Kevin Drum is defending Bernie Sander against the Wall Street Journal but I think he is implying something at the end of his piece that is very wrong. His logic would imply that Vermont would be getting ready to ramp up for single state single payer with a go-live date of 1/1/17.
Then there’s the $15 trillion price tag for universal health care. Is this a fair estimate? It’s probably in the ballpark. Private health insurance accounted for about $1 trillion in spending last year, and assuming reasonable growth that will probably come to around $15 trillion over the course of a decade…..But here’s the thing: this is money we already spend. Right now, employers and workers pay insurance companies $1 trillion for health care. Under Bernie’s plan, we’d instead pay that money to the federal government. Generally speaking, this would be invisible to most of us. Behind the scenes, our dollars would flow to a different place, and that’s about it….
You should think of the Sanders plan as costing about $3.4 trillion. You may or may not like the idea of universal health care, but it wouldn’t have much impact on how much money you actually take home each week.
Single payer benefits people who are currently uninsured. It benefits people who have shitty insurance (including most Bronze plans) when the single payer benefit design is better than what they have, and it benefits people who pay a high percentage of their total compensation for healthcare.
Single payer, especially if it is based on Medicare which has an 82% to 84% actuarial value, also creates comparative losers. People who have very high actuarial value plans either lose their coverage or have to pay extra. People who make a lot of money that is being taxed at a higher rate are worse off (as they have more money and tend to have high actuarial value plans). Providers are worse off as they lose market power to dictate rates (From a societal POV, this is excellent as smashing rentiers is a good thing on net but sucks to be a rentier).
There are winners and losers in almost all policy proposals (there are very few truly Pareto improving policies that can survive contact with Congress). Universal healthcare financed by general taxation produces winners and losers. The losers are the well connected who will see less take-home pay unless an analyst uses heroicly absurd assumptions about segmented marginal propensity to consume taxation and public expenditure multipliers which creates an economic boom.
PPACA got around this problem by a comparatively very liberal Congress willing to lose its majority to accomplish a 100 year goal while also making most of the losers fundamentally unsympathetic people:
- People earning over $250,000 per year in Modified Adjusted Gross Income who have employer sponsored health care or Medicare and are paying more in taxes
- Young single males with absolutely no health problems, no relatives with health problems and incomes over 250% Federal Poverty Line that previously had a $42 a month, $25,000 deductible plans that did not cover maternity or mental health needs. Those policies got cancelled and they actually have to buy good insurance. Young guys making under $25,000 a year usually will get decent subsidies, past that, it is hard to be sympathetic to someone bitching that they (a member of a high accident group) have to buy decent insurance.
Single payer takes the same group of people of PPACA losers and makes them losers again. However this policy change would mobilize most if not all of the current coalition that wants to repeal, delay or shrink the Cadillac tax on high cost health plans would be included as losers, potential losers or perceived to be losers. The anti-Cadillac coalition is a blocking coalition unless some of its members can be bought off with significant policy goodies.
WereBear
As I am less and less a member of a high-earning class, it seems to follow that I am less and less sympathetic to their complaining about having to actually contribute to society.
Baud
Yeah, what you said.
Richard Mayhew
@WereBear: I agree, but the high earning class tends to get heard a whole lot more than us working stiffs, so when they scream, the political process listens.
Thoughtful Today
More policy details:
Bernie Sanders on healthcare.
Baud
Unlike Republicans and tax cuts, Democratic candidates will at some point have to address to cost of their proposals.
Cervantes
Succinct.
David Koch
Richard,
1. What would the cost of single-payer be over a 10 year period?
2. The current Medicare payroll tax is 2.9%. If covers 49.4 million people (as of 2012 per Kaiser foundation). How high would the payroll tax have to go to finance the additional 267.6 million people that would enter the program?
Thanks
raven
Since we are on insurance, how do ya’ll feel about these “follow up” appointments where they whack you $50 for a copay and they doc just says, ok you are cool? My second hand surgery followup is today and the last one took 1 minute.
gvg
Only problem I have with it is….data security. Which is a problem in the current system too, but could be worse in a national system. It impacts a whole lot more than health care of course. I don’t want to derail a move to single payer as I think it’s a whole lot more efficient, fair and logical (or could be if designed right). I want a big commitment to the whole issue of data security. I do think it would be easier to demonize a national healthcare system after some big bad data breach and could make repeal possible unlike ACA. This is a whole other conversation and involves making retailers more responsible for their errors, iinconveniencing consumers and the government upgrading it’s own system plus people actually paying taxes to have enough inspectors and IT cops to enforce new laws etc.
