Aug 9, 2018

Medicare for All: $32 Trillion in New Costs or $2 Trillion in Savings?

Chad Reese Staff writer

Last week, a new Mercatus study on the costs of “Medicare for All” (M4A) reignited the debate over the future of healthcare in the United States.

Authored by Charles Blahous, Mercatus Center senior research strategist and former public trustee for Social Security and Medicare, the study found that adopting M4A as proposed by Senator Bernie Sanders (I-VT) would cost the federal government more than $32 trillion over the course of ten years. Dr. Blahous also noted that the price tag was so steep that even doubling all federal individual and corporate income taxes would be insufficient to fully fund it.

Some of the reactions to the study, however, were surprising.

As The Washington Post's fact-checker Glenn Kessler noted, some individuals, including Sen. Sanders himself, claimed Dr. Blahous’s paper proved M4A would save the country $2 trillion.

Those claims, according to Kessler, went too far. In Kessler’s words, critics “cannot seize on one cherry-picked fact without acknowledging the broader implications of Blahous’s research.” They warranted, in Kessler’s view, a “Three Pinocchios” rating (you can read more about what that rating means and The Fact Checker’s methodology on their site).

Indeed, just a few days after the study was released, Dr. Blahous wrote in The Wall Street Journal that “Some have seized on a scenario in my estimates showing a slight decline in projected total public and private health expenditures under Medicare for All. But that decline, relative to current projections, relies on an assumption that (M4A) would immediately and dramatically cut provider payment rates by roughly 40 percent.”

In other words, as noted in both The Washington Post’s fact check and Dr. Blahous’s op-ed, the savings estimates only reflect a particular aspect of the methodology of the study. Dr. Blahous adopted the most generous cost-saving assumptions made by M4A in order to more fairly analyze the specific proposal, but he also notes in several places throughout the paper that those assumptions may be unreasonable.

In the fourth sentence of the paper’s abstract, Dr. Blahous wrote “It is likely that the actual cost of M4A would be substantially greater than these estimates…”

Dr. Blahous’s Mercatus Center colleague and senior research fellow Robert Graboyes put it this way: “…Blahous certainly didn’t predict that M4A would reduce healthcare spending. He merely said that under the best case scenario touted by M4A supporters, the bill would effectively transform the federal government into history’s largest insurance company…As the study makes clear, M4A’s expenditure-cutting promises are dubious.” 

For those interested in learning more, you can read the study in its entirety at Mercatus.org.

Photo credit: Molly Adams, Flickr

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