In November 2016, I examined Colorado's referendum for a statewide single-payer healthcare system, and it was as unflattering as it was costly. Most relevantly, I wrote a piece back in January 2016 that not only analyzed the three most prominent cases of single-payer healthcare (and even these countries feature some role for private insurance), but also scrutinized the "Medicare for All" plan that Sanders proposed while on the presidential campaign trail. Although I was staunchly opposed to his "Medicare for All" bill in 2016, there is still a theoretical possibility that Sanders worked out the kinks. Let's take a brief look.

While single payer comes off as alluring, the biggest concern is that of cost. Sanders doesn't have a clear idea of how this will exactly be funded, which should be a red flag right there. However, he has a list of options of how to finance "Medicare for All," which primarily consists of a list of taxes on the rich that we can increase. Since he is unsure as to how exactly he is going to fund it, I am going to avoid (at least for the time being) comparing his financing options currently versus who he proposed back in 2016. What I can say is that if Sanders, by some miracle, were able to pass all the proposed policy alternatives, it would generate $16.2 trillion in tax revenue. All of this assumes, of course, we take Sanders' estimates at face value, which is not something I would do given how he was so off base back in 2016. Since we don't know how Sanders would finance "Medicaid for All" yet, it is premature to officially say whether his bill is fiscal insolvency. However, if estimates from his 2016 proposal are any indication, this bill is insolvent. According to the Left-leaning Urban Institute, Sanders' 2016 proposal would have cost $32 trillion, which would potentially be a shortfall of over $15 trillion!

Let's think of the cost in another way. Medicare's cost curve is already unacceptable (Steurele, 2015). The Centers for Medicare and Medicaid Services (CMS) project that the trust fund for Medicare is to be depleted by 2029. Looking at other countries, implementing single-payer did not keep costs down, but rather expanded the cost curve. Colorado and California had similar issues when trying to implement single-payer healthcare. Sanders' home state of Vermont could not pass a single-payer bill because, "surprise, surprise," single-payer healthcare does not contain costs in theory or in practice. Increasing the aggregate demand for healthcare without working on increasing the supply would actually increase prices: who would have thought? The Bernie Sanders of 1987 surely understood that concept (see below). What happened to him in the past 30 years with regards to healthcare reform is beyond me.

This is more an exercise of one Jew kvetching about another Jew's incapability of understanding the basics of economics than it is anything else. However, I do worry, not because I think this bill will pass. Given the Republican majority in both chambers of Congress, I'm not worried about that. Plus, the recent Obamacare debates show that the American people are leery of drastic changes to the healthcare system. Sanders' bill could be positioning the Democratic Party for whenever it gets itself back into power. What is scariest about this bill, though, is how far to the Left the Democratic Party is moving. My liberal friends often complain about how far to the Right the Republicans have moved, but they should also take a look at the party they are most likely to be sympathetic towards. This is scary because the government has botched up Obamacare so badly, not to mention single-payer systems such as the Veterans Affairs (VA) or Indian Health Affairs (IHA). Why should I trust the government with more power over healthcare when it has proven its incapacity to run healthcare exchanges or adequately provide health under the VA or the IHA?

If it does gain enough traction one day, that is what is scary. According to the Peterson Institute for International Economics, the United States is the only major economy facing a sizable increase in public debt burden. The bipartisan Committee for a Responsible Federal Budget illustrates how Sanders' plan would increase the debt-to-GDP ratio nearly 60 points over the next decade (see below). As previously mentioned, we already have issues with affording Medicare, and turning it into a single-payer system would merely exacerbate our debt issues. It is not just an issue of cost. Since Medicare pays doctors far less than private insurers (and therefore are less likely to see Medicare patients), there is also legitimate concern that doctors would refuse to participate in "Medicare for All." As observed with Obamacare, the technical and administrative transitions would be horrendous. However, that is not going to stop the Democrats on pushing something like this.

