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.