San­ders’ health care plan is miss­ing its price tag

The Denver Post - - OPINION - By Megan McAr­dle A longer ver­sion of this col­umn is at den­ver­post.com/opin­ion.

So Bernie San­ders has a health care plan. It sounds won­der­ful. It cov­ers ev­ery­thing, from den­tal to long-term care. There will be no co-pays or de­ductibles. You will not have to has­sle with an in­surer over what’s cov­ered. There’s just one small prob­lem, which is how he is plan­ning to pay for this.

Yes, his health care plan lays out rev­enue es­ti­mates in great de­tail. But the rev­enue es­ti­mates and the cost es­ti­mates are too rosy for me to take se­ri­ously.

The Na­tional Health Ex­pen­di­ture data says we spent about $3 tril­lion on health care in 2014 from all sources — govern­ment in­sur­ance, pri­vate in­sur­ance, out of pocket. The govern­ment al­ready spends $1.3 tril­lion, or there­abouts, so we can’t fairly count that against San­ders’ health care plan. How­ever, that leaves us with about $1.7 tril­lion to go. Yet San­ders claims that his plan, de­spite pro­vid­ing vastly more gen­er­ous ben­e­fits than ba­si­cally any plan in ex­is­tence, will cost only $1.35 tril­lion a year. That’s a pretty big gap. How does he get there?

“Re­form­ing our health care sys­tem, sim­pli­fy­ing our pay­ment struc­ture and in­cen­tiviz­ing new ways to make sure pa­tients are ac­tu­ally get­ting bet­ter health care will gen­er­ate mas­sive sav­ings.”

When Rea­gan pro­posed his first fed­eral bud­get, his bud­get di­rec­tor, David Stock­man, no­to­ri­ously dis­ap­peared the bal­loon­ing deficits into a multi­bil­lion­dol­lar line item of sav­ings to be named later — a so-called Magic As­ter­isk. All bud­gets have a whiff of this about them, but few have dis­played the dar­ing of Stock­man.

But San­ders has sur­passed his pre­de­ces­sors by a wide mar­gin. He has pro­posed a Magic As­ter­isk worth a third of a tril­lion dol­lars a year.

At this, we are be­ing char­i­ta­ble. If you make health care ab­so­lutely free to pa­tients, and refuse to al­low your govern­ment in­surer to deny treat­ments, then peo­ple are go­ing to use more health care. So we shouldn’t be start­ing with a base­line of $3 tril­lion; we should be start­ing well above that. Call it $3.15 tril­lion, and we’ll put the to­tal gap he needs to cover at around a half a tril­lion dol­lars a year.

By any rea­son­able mea­sure, San­ders’ plan would put a big­ger hole in the bud­get than Marco Ru­bio’s tax plan. And that is not, of course, count­ing the cost of any of his other pro­pos­als, just his sin­gle-payer sys­tem.

But don’t sin­gle-payer sys­tems cost less? Not un­less you have a plan to make health care work­ers ac­cept less pay, close the hospi­tals that are hov­er­ing on the verge of red ink, and oth­er­wise mas­sively drive down the prices that we pay for health care.

And no, it can’t all come out of pre­scrip­tion drugs, which con­sti­tute only about a 10th of our health care spend­ing, much of that on al­ready-cheap gener­ics. We also can’t make it up from preven­tive medicine (which costs money, rather than saves it, what­ever its other ben­e­fits), or un­com­pen­sated hos­pi­tal care, or any of the other “magic pots of money” that were hy­poth­e­sized to ex­ist when Oba­macare was be­ing de­bated. If we want to raise money for sin­gle payer, we are go­ing to have to take the bor­ing, old-fash­ioned step of mak­ing some­one empty their pock­ets and pay.

What makes our health care sys­tem ex­pen­sive is not in­sur­ers, who have quite mod­est profit mar­gins, nor high ad­min­is­tra­tive over­head. What makes it ex­pen­sive is the cost of la­bor in the health care sys­tem, the cost of the med­i­cal devices and fancy new drugs we’d all very much like to con­tinue hav­ing in­vented, and the in­dus­try’s very pricey phys­i­cal plant.

We could force all health care work­ers to take a dou­ble-digit across-the-board pay cut, of course. But we can do that with­out a sin­gle-payer sys­tem. What we lack is not the abil­ity, but the political will. Judg­ing from his health care plan, San­ders isn’t any braver than all the politi­cians be­fore him who have res­o­lutely failed to, say, slash Medi­care physi­cian re­im­burse­ments.

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