Federal Spending Rises, Total Health Expenditures Drop in Medicare for All Plan

August 2, 2018

A recent report about Senator Bernie Sanders’ “Medicare for All” plan calls attention to a substantial federal cost increase of $32.6 trillion in spending over 10 years. But, the report also reveals that total cost of healthcare spending would decrease over that 10-year period.

A recent report about Senator Bernie Sanders’ “Medicare for All” plan calls attention to a substantial federal cost increase of $32.6 trillion in spending over 10 years. But, the report also reveals that total cost of healthcare spending would decrease over that 10-year period.

Medicare is the foundation for Sanders’ Medicare for All plan, in which private companies would no longer provide health insurance. The government would deal directly with drug makers, lowering prescription costs. Medicare for All would provide approximately 30 million uninsured US residents healthcare coverage. Sanders, I-Vermont, proposes to eliminate deductibles, coinsurance, copayments, and other cost sharing bills for medical services, while improving benefits by expanding to cover dental, vision, and hearing.

Sanders endorsed a government-run system that covers all Americans in the 2016 Democratic presidential primaries, and it continues to be a leading point of discussion for Democrats looking ahead to the 2020 election. “If every major country on earth can guarantee health care to all, and achieve better health outcomes, while spending substantially less per capita than we do, it is absurd for anyone to suggest that the United States cannot do the same,” Sanders has said.

The analysis from the libertarian Mercatus Center at George Mason University estimated the cost of Medicare for All during a 10-year period, from 2022 to 2031, after an initial phase-in. It found that the plan would cost the federal government $2.5 trillion to $3 trillion a year, in terms of spending. The study results also revealed that doubling all federal individual and corporate incomes taxes would not fully cover the additional costs, after considering current government healthcare financing. Those results aligned with independent studies authored by Kenneth Thorpe, a health policy professor at Emory University in Atlanta. The studies discovered increases in spending that ranged from $24.7 trillion to $34.7 trillion over 10 years.

Sanders’ team found an error in an initial version of the Mercatus report, which counted a long-term care program that was in the 2016 proposal. It did not, however, count the current one. Blahous corrected it, decreasing his estimate by about $3 trillion over 10 years.

The increase in healthcare spending derives from a shift of funding from private companies to the government. The savings produced by Medicare for All stems from the reduction of physician and hospital reimbursements, lower drug costs from negotiations with drug companies, and lower administrative costs. Also, future spending will decline as more patients are able to get treated for chronic or acute medical problems.

As a result, under Medicare for All, total health spending in 2031 would come to approximately $303 billion lower than what is currently projected. The country’s overall national health expenditures would be $2 trillion lower from 2022 to 2031, according to the Mercatus model.