Mercatus Study Finds Medicare for All Saves $300 Billion
Matt Bruenig July 30, 2018
Molly Adams / Flickr
The US could insure 30 million more Americans and virtually eliminate out-of-pocket health care expenses while saving $300 billion in the process, according to a new report about Medicare for All released by the libertarian Mercatus Center.
In the report, Charles Blahous attempts to roughly score Bernie Sanders’ most recent Medicare for All bill and reaches the somewhat surprising (for Mercatus) conclusion that, if the bill were enacted, the new costs it creates would be more than offset by the new savings it generates through administrative efficiencies and reductions in unit prices.
The report’s methods are pretty straightforward. Blahous starts with current projections about how much the country will spend on health care between 2022 and 2031. From there, he adds the costs associated with higher utilization of medical services and then subtracts the savings from lower administrative costs, lower reimbursements for medical services, and lower drug prices. After this bit of arithmetic, Blahous finds that health expenditures would be lower for every year during the first decade of implementation. The net change across the whole 10-year period is a savings of $303 billion.
When talking about Medicare for All, it is important to distinguish between two concepts: national health expenditures and federal health expenditures. National health expenditures refers to all health spending from any source whether made by private employers, state Medicaid programs, or the federal government. It is national health expenditures that, according to the report, will decline by $303 billion.
Federal health expenditures refers to health spending from the federal government in particular. Since the federal government takes on nearly all health spending under Medicare for All, federal health expenditures will necessarily go up a lot, $32.6 trillion over the 10-year period according to Blahous. But this is more of an accounting thing than anything else: rather than paying premiums, deductibles, and copays for health care, people will instead pay a tax that is, on average, a bit less than they currently pay into the healthcare system and, for those on lower incomes, a lot less.
At first glance, it is strange that the Mercatus Center, which is libertarian in its orientation and heavily funded by the libertarian Koch family, would publish a report this positive about Medicare for All. The claim that “even the Koch organizations say it will save money while covering everyone” provides a useful bit of rhetoric for proponents of the policy.
But the real game here for Mercatus is to bury the money-saving finding in the report’s tables while headlining the incomprehensibly large $32.6 trillion number in order to trick dim reporters into splashing that number everywhere and freaking out. This is a strategy that already appears to be working, as the Associated Press headline reads: “Study: ‘Medicare for all’ projected to cost $32.6 trillion.”
Messaging strategy aside, there is room to quibble with Blahous’ positive findings. He assumes administrative costs will only drop from 13 percent to 6 percent for those currently privately insured. But, according to the Kaiser Family Foundation, Medicare’s administrative costs have consistently been below 2 percent. He assumes utilization of health services will increase by 11 percent, but aggregate health service utilization is ultimately dependent on the capacity to provide services, meaning utilization could hit a hard limit below the level he projects.
But even if you take the report’s headline figures at face value, the picture it paints is that of an enormous bargain. We get to insure every single person in the country, virtually eliminate cost-sharing, and save everyone from the hell of constantly changing health insurance all while saving money. You would have to be a fool to pass that offer up.
Matt Bruenig July 30, 2018
Molly Adams / Flickr
The US could insure 30 million more Americans and virtually eliminate out-of-pocket health care expenses while saving $300 billion in the process, according to a new report about Medicare for All released by the libertarian Mercatus Center.
In the report, Charles Blahous attempts to roughly score Bernie Sanders’ most recent Medicare for All bill and reaches the somewhat surprising (for Mercatus) conclusion that, if the bill were enacted, the new costs it creates would be more than offset by the new savings it generates through administrative efficiencies and reductions in unit prices.
The report’s methods are pretty straightforward. Blahous starts with current projections about how much the country will spend on health care between 2022 and 2031. From there, he adds the costs associated with higher utilization of medical services and then subtracts the savings from lower administrative costs, lower reimbursements for medical services, and lower drug prices. After this bit of arithmetic, Blahous finds that health expenditures would be lower for every year during the first decade of implementation. The net change across the whole 10-year period is a savings of $303 billion.
When talking about Medicare for All, it is important to distinguish between two concepts: national health expenditures and federal health expenditures. National health expenditures refers to all health spending from any source whether made by private employers, state Medicaid programs, or the federal government. It is national health expenditures that, according to the report, will decline by $303 billion.
Federal health expenditures refers to health spending from the federal government in particular. Since the federal government takes on nearly all health spending under Medicare for All, federal health expenditures will necessarily go up a lot, $32.6 trillion over the 10-year period according to Blahous. But this is more of an accounting thing than anything else: rather than paying premiums, deductibles, and copays for health care, people will instead pay a tax that is, on average, a bit less than they currently pay into the healthcare system and, for those on lower incomes, a lot less.
At first glance, it is strange that the Mercatus Center, which is libertarian in its orientation and heavily funded by the libertarian Koch family, would publish a report this positive about Medicare for All. The claim that “even the Koch organizations say it will save money while covering everyone” provides a useful bit of rhetoric for proponents of the policy.
But the real game here for Mercatus is to bury the money-saving finding in the report’s tables while headlining the incomprehensibly large $32.6 trillion number in order to trick dim reporters into splashing that number everywhere and freaking out. This is a strategy that already appears to be working, as the Associated Press headline reads: “Study: ‘Medicare for all’ projected to cost $32.6 trillion.”
Messaging strategy aside, there is room to quibble with Blahous’ positive findings. He assumes administrative costs will only drop from 13 percent to 6 percent for those currently privately insured. But, according to the Kaiser Family Foundation, Medicare’s administrative costs have consistently been below 2 percent. He assumes utilization of health services will increase by 11 percent, but aggregate health service utilization is ultimately dependent on the capacity to provide services, meaning utilization could hit a hard limit below the level he projects.
But even if you take the report’s headline figures at face value, the picture it paints is that of an enormous bargain. We get to insure every single person in the country, virtually eliminate cost-sharing, and save everyone from the hell of constantly changing health insurance all while saving money. You would have to be a fool to pass that offer up.
tough sell though.
"Government needs to cut spending."
"Okay, Medicare for all saves trillions."
"NOOOOOOOOOOOOOO!!!!!!!!"
....