The truth of the matter is that the Democrats are much more unified on healthcare than the Republicans are. For those of us who want less government involved in the healthcare marketplace, this needs to be a wake-up call. It might be tempting to dismiss single-payer outright since the Democrats don't have a workable plan. That is why alternatives to reform the system are vital. As but one example, the centrist Brookings Institution suggests, in response to Sanders, universal catastrophic coverage. Brookings asserts that it would combine the Left's dream of universal access and the Right's dream of using market forces to best efficient and cost-effective. In any case, if proponents of limited government or a freer healthcare market don't come up with something, we could wake up in an America that not only has healthcare completely controlled by government, but ends up being more bloated and inefficient than it ever has been before.

Colorado, Please Don't Pass the Single-Payer Healthcare Amendment

I'm finding this election cycle to not only be unusual because of the presidential election, but also because of some of the peculiar ballots that states are proposing. One that caught my eye was Amendment 69: Colorado Creation of the ColoradoCare System. Essentially, ColoradoCare would be America's first implementation of a single-payer healthcare system. The ColoradoCare YES campaign published a 43-page publication here that outlines how it would work. The ColoradoCare system would aim to comprehensively cover all state residents, including pharmaceuticals, hospital visits, medical equipment, mental health services, and chronic disease management. This universal healthcare would be paid for by the Coloradan taxpayers by an additional 10 percent income tax in which two thirds of the burden would fall on the employer for payroll income. For proponents, Colorado would set the example of how single-payer healthcare could look across the rest of the country.

I don't have a problem with single-payer healthcare solely because it does not make for good economic theory. After looking at Bernie Sanders' single-payer proposal along with three case studies earlier this year, I found that in practice, single-payer healthcare increases costs, increases waiting times, stymies healthcare research and development, and has the real possibility of rationing healthcare. Even the liberal state of Vermont, home of Bernie Sanders, could not even pass single-payer healthcare, in large part due to high costs. In spite of mainstream economic theory and the failures of current single-payer healthcare systems, perhaps ColoradoCare would be different. While looking at the past does have predictive power, it doesn't necessarily dictate the future. Perhaps the Coloradan plan will be different from other attempts at successfully implementing single-payer healthcare.

Back in August, the non-partisan Colorado Health Institute (CHI) released its independent financial analysis of ColoradoCare. You know something is awry when both proponents and opponents laud the study. The "good news, bad news" portion is best summarized in the analysis' conclusion (CHI, p. 14). The good news is that ColoradoCare would provide universal healthcare without increasing healthcare spending in the economy. The bad news is that it would lack the revenue to sustain itself (see chart below).

The inability to afford single-payer healthcare is unsurprising. It is a system where you provide excessively comprehensive coverage, have the intended goal of not turning anyone down, and do not provide the ability for people to have awareness of healthcare costs, all of which increase costs. Because of these unaffordable costs, the CHI provides options for covering the deficit, including cutting benefits, raising taxes, reducing provider rates, and shutting down ColoradoCare. As this article from Bloomberg points out, have fun trying to raise taxes when you just increased taxes by a ridiculous amount. Since you have made the citizens of Colorado dependent on ColoradoCare, it would also be difficult to cut benefits. Local provider groups (e.g., hospitals, doctors) can be gouged, but they're politically well-connected. Going after out-of-state providers would disincentivize them from coming to Colorado in the first place. That would lead repealing the Amendment, which would not politically be an easy task, either. Also, it would be even more complicated to implement on a state level because during times of recession, states are even more pressed to balance the budget, which means that if single-payer were a reality, it would put significant pressure on other programs.