Richard Mayhew
@David Koch: I’m not sure — a trillion in year one in incremental federal expenditures is probably a good guess, so probably an 8% to 10% tax on all income (earned, unearned, and first dollar) and if we exclude the first X plus Y for each dependent, a higher rate. That is a calculation I can’t make.
Moslerfan
Richard, I think you missed KD’s point, which is that under single payer, ACA, or the old private system we had, the national bill for health care is going to be somewhere in the neighborhood of $15T over 10 years. Only the difference in total cost between Bernie’s plan and what was going to be spent anyway should be on his shoulders.
raven
Never mind, I cancelled it.
gene108
I am not in favor of single payer. Single payer would have made sense decades ago, when few people had insurance and costs were not out of control.
Right now we have a very fragmented system that for all its flaws does provide health care to people.
We are seeing rural hospitals in non-Medicaid expansion states close or face a risk of closing due to lack of funds. In order for single payer to make any sense financially you will reduce the overall spend on healthcare. At which point, I am not sure how providers are going to be able to adjust to the drop in revenue.
Also, I am not sure how private insurance companies, which employ thousands of people will be affected. I assume with government paying for health care insurance companies won’t be as in demand and will see a drop in business and thus lay offs.
Jumping to single payer will have consequences that a lot of proponents have not thought out.
Personally I would love to move off of employer based coverage and in principle I think single payer is a great way to do this.
I just have my doubts that the disruption it will cause will make things that much better than they are now.
If the evil fucking non-Medicaid expansion states would expand Medicaid, per Obamacare, we will pretty much achieve single payer rates of insuring everyone.
Edit: Also Republicans will be back in charge at some point, hopefully later than sooner, so I do not want my access to health care, if provided by the government, be dependent on the good judgement of Republicans. Those fuckers are still trying to gut Social Security after 80 years and Medicare after 50 years.
Steeplejack
@Richard Mayhew:
Something broken here.
Eric U.
@raven: last two visits to my podiatrist have later been charged as two visits, so 4 visits when I only walked through the door twice. It’s only an extra $20 each time to me, but it seems shady. I’m guessing that insurers are going to crack down on this practice. I noticed the waiting room was really empty, I’m wondering if patients are leaving
David Koch
The problem is money illusion.
Must people don’t think of their employer provide insurance as compensation, but rather as a “benefit”. A fringe benefit – an employee benefit – a benefit. They don’t realize that they’re really paying the premiums because it’s not directly coming out of their checks. They think it’s something the employer mostly pays.
With single payer they would be getting higher income, but they would have to pay a higher tax.
for a good number of people it would be a net wash. Higher compensation in one hand, offset by higher taxes on the other.
Good luck trying to explain to the vast nation of low information voters who can’t balance their own check book that their Medicare tax hike to 8 to 10 percent is a net wash from their prior arrangement.
Richard Mayhew
@Moslerfan: No, I agree with Kevin’s general point. Roughly X will be spent over the next 10 years for healthcare in the US. Single Payer or Universal Coverage through non-single payer means will spend roughly X (probably a little bit less than X as the HHI index works in favor of united payers) or the PPACA system of still fragmented coverage combined with Medicare/Medicaid/CHIP/VA/employer sponsored coverage will spend roughly X over the course of the decade. It matters which hands touch X amount of money.
However, he is wrong in that how that X is financed will not produce winners and losers. Going to a general taxation model to raise X has very different distributional consequences than the current system. Behind the Rawlsian veil of ignorance, I would prefer the general taxation model, but we don’t live behind that veil, so people who benefit from the current system and who would be hurt by higher general taxation will (justifiably) scream. And those screams will be heard.
WereBear
@David Koch: People see the bites taken out of a socialist European’s paycheck and they get upset; not taking the extra mental step of understanding that their take home is higher, but so are their bills. That American tax bite is just the first of many bites.
