Plans have case of ‘something for nothing’ disease
IT’S an old joke among health-policy wonks that what the American people really want from healthcare reform is unlimited care, from the doctor of their choice, with no wait, free of charge.
For Republicans, trying to square this circle has led to panic, paralysis and half-baked policy proposals such as the ObamaCare-replacement bill. For Democrats, it has led from simple disasters such as ObamaCare itself to a position somewhere between fantasy and delusion.
The latest effort to fix health care with fairy dust comes from California, whose Senate voted to establish a statewide single-payer system. As ambitious as the California legisla- tion is, encompassing everything from routine checkups to dental and nursing-home care, its authors haven’t yet figured out how it will be paid for. The plan includes no co-pays, premiums or deductibles. Perhaps that’s because the legislature’s own estimates suggest it would cost at least $400 billion, more than the state’s entire presentday budget.
In fairness, legislators hope to recoup about half that amount from the federal government and the elimination of existing state and local health programs. But even so, the plan would necessitate a $200 billion tax hike. One suggestion being bandied about is a 15 percent state payroll tax. Ouch.
The cost of California’s plan is right in line with that of other recent single-payer proposals. For example, last fall, Colorado voters rejected a proposal to establish a singlepayer system in that state that
was projected to cost more than $64 billion per year by 2028. Voters apparently took note of the fact that, even after figuring in savings from existing programs, possible federal funding and a new 10 percent payroll tax, the plan would have still run a $12 billion deficit within 10 years.
Similarly, last year Vermont was forced to abandon its efforts to set up a single-payer system after it couldn’t find a way to pay for the plan’s nearly $4 trillion price tag.
And who could forget Bernie Sanders’ proposed “Medicare for All” system, which would have cost $13.8 trillion over its first decade? Bernie would have paid for his plan by increasing the top US income-tax rate to an astounding 52 percent, raising everyone else’s income taxes by 2.2 percentage points and raising payroll taxes by 6.2 points.
Of course, it is no surprise that “Medicare for All” would be so expensive, since our current Medicare program is running $58 trillion in the red going forward.
How, though, could a singlepayer system possibly cost so much? Aren’t we constantly told that other countries spend far less than we do on health care?
It is true that the US spends nearly a third more on health care than the second-highestspending developed country (Sweden), both in per-capita dollars and as a percentage of GDP. But that reduction in spending can come with a price of its own: The most effective way to hold down health-care costs is to limit the availability of care. Some other developed countries ration care directly. Some spend less on facilities, technology or physician incomes, leading to long waits for care.
Moreover, foreign health-care systems rely heavily on the US system to drive medical innovation and technology. There’s a reason why more than half of all new drugs are patented in the United States, and why 80 percent of non-pharmaceutical medical breakthroughs, from transplants to MRIs, were introduced first here. If the US were to reduce its investment in such innovation in order to bring costs into line with international norms, would other countries pick up the slack, or would the next revolutionary cancer drug simply never be developed? In the end, there is still no free lunch.
American single-payer advocates simply ignore these tradeoffs. In the process, they also ignore the fact that many of the systems they admire are neither single-payer nor free to patients.
Above and beyond the exorbitant taxes that must almost always be levied to fund their single-payer schemes, many of these countries impose other costs on patients. There are frequently co-payments, deduct- ibles and other cost-sharing requirements. But American single-payer proposals eliminate most or all such cost-sharing.
Adopting single-payer would crush the American economy, lowering wages, destroying jobs and throwing millions into poverty. The Tax Foundation, for instance, estimated that Sanders’ plan would have reduced the US GDP by 9.5 percent and after-tax income for all Americans by an average of 12.8 percent in the long run. That is, simply put, not going to happen.
Americans cannot have unlimited care, from the doctor of their choice, with no wait, for free. The politician who tells them as much will not be popular. But he or she may save them from something that will much more likely resemble a nightmare than a utopian dream.