But let's delve a little deeper because creating budget deficits is not the Amendment's only issue:

1. Remember the income tax increase I mentioned earlier, the one that would make Colorado have the highest state income tax in the country? That additional income tax would bring in $38 billion, which is larger than the current $27 billion state budget. That would mean that single-payer healthcare would more than double the budget. 
2. There would be a 21-member Board of Trustees that would not have oversight, and would have the authority to increase taxes as frequently as annually because the Board would be able to circumvent the state legislature and the Taxpayer Bill of Rights (TABOR). Although the Amendment states some general categories of what is to be covered, the Amendment does not lay out any specifics. What exactly is covered would be at total discretion of the Board. Do you really want your personal, private healthcare decisions, not to mention price control for healthcare-related prices, to be at the whim of a Board of Trustees? 
3. Medicare, TRICARE, and federally regulated plans would still be in effect, and will actually be  a secondary fund source for ColoradoCare. For those on federally-run healthcare programs, ColoradoCare would be a secondary payer, which means that potential administrative benefits under a true single-payer healthcare program would not be realized. 
4. Why does this need to be an amendment in the state constitution? In the likelihood of failure, it would be difficult to undo ColoradoCare. 

If passed, Colorado would be the guinea pigs for an initiative that is both unclear with specific coverage and has been untested in the United States. With what we do know, the Amendment would run up significant deficits in Colorado, and would be unsustainable in Colorado. While proponents laud the universal coverage that would come with ColoradoCare, universal coverage does little to no good if ColoradoCare cannot sustain funding to provide all that healthcare. When all is said and done, ColoradoCare is another example of the false promises that come with the single-payer healthcare system. Fortunately, I'm not too worried because the latest polling shows that Coloradans are not in favor of Amendment 69. However, I will conclude with this: If you live in Colorado and care about the future of Colorado, vote No on Amendment 69 this November.

Bernie Sanders' Medicare For All And Why Single-Payer Generally Doesn't Work So Well

Right before the Democratic presidential debate, Bernie Sanders released his latest bombshell of a policy alternative: Medicare for All, which is Sanders' plan for single-payer health care. Sanders' federally administered universal single-payer health care plan would abolish private health insurance and would "cover the entire continuum of health care from inpatient to outpatient care; preventative to emergency care." Sanders' plan would supposedly do away with copays and deductibles. This plan, according to Sanders, would integrate the system that would contain costs, thereby being able to "avoid provider shortages" and "negotiate fair prices for the American people collectively." In spite of the name, this plan hardly resembles Medicare since Medicare requires cost-sharing and premiums, not to mention that Medicare is nowhere near as comprehensive or generous as what Sanders is promising. It sounds lofty to provide the American people with comprehensive, affordable health care with very little obstacles. However, taking a look at the plan, one has to ask whether Sanders' plan would work in America or even be a good idea.

Let's talk about political feasibility first. Sanders attributes political infeasibility to the health insurance companies since it's in their self-interest not to have a single-payer health care system. While insurance companies would lose out under a single-payer program, Sanders is conveniently forgetting about some other obstacles. A majority of Americans historically have not been in support of a single-payer system. Although there has been some wavering on whether the government should be responsible for providing healthcare, more Americans have been against government intervention in healthcare since Obamacare's main provisions took into effect in 2014 (Gallup). It won't just be the loss of freedom that annoys Americans, but the increased tax rates under Sanders' plan (more on that momentarily). Also, most people like their current plan. Sanders' proposal is that you can't keep your current plan because he is going to replace it with a single-payer system. Even Obama realized that such upheaval was a bad idea. It's why he had to keep promising that one could keep their plan under Obamacare, even though that ended up being a lie. Threatening to disrupt that contentment is not going to make voters happy. An even bigger obstacle is that the Republicans will most probably either have one or both chambers of Congress after the November election. Even when the Democrats controlled both chambers back in 2010, they were unable to pass the public option. Also consider that Bernie's home state of Vermont, which is the one of the most liberal states in the Union, could not pass single-payer health care because it was unaffordable. What makes Sanders think that he could possibly pass such a bill with Republican control of Congress?