When a European opens their check, that’s their fun money, so to speak. So much else is already taken care of. If Americans would only figure out that, at the end of the month, socialist Europeans have more money to spend as they wish, we would get more traction with the idea.
Sherparick
Also, as understand “Medicare for All” it would largely replace Medicaid which is approximately $500 Billion a year (hence of over ten years $5 Trillion dollars) and another $ 6 Billion a year for CHIPS and another $100 Billion in ACA subsidies a year, which is another $1 Trillion dollars over ten years.
Another thing that creates confusion and makes this a political pipe dream is that Government indirectly pays the current “benefit” of health insurance to both employers and employees. For employers, the expense of providing the health insurance benefit is directly deductible from their taxable income. For employees, this benefit is not “taxed” as income, so depending on one’s bracket it is a 10%s to 39% paid by the government (and more when state income taxes are taken into account.) This is also why “single” payer and even “Clinton care” quickly become non-starters politically as you take away from people what they know and think are getting without cost and start taxing them for it.
SP
Richard- what is the actuarial value of single payer or single provider systems in other countries- UK, Canada? That would make it easier to compare value to their funding systems.
Richard Mayhew
UK, very high 90s
Canada — mid 90s
— most of the consumer paid portion for UK/Canada is for non-covered services like physio rehab not in the form of co-pays or deductibles.
France ~87% plus optional supplemental
Kylroy
@Richard Mayhew: Weird, I had it in my head that Britain’s healthcare system was one of the stingier ones in Europe.
Richard Mayhew
@Kylroy: They deny a lot of services/don’t offer them unless you take the Chunnel, and they restrict drug choices significantly through the NICE committee (no, I am not making that acronym up) but NHS has very little if any actual patient level cost-sharing for major medical expenses . They have an 8 pound (~$12) co-pay for prescriptions and co-pays for dental/vision.
They might not offer low effectiveness treatment, but what they do offer, NHS pays..
foosion
Single payer might bring down costs, by eliminating private insurer overhead if nothing else. Medicare and Medicaid have much lower costs.
Not having to choose between numerous insurance plans (consumer) or deal with numerous insurance plans (providers) has great value.
David Koch, money illusion – employer takes the subsidy that it had been paying a private insurer and pays it to the government. Could easily be a transparent process for most.
US healthcare costs are much too high compared to the rest of the world without any corresponding benefit to consumers. Bringing those costs down is going to hit providers, whether through single payer or something else.
Robert Sneddon
@Kylroy: As someone who has the NHS as my only health provider I will say my impression of the US mess is that it is a deliberate job creation scheme and that’s where most of the extra expenditures per person for US healthcare end up, paying for folks like Richard here to wastefully dig holes and fill them in again.
I was discussing this with an American on an email bounce, he’s totally in favour of a US single-payer like the NHS. Just turn up, show your SS card or other proof of citizenship and get treated, he said.
I had to gently let him down by explaining the NHS doesn’t require any proof of anything to get treated, citizenship or otherwise. It would cost extra to filter out people so the NHS treats everybody in need.
“But how would they know if I’m entitled to treatment or not?” was his reply. He didn’t seem to get the idea of the NHS, sadly. It’s not an entitlement.
Robert Sneddon
@Richard Mayhew: Which services are not provided by the NHS but are available in France? Chiropractic, homeopathy?
NICE look at the cost benefits of some drugs, usually the most expensive cancer treatments which have a debatable effect on quality of life and life extension for a few people. Pretty much everything else in the modern formulary is available otherwise to those that need it.
Oh, and the co-pay for prescriptions you mention is only applicable in England, the other nations like Scotland abolished prescription charges a couple of years ago. The charges only apply in England for adults in work or their partners whereas low income folks, unemployed, children and pensioners get their prescriptions free. It’s only a matter of time until the English fall into line with the rest of the country and go for free prescriptions for all given the extra paperwork needed to handle the payments.
