Recent electoral setbacks have raised questions about the power and appeal of Bernie Sanders, Alexandria Ocasio-Cortez, and others who identify as Democratic Socialists to enact their agenda. Still, pressure to extend “Medicare for All” persists. Senator Sanders’s bill by that name has 16 co-sponsors, and 70 members of the House have formed a “Medicare for All Caucus.” The issue will hang over this year’s mid-term elections, and likely in 2020 as well. Universal public health care is a legitimate point to debate, but all involved, pro and con, need to own up to the costs involved.
Advocates don’t simply want to expand the existing program to everyone; their version of Medicare would include dental, vision, and hearing—none of which is currently covered. Further, their proposed law stipulates “no cost-sharing,” such as “deductibles, coinsurance, copayments, or similar charges” on “any individual for any benefits.” This is actually much different from Medicare as it stands today for retirees; hospitalization in Medicare Part A includes a $1,340 deductible for each benefit period. It imposes no coinsurance on the first 60 days of hospitalization, but a charge of $335 per day between 61 and 90 days in the hospital, and a charge of $670 per day over 90 days. Part B, the medical part of Medicare, includes a $183 yearly deducible and requires the patient to pay 20 percent of the Medicare-approved amount.
Part A, hospitalization, has no monthly cost, but Parts B and D, the medical and drug portions, demand monthly premiums just like any private insurance program. The monthly amount varies with income: retirees today pay $134 a month, on average. But with no copays or deductibles, plus the added benefits that Sanders’s bill seeks, those monthly premiums would surely rise, not least because working people have higher incomes than retirees. It is guesswork to put a figure on how much these costs would go up, though the current Medicare premium for those who want it—but have paid into the system for less than seven-and-a-half years—is $422 a month. And that’s for Medicare as it presently exists, not for the proposed luxury version. No doubt Sanders, Ocasio-Cortez, and those in the caucus know that even today’s Medicare entails significant monthly premium payments for its recipients, though it is far from clear that this is widely understood by the average person who supports Medicare for All.
Even without expanding the scope of coverage to vision and dental care, a simple extension of existing Medicare to everyone would impose prodigious costs. Medicare presently covers some 58 million people in one or more of its plans. The government last year spent $597 billion on these beneficiaries, representing about 14 percent of all government spending, and generating 3 percent of economic activity. Had the country extended coverage to all 323 million Americans in 2017, it would have cost Washington more than $2.6 trillion, almost 65 percent of the total budget, and over 75 percent of government revenues for the year. Those outlays would amount to just over 13 percent of the country’s gross domestic product (GDP). To cover the more than $2 trillion in additional expenses, the federal government would need to go far deeper into debt than it already has, or raise taxes significantly. To give an idea of the pressure, doubling individual and corporate taxes would still fail to cover the cost difference. And this is without even considering the additional benefits envisioned in the current legislation.
Meantime, Medicare would continue to grow faster than either overall federal outlays or the economy as a whole. In the last ten years, for instance, the nation’s Medicare bill has risen an average of 4.7 percent a year, far faster than overall government outlays, which have grown less than 3.8 percent a year, or the overall economy, which, even including inflation’s effects, has expanded at barely 3 percent annually. Without the expansions envisioned by the Democratic Socialists, Medicare is already on track to absorb some 17 percent of the federal budget by 2030. In the process, it would squeeze out other things that the public wants Washington to do.
The country might avoid this unsupportable expense, even in a universal system, by changing the way that it delivers health care. After all, many other developed countries offer universal public health care for a lot cheaper than in the United States, with seemingly no ill effects to their population’s general health. Several manage this trick by allowing health care workers with less training than medical doctors more latitude to diagnose maladies and prescribe drugs and other procedures. Others allow more automated care than we do. All make less effort to prolong life in old age, and all ration care, either through waiting lists for some procedures or by denying certain therapies that American doctors routinely pursue.
Trade-offs will be necessary to impose Medicare for All. Three choices stand on offer. Public insurance either cares for a certain portion of the population (in the case of the United States, older residents); or a truly universal plan will absorb sums sufficient to preclude other government projects; or the public settles for less timely and less complete health care. These are the choices. Advocates for Medicare for All owe the public clarity on which choice they want for the American people.
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