But let's assume that Sanders had the votes to pass such legislation. While it is commendable to see Sanders put out actual numbers, the numbers he presents should give us great reason to pause. Health care spending reached $3.0T in 2014. Sanders' plan promises to only cost $1.38T in addition to current health care costs. A 54 percent price differential from the status quo seems too good to be true, so let's see how he plans on paying for the plan, and then I can go item-by-item as to the feasibility of each figure:

• 5.9 percent income tax on the employer: $630 billion
• Sanders is disingenuous if he is passing this off as a tax on the employer. With the employer-sponsored tax exemption, the amount that the employer pays into that translates into lower wages for the employee. Although the employer and employee pay roughly the same for the payroll tax, guess where the brunt of the incidence falls? On the employee in the form of lower wages. Commentators have already picked up on this idea, and there is no reason to believe that Sanders' so-called "tax on the employer" would be any different. Regardless of tax incidence rate, saying that there would be a new 8.4 percent payroll tax would in net terms (the current 15.3 percent FICA tax, and removing current Medicare still only accounts for 2.45 percent, which still translates into a net increase of 5.5 percent, i.e., 8.4-2.45=5.5) that creates a net total of a 5.95 percent FICA increase doesn't have as good of a ring to it. 
• 2.2 percent flat income tax on households: $210 billion
• Sanders' tax exemption would still have a family of four making $50K a year only pay $466 (if said family is making $40,000 a year, it's still a 1.16 percent tax). If you are a family of four making beyond that, well, you're paying the full tax on your income. In 2014, the median household income in this country was $53.6K. For someone who is campaigning to help the "shrinking middle class" and said only a month ago he would only raise taxes for the middle class for paternity leave, it seems odd that he would now be open to increasing taxes for the middle class.  
• Increasingly progressive income tax with marginal rates at 43.9 percent for those making at least $500K, and 52 percent for those making at least $10M: $110 billion
• This tax hike would affect not quite 5 percent of the population. While it might sound nice to "stick it to the rich," the benefits of marginal income tax hikes are overstated. Historically, tax revenue as a percent of GDP has hovered between 14 and 20 percent since the end of WWII [mostly between 15 and 18 percent], regardless of what the marginal income tax rate has been. High income taxpayers are more responsive to marginal tax rates (Gruber and Saez, 2000), and a drop in the marginal tax rate would have a positive effect on the GDP (Mertens, 2013). The Brookings Institution also published a report last year saying that increasing marginal income taxes to 50 percent would have a negligible effect on income inequality, which has indirect effects on the health care market. This all gives me reason to doubt that Sanders' marginal income tax-based estimations are high. 
• Taxing capital gains and dividends the same as income from work: $92 billion
• This is effectively supposed to increase the top rate on investment income from 23.8 to 54.4 percent. However, taxing capital gains in this country is not the same as taxing income from work because capital gains and dividends are double-taxed in this country. First, 35 percent of one's profits are hit by the corporate tax. Then, Bernie would take 54.4 percent of the remaining 65 percent, which would only leave 35 percent. Going from taxing 50 percent of investment income to 65 percent is a bit much, even for liberal economists like Peter Diamond and Emanuel Saez, who think the peak of the Laffer Curve is effectively at 54 percent. I would go as far as to say that lower capital gains tax rates are better because such a high tax rate would greatly disincentivize investment (see here, here, here, and here). 
• Limit tax deductions for the rich: $15 billion
• Sanders does not state which tax deductions will be limited, so I cannot comment further on the efficacy. Even if Sanders could actually deliver on these tax deductions, it would still account for a little over 1 percent of the overall revenue for this proposal.