Thoughtful Today
Paul Waldman adds some additional context to the {cough}Murdoch’s{/cough} Wall Street Journal’s distortions of Bernie:
“At the moment, total health care spending in the United States runs over $3 trillion a year; according to the Centers for Medicare and Medicaid Services, over the next decade (from 2015-2024), America will spend a total of $42 trillion on health care.”
gussie
“PPACA got around this problem by a comparatively very liberal Congress willing to lose its majority to accomplish a 100 year goal while also making most of the losers fundamentally unsympathetic people.”
Turns out I’m a loser, too. Freelancer. Head of household. Family income varies from $100,000/year (once every four-five years) to $10-20,000, the rest of the time. We’re all healthy. We used to have catastrophic coverage for $250/month.
Now we’ve had a couple good year in a row, so we get not help. Which normally we would’ve socked that money aside for the lean years (this one will be, and almost certain next year, too), we were forced to pay an addition $5000 per year to insurance companies. Ten grand. That’s one (bad) year’s income we paid, on a service we didn’t want and didn’t use.
I still support the ACA, because it’s been better for more people than it’s been bad for. But it’s been really bad for me and my family. Every month we send a big check to Blue Cross. They’ve done quite well from us.
VFX Lurker
@gussie:
If your catastrophic coverage had ever been put to the test, I wonder how “affordable” it would have been.
Kylroy
@VFX Lurker: Exactly. Based on my experience working with individual insurance in the aughts, you would have been on the hook for tens of thousands of dollars, your premiums would have skyrocketed, and you would be incapable of buying new insurance. The pre-PPACA arrangement worked out well for you because you were adhering to the U.S. national health plan: “Don’t get sick.”
gussie
@VFX Lurker: Would’ve totally sucked, absolutely! But it was a risk I was willing to take. Just like it’d completely suck if my house burns down even though I’m underinsured, but that’s another risk I’m willing to take. There are tradeoffs in life. Instead of having to pay ten thousand dollars after a catastrophic illness, I’ve had to pay thousand and thousands … anyway. The insurance company is willing to bet that we won’t get sick enough to cost them more than we pay them. I believe they are right to make that calculation.
This is what I don’t get: you’re kind of blaming me, like I should be grateful for a system that doesn’t work for me personally. It’s not enough that I appreciate that it’s overall better for the country. It has wasted my money in such a way that very well may cause serious repercussions in my life, because my income fluctuates so much. The 10 grand I’m spending on insurance this year and last might be the same 10 grand I don’t have to pay the mortgage next year. Then I’ll lose my house. And I’ll still have health insurance, which is great! It’s very important to have health insurance. It’s more likely under the ACA that I’ll lose my house because I just run out of money, and less likely that I’ll lose my house due to catastrophic illness. But overall? It’s still more fucking likely that I’ll lose my house.
Keith
There is another important point to make. The WSJ article asserting that Sanders’ plan costs $18 trillion (!) for which Drum tries to offer a defense is not one that actually depicts the cost of a plan offered up by Bernie Sanders.
What the WSJ authors did was take something else, HR 676 (Conyers), and attribute the content and construction of that plan to Sanders, then use the topline numbers from the lead Amherst, U Mass. economist’s (Friedman) analysis of the bill’s costs (but not any savings therefrom) as Sanders’ total spend. It is a magic trick built on something of a strawman, dependent on ignoring any and all savings attributable to Conyers’ legislative package. A better display of revenues, costs and overall savings, from the perspective of the Amherst U Mass. economist himself was printed at HuffPo.
His bottom line? The overall savings afforded by extending coverage to all through a single-payer system would be something like this or if you prefer the short version, this. In simple terms, a $5.08 trillion reduction in health care expenditures over 10 years.
And, yes, revenues are needed (while private and employer insurance premiums reduce to zero).
And, yes, there are bound to be some who will no longer be on platinum, or Cadillac employee or private coverage (nothing to stop them from seeking their own private insurance “padding” if they so demand and could afford) – some may see a net reduction in their take-home income. (The overwhelming majority would not).
But, for all the attempted deflection and distraction by WSJ I don’t see one other critical and positive outcome from the adoption of such a national single-payer system. No longer would you be bound by the network, no longer beholden to a job for coverage. You get coverage simply for being alive, wherever you choose to move and live.
