Medicare for All: A Bargain at $33 Trillion

One holiday is over, but other dinners with non-socialist relatives and friends loom. Here, Steve Max gives us some talking points when someone says, as they very well may, that Bernie or Elizabeth will bankrupt the country with their health plans—Eds.

Thirty-three trillion dollars for health care is a big scary number, and when you see all the zeros it’s even worse (33,000,000,000,000.)  It’s about the size of the entire U.S. and Chinese economies combined–the top two in the world. Debate hosts constantly ask Bernie Sanders and Elizabeth Warren how the United States can possibly afford it? Unfortunately, neither of them has done the best job of answering that question. Understandably, no candidate wants to spout numbers in their few minutes of spotlight.  

Note that thirty-three trillion is the total 10-year cost estimate equaling $3.3 trillion a year. Is that a lot or a little? It depends on what you compare it to. It’s about the size of the economy of India, pretty big. But guess what:  ? Ttotal U.S. spending on health care is now $3.5 trillion a year. What Sanders and Warren are proposing is to spend what we are already spending in a far more effective way the money that we are already spending. Everyone will be included. Services will cover dental, hearing, vision, and prescription drugs. Funds would be provided for retraining insurance company employees.

Insurance premiums, co-payments, and deductibles will be replaced by a progressive income tax. Costs will be greatly reduced for families. But, how is all that possible?

Last year, the federal government spent $1.1 trillion on health care, about a third of what Medicare for All will cost annually. The Congressional Budget Office projects that, under current law, this will rise to $2.3 trillion by 2029.  Long term projections are always iffy, but clearly the already large share of the cost of Medicare for All that would come from existing federal programs (such as Medicare, Medicaid, children’s health (CHIP), and the Veterans Administration), will increase dramatically over time. These plans will be rolled into the one national plan or, more specifically, Medicare will be progressively opened to younger people.

As for the rest of the cost, the Sanders bill doesn’t include details. He and Congress will have to supply them when the time comes. We do know that beyond what the government is already doing, another $2.6 trillion of annual health care spending is paid by private insurance premiums. The idea is to convert private insurance spending by corporations and individuals into public spending. 

Sanders did post a memorandum outlining several options, including the following:

  • “Creating a 4% income-based premium paid by employees, exempting the first $29,000 in income for a family of four. “
  • “Imposing a 7.5% income-based premium paid by employers, exempting the first $2 million in payroll to protect small businesses.”

Reducing costs will also play a major role in paying for the plan. In the current system, in addition to trying to collect fees from individual patients, every medical provider must deal with hundreds of different insurance and employer plans, each with its own forms, rules, coverage, co-payments and deductibles. A multi-country analysis found that  for every ten doctors in the United States, seven additional people are employed trying to get the doctors paid. Additional people are employed by insurance companies to find ways not to pay. 

According to The New England Journal of Medicine, administrative costs in the US are $1,059 per capita  In the Single Payer (i.e., Medicare for All) Canadian system, administrative costs are $307 per capita. Administrative costs in the U.S. health care system are 8.5% of all health care spending. In Single Payer Canada they are 4.1% and just 2% in the US U.S. Medicare system. With Medicare for All, there will be one set of rules for everyone, and one agency to handle billing. 

The United States now spends twice as much on health care as the average of all the other industrial countries. Yet we rank 28th in life expectancy – right down there with Turkey. We rank 55th in infant mortality – just between Gibraltar and Serbia. With Medicare for All we can bring down costs, pay less, and live healthier lives. 

* Some of the current workers will be needed to administer the new system.  Some will get early retirement. The Sanders bill says “For up to 5 years following the date on which benefits first become available…up to 1 percent of the budget may be allocated to programs providing assistance to workers who perform functions in the administration of the health insurance system and who may experience economic dislocation as a result of the implementation of this Act (pp. 45Â 46). “A very detailed discussion of the problem starts on page 108 of this report, which lays out a plan to deal with the problem which the authors conclude would be about covered by the 1% of budget mentioned in the Sanders bill.