• Responsible Estate Tax: $21 billion
• Sanders makes this sound nice with having something "responsible," but I don't know how responsible it is to not thinking something through. In 2014, the revenue collected on the estate tax was $19.3B. The estate has an exemption of $5.34M and a 40 percent top rate. In order to reach this goal, Sanders would have to more than double current revenues. Sanders could either lower the exemptions, raise the estate tax rates, or a combination thereof. Estate taxes are already unpopular, not to mention that the Republicans tried repealing the estate tax last year (see more about that in my analysis on the estate tax). Sanders provides no plausible way of doubling estate tax revenue to fund "Medicare for All."   
• Projected savings on health care expenditures: $310 billion
• Sanders' argument is that because there is a single payer, it is more efficient than having multiple insurance companies, which cuts down on the costs. Under these figures, Sanders predicts that his plan would cost $6.9T less for the American people than the status quo, which is hardly a ringing endorsement for Obamacare. I am not skeptical of Sanders simply because our president already promised us lower healthcare costs, and all the American people received was higher health care costs.  
• Intuitively speaking, Sanders is promising much more health care coverage than what even Obamacare is covering. Even with no cost-sharing requirements and the elimination of the $150B employer-sponsored health insurance tax deduction, people will no longer have a reason to question the price of their health care. If anything, health care costs are going to skyrocket. 
• Larry Levitt at the Kaiser Family Foundation thinks that Sanders being able to save $6T over ten years is an unrealistic form of aggressive cost containment. We also have evidence showing that single-payer actually drives up costs, mostly due to waste: 
• Ezra Klein recently mentioned the Rand Corporation's Health Insurance Experiment (HIE). Although conducted from 1971 to 1986, it is still the largest and most comprehensive study on U.S. health policy to date. The purpose of the study was to find out two factors regarding health care financing: 1) whether people consumed more health care when it was free, and 2) whether it caused a change in one's health. Not only was there a negligible difference in health quality, but less services were used, which also led to less health care expenditures. In this Experiment, 34 percent of spending under the free health care system was waste, whereas it was only 4 percent under the cost-sharing system. 
• His cost containment figures are specious at best. Sanders assumes that the slowdown in health care costs of 3.6 percent is going to continue, when in fact, actuaries over at the the Center for Medicare and Medicaid Service show that health care inflation is going to pick up once more, which is to say that his estimation here is rosy. 
• Sanders also fails to take in account another factor in terms of cost savings. In the United States, there is a significant amount of health care spending done at the state and local levels. Sanders' plan assumes that all of health care spending is done at the federal level, which means Medicare for All would also be replacing state-level spending. Essentially, Sanders fails to take in account the state-level spending into his figures. As Avik Roy of the Manhattan Institute points out, once Bernie's plan accounts for state-level spending, Sanders' plan does not save us $6T, but rather, it ends up costing an extra $28T over the next decade! What that means for Sanders' tax numbers for this plan is that he would either increase them more in hopes to acquire more tax revenue or run up a whole lot of debt to make it work. 
• In his proposal, Sanders leaves out deadweight loss. Deadweight loss is the "loss of economic wellbeing imposed by a tax." This loss occurs because the price differential induced by taxes causes a good or service to be less attractive to consumer. Whether or not Sanders likes it, the economic reality is that higher taxation creates less incentive to consume. The fact that Sanders does not remotely address deadweight loss renders the proposal to be, at the very least, incomplete.  