Meanwhile the nation saves money – and Richard Mayhew has to find another venue for his valuable skills.
dollared
@Richard Mayhew: Richard, why couldn’t we achieve at least the 87% rate that France has? That would have a huge impact on the incremental cost analysis.
mclaren
Nationalized universal single payer also creates a really big loser: health insurers.
Isn’t it interesting that Richard Mayhew, who works for a health insurer, never mentions that little fact?
Nate
@gussie: I’m glad to hear from someone else who has had a rough go with ACA. I’m in a similar freelance situation, though I don’t make as much year-to-year. My wife is an academic, has a good job with so-so insurance that our kids can use, but to add me to it is frankly unaffordable.
Unfortunately, because I technically have access to that insurance, however financial unavailable it is, I’m not eligible for any subsidies to take to the ACA marketplace. So we’re stuck paying full out of pocket for health insurance. For a Bronze plan that’s over $200 a month and rising fast. Right now it’s still less expensive than adding me to my wife’s plan (which would be an additional $500/mo), but it may not be for long. Fortunately I’m healthy and not likely to get sick soon, but I’m not getting any younger.
I have enough perspective to see that ACA is a better deal for a lot of people, and on the whole we’re better for having it, but we’re clearly worse off. So reading all the time about how the”losers” are fundamentally unsympathetic is pretty grating.
Richard Mayhew
@dollared: Short answer — the marginal Democrat in Congress wanted a good CBO score. Each additional point of required actuarial value coverage is X billion dollars over 10 years. Each X billion requires a fraction of X billion in increased subsidies.
Mandating 60% AV coverage (Bronze) as minimal acceptable coverage saves a lot of money than saying 85% or 87% AV coverage is minimal acceptable coverage as the subsidy level would then be pegged to 90% or 95% coverage instead of 70% coverage.
Honestly, I have not performed the calculation, but I would bet that the ACA subsidized coverage (Exchange (with premium and cost sharing assistance subsidies) and Medicaid) has a blended actuarial value in the high 80s for the states that expanded Medicaid.
Doodling my notes now:
Mediciad is about 97% to 99% AV coverage,
Silver Cost Sharing Assistance breaks out to be about 90% coverage for <200% FPL
Platinum coverage is 90% AV,
So these streams would bring the AV average up.
Gold at 80% and Silver/Bronze at 70%/60% bring down the average. Poorer states with higher CSR Silver and more Medicaid probably see higher average ACA AV than richer states (Kentucky is probably has a big AV average).
Kevin Nelson
@gussie: Your case provides an excellent example of the need for income averaging for ACA subsidies or tax credits. I don’t know a lot about these details, I work more in the Medicare end. There should be a provision to give you a tax credit/refund if your income ends up being less than the prior year used for calculation. OTOH, if we had single payer, and everyone was covered, it would not be an issue.
Kevin Nelson
@Richard Mayhew: Richard, thanks for this blog. I have enjoyed it immensely. My history: 30+ years as a front line field office claims rep with Social Security. Eight seasons part time HIICAP/SHIP counselor during the Medicare Part D Open Enrollment Period 10/15-12/7. I agree we should not accept ‘Medicare for All’ other than a slogan. Look at the legislative history of Medicare- It was a compromise between at least three factions, and so ended up a somewhat flawed program. Sadly, while the GOP has a majority in the House and more than 40 Senators, we will never be able to craft an entirely new, sensible and rational National Health Care system. But thanks for your efforts, and please continue to share the wonkiness.
Bob Hertz
I am a great fan of single payer, but I also study budgets with care. Here are the problems I see with single payer:
1. Assume that we leave Medicare, Medicaid, and the VA alone. That means about 130 million adults and 70 million young persons to cover in single payer.
2. Assuming an average to generous health plan, $5000 apiece for adults and $1800 apiece for children, this will cost about $800 billion a year.
3. We could in theory (or in northern Europe) impose a payroll tax of about 14% to pay for all of this.
4. But that would cripple the millions of firms which provide no health insurance today.
5. So we would need a graduated income tax. Eventually, a person making $200,000 would be paying about $20,000 toward national health care.
Today, many of those who make $200,000 get free health insurance from their company, and even the self employed rarely pay more than $10,000 a year.
Such a sudden tax increase would never pass Congress.
So I am open to suggestions on how we could realistically pass single payer.