I have taken a good look at the particulars of Sanders' "Medicare for All," and they don't work. Perhaps we need better figures. Perhaps seeing if there are any success stories of single-payer health care would help the case of proponents. I took a look at the single-payer system about three years ago, but it was more from the lens of economic theory. This time, I would like to take a look at three large countries that use a single-payer system: Canada, the United Kingdom, and Taiwan. Before continuing, let me differentiate between universal health care and single-payer. Single-payer is a form of universal health care that refers to the the funding mechanism, i.e., health care is financed by a single [public] fund. Single-payer says nothing about how the health care is delivered or for whom the doctors work. There are other types of universal health care, such as the two-tier system and mandated insurance. The countries I selected fall under the definition of single-payer. The countries I selected are also on the larger end, which is important considering the diseconomies of scale that take place with larger countries. By getting a better sense of how single-payer is implemented in other countries, we can see whether the argument for single-payer health care has merit or if it's mere speculation.

Canada
Canada is one of the most infamous cases of single-payer health because of notoriety. Even with the rise in the rate of doctors in Canada, it has not done anything to mitigate Canada's waiting times, which are horrific. According to a 2015 report from the Canadian think tank Fraser Institute on Canadian waiting times, waiting times in Canada for a general practitioner is 8.5 weeks, which is 130 percent longer than it was in 1993. A consultation with a specialist takes 9.8 weeks on average. These long waiting periods have created a backlog of 894,449 procedures. This has cost the average waiting person $1,289, or the entire Canadian health care system $1.2B per annum. These waiting times also affect the mortality rate by causing an estimated 44 thousand female deaths between 1993 and 2009 (Barrua et al., 2014). This could explain why in 2014, 52,000 Canadians received non-emergency treatment abroad. The province of Ontario, which accounts for nearly 40 percent of the Canadian population, is dealing with an acute case of hospital cuts.

Single-payer systems use the immense bargaining power to lower prices for health care services. Artificially pushing health care costs below the equilibrium point, i.e., what the prices would be in a competitive market without government interference, creates fiscal solvency issues in the long-run. The World Health Organization has estimated health care expenditures for each country, and Canada comes out at 10.9 percent of GDP. Granted, this is better than the USA's 17.1 percent. However, Canadians pay still pay a substantial amount because many health care expenditures are not earmarked as such, which makes them all the more difficult to track and compare. According to Canadian government statistics, total expenditure has increased in real dollars, and health care expenditures as a percent of GDP have increased by 3 percentage points since the implementation of single-payer in Canada. So much for cost containment!

Single-payer uses bargaining power to lower the prices not just for doctors, but for those doing research and development in pharmaceuticals and medical devices As such, a single-payer system provides little incentive to invest in new medical technology. Canada's investment in pharmaceutical research has dropped 35.8 percent between 2004 and 2013. Even the Canadian government concedes that the United States has a 36.3 percent market share in the medical devices market that is disproportionate to its overall representation in the world economy of 23 percent (see IMF data here).

Taiwan
The Brookings Institution published a policy brief (Cheng, 2015) highlighting some of the major metrics to determine health care success. In Taiwan's favor are healthcare costs as a percent of GDP (only 5.4 percent), high public satisfaction, near-universal coverage (99.6 percent coverage), and short waiting lines. To be fair, those short waiting times seem to exist because Taiwan's average consultation time is lower than average. Even looking at Taiwan's budget numbers, it had been running deficits up until a few years ago, all of which have been paid off (p. 31). Cheng, however, did point out some disadvantages. One is that Taiwan's population is rapidly aging. All developed nations are dealing with a rapidly aging population, but it's more pronounced for a single-payer system because the system relies on tax revenues. Much like with Social Security, if we reach the point where there are more beneficiaries and less taxpayers, the accounting is not in favor of long-term solvency. Aging population won't just put pressure on revenues, but also on doctors. Taiwan already has a doctor and nurse shortage. Taiwan has 1.7 doctors and 5.7 nurses per 1,000 people, while the OECD average is 3.3 doctors and 8.6 nurses.

Another is that by the the admission of the Ministry of Health and Welfare, the agency that runs that National Health Insurance Administration (NHI), Taiwan does not provide high-quality care. Taiwan is one of the Four Asian Tigers, so it's not as if it's some dysfunctional, developing country that is incapable of providing high-quality health care. The lack of quality is predictable because lower prices provide less incentive for quality or even research and development.

PriceWaterhouseCooper (PWC) published an interesting report on Taiwan's healthcare system last year. There are worries that low prices are delaying development in the development of pharmaceuticals and medical devices. Taiwan already has to import the high-quality medical devices because it only produces lower-quality devices. Related to the idea of quality is that the number of hospitals has been decreasing in Taiwan, while the number of clinics has been increasing.

United Kingdom
Great Britain has the National Health Service (NHS) that directly funds health care through tax revenue. What's more is that most of health care practitioners in the United Kingdom are government employees, which is a facet that turns single-payer into a bona fide system of socialized medicine. The King's Fund Quarterly Monitoring Report sheds some light on the problems that the NHS presently faces. The waiting list size is 3.5 million people, which is about five percent of the overall population. 64.4 percent of provider organizations are recording deficits at year end. Professor John Appleby, the chief economist of the King's Fund, stated last year that "the next government will inherit a health service that has run out of money and is operating at the very edge of its limits."As the King's Fund brought up in its Budget Brief last July, the NHS is facing real financial challenges.

Quality also suffers as a result of single-payer. In the United Kingdom, cancer survival rates are much lower than those in the United States. The same issues of quality can be said for strokes. For those who were worried about "death panels" in the United States, it is a reality under the British health care system. The National Institute on Clinical Effectiveness (NICE) is the entity that rations health care by declaring what services are too expensive. When drug prices hit around the £30,000 mark (around $44.5K), the government won't pay any further. Effectively, the puts a price tag on the life of each citizen at £30,000.

Postscript
The effects of single-payer health care are not just sound economic theory. In practice, single-payer health care results in creating considerable barriers to access health care, reduces quality of health care, disincentivizes health care innovation, and does nothing to contain health care costs. With the rapidly aging populations of the countries in the developed world, the problems with single-payer and its ability to be solvent in the long-run will be more pronounced with time.

To think this is what Sanders wants for the American people: Medicare for All. With how single-payer systems perform, why should we destine ourselves to such mediocrity? The fact that Sanders wants Medicare for All says lot, considering how Medicare presently performs. In 2014, Medicare made $60B in improper payments. Medicare has been labeled "high risk" by the Government Accountability Office (GAO) since 1990. When Sarah Kliff over at the Left-leaning Vox, who is by no means a free-market advocate, says that Medicare is not great to begin with, it should make us wonder why we should entrust the government with providing "Medicare for All" when the federal government cannot even handle what it manages now.

Sweden recently switched from single-payer to a system with private insurers, and Switzerland rejected single-payer last year via a referendum. It is possible to provide universal healthcare coverage and keep the healthcare market relatively free, much like we see in Switzerland and Singapore. Just because I do not like single-payer system doesn't mean that I am going to defend the American health care system as the best system of health care. There is plenty to criticize regarding the American health care system, including employer-sponsored health insurance, including insurance mandates under Obamacare, and FDA regulations over research and development for pharmaceuticals. Government regulations have made it difficult for the health care industry to innovate. As the Manhattan Institute elucidates in its recent report on health care reform, government intervention in health care has made it impossible to use the digital revolution to innovate health care, an "Uber for healthcare" of sorts. Multi-payer health care systems that have a semblance of a liberalized health care system work best. I hope that as voters head to the voting booth for the presidential primaries, they can see Sanders' single-payer plan for what it is: a snake oil cure completely divorced from reality.


1-31-2016 Addendum #1: Emory University health care expert Kenneth Thorpe, who was the same expert who created the plan for the failed single-payer plan in Vermont, released a study on Sanders' plan. Unsurprisingly, this study found that Sanders' plan would cost the American people twice the amount that Sanders had estimated.

1-31-2016 Addendum #2: The Tax Foundation released their analysis of Sanders' tax plan, of which the taxes for the single-payer plan play a major role. When looking at Sanders' tax plan as a whole, it is projected to shrink the size of the United States economy by 9.6 percent over the next decade.

2-4-2016 Addendum: The bipartisan Committee for a Responsible Federal Budget (CRFB) released their analysis on Sanders' plan. Even assuming that Sanders' cost-savings are accurate, the CRFB calculates a shortfall of $3T over the next decade, which would translate into an additional 13 points to the debt-to-GDP ratio. However, if Thorpe's calculations are accurate (see first 1-31-2016 addendum), then the extra $14T that Thorpe estimates will increase the debt-to-GDP ratio to about 150 percent.

1-30-2018 Addendum: Evidence continues to pile up that rationing in the single-payer healthcare system causes considerable problems. Not only did the BBC put out an article showing how "patients are dying in hospital corridors," but the Fraser Institute released a report showing how Canadian waiting times reached an all-time high average of 21.2 weeks.