Before you fly off the handle and post comments here, please read the entirety of my diary.
But, let me begin by stating a few disclosures.
- I am a supporter of Hillary Clinton. I am not a paid staffer, or working for her campaign. I am just a citizen activist, like most of you.
- I am NOT an opponent or critic of the Single-Payer health care system. In fact, I’ve advocated for it before, and have also criticized the Affordable Care Act for not going far enough. I got a lot of angry replies t the ACA diaries, let me tell you.
- I am NOT arguing that Single-Payer won’t save the United States on aggregate, a lot of money over our current health care system.
- I am not a former PUMA. In fact, I was a staunch supporter of Barack Obama back in 2008, and went to war daily with the PUMAS back then on this site. Got criticized pretty hard for it, too.
- I am not a “corporate whore,” or “GOP concern troll,” or “New Democrat,” or whatever ad hominem epithets people like to come up with to discredit dissenting opinions they don’t want to spread.
Here’s what I am: A liberal Democrat who sees the 2016 election as one that we and this United States cannot afford to lose to the GOP. There is no room for a vanity candidate this year. Even in 2008, we had the firm knowledge that the Democrats were going to control Congress no matter who won the Presidency. That made it easier to support Barack Obama. Also, as odious as John McCain was, he’s practically George Washington compared to the crazy radicals and dangerous sociopaths who are running for President on the GOP side this year.
So, this election is extremely important. Maybe historically important beyond what it has been for nearly 70 years. That’s why I am writing this diary. So, why the headline? Well, let me explain.
LET’S GET REALISTIC ABOUT SINGLE-PAYER
Let’s start with a definition. The Single-Payer health insurance system is the elimination of all private health insurance coverage, and substituting a single entity, usually the government, as the sole payer of health insurance claims. The advantages of such a plan include making health insurance and care universal, unshackle it from employment (thus benefitting employers, too, and making it easier to change jobs), and also allowing the single-paying entity to use monopsony power to regulate the costs of such care.
In Countries with single-payers systems, it is funded primarily through individual and business taxes, and possibly user-fees or co-pays for certain services (as in the case of Sweden, which caps out of pocket costs for such fees).
So, in order to implement a single-payer system in the United States, you would be required to (in simple terms), make private health insurance illegal, consolidate all publicly funded health care programs into a single entity (or regional/state administered ones), and then implement a taxation scheme to pay for it all.
Theoretically, you could pay for Single-Payer by replacing all the existing funding sources with a uniform taxation system. And, again theoretically, the savings from implementing a single payer system would redound to everyone who would see their currently paid health care premiums, and payroll taxes (and possible co-pays) replaced by a single, lower tax. So far, so good.
I say all this to be as fair as possible to Bernie Sanders and his ardent supporters. Because what I am about to say is problematic for Bernie and those who have the dream of implementing such a system in the United States: Bernie Sanders’ numbers (such as they are, and that’s another issue) just do not add up.
Here’s why.
The True Costs of Single-Payer
First, start with the amount the United States as a whole spends on health care on an annual basis. There are two numbers I want to focus on. The first is the actual raw dollar total the United States expends: $3 Trillion, as of 2013, according to the Centers for Medicare & Medicaid Services. That number is rising at about 5% a year, but let’s use that figure as a baseline because its relatively accurate, and nice and round.
The second number is 17. As in 17% of United States GDP is spent on an annual basis on health care.
As you can guess, the 17% (according to the World Bank) and $3 Trillion figure are related. $3 Trillion is ~17% of the US GDP (which is about $16.8 Trillion).
Second, to estimate the actual savings the United States would enjoy (in the aggregate) from switching to a single-payer health care system, we need to look for a similar modern economy with a similar culture to the United States that has a single payer system in place. It just so happens that Canada is a nice exemplar and is often cited by Bernie Sanders and others who wish to implement that system here. I am making an assumption here, that I hope you will agree with. It is fair to assume that the savings we can achieve by implementing single-payer in the United States would be comparable to the savings achieved in Canada. If so, I propose using as a rough measure of the savings we might enjoy, the percentage of GDP that Canada spends on health care as a benchmark. That number is 11% (also according to the World Bank). So, if the United States currently uses 17% of its GDP to pay for health care, and Canada uses 11%, that looks like the US could achieve a substantial savings by switching to the Canadian model.
If the United States reduces its aggregate health care costs to the Canadian 11% of GDP, the total amount of health care spending in the United States would drop from $3 Trillion to roughly $1.85 Trillion...per year. That’s a huge savings, right?
And keep in mind I am trying to be as fair as possible to Bernie here. I am assuming that Bernie’s plan would save the United States, on the whole, $1.15 Trillion a year, And that assumes it goes into effect immediately, with zero transition costs or impacts to our economy (which are truly beneficial assumptions for Bernie). So this is the idealized scenario.
Now remember, for single-payer to work, you have to shift all the funding sources for health care to a single entity. That means there’s one entity (the Government in Bernie’s plan) that writes all the health care checks in the country. And all the savings I just outlined come from the monopsony power of the single payer being able to dictate prices, early health care screening, etc. So all the cost saving benefits of Single payer are incorporated into that $1.15 Trillion costs savings.
That means for Bernie’s plan to work in an idealized situation, he has to come up with at least $1.85 Trillion in TAXES to pay for his plan. So what do we know about Bernie’s revenue sources for single payer?
Bernie’s Plan
Well, all we really have to go on right now that is a concrete plan is the Single-Payer bill Bernie introduced in 2013. That bill, according to an analysis done by Politifact, has several sources of funding. Per Politifact:
To pay for it, Sanders would impose broad-based taxes: a 6.7 percent payroll tax on employers and a 2.2 percent tax on individual incomes under $200,000 or joint incomes under $250,000. (Progressively higher rates for higher-income earners are described in his 2013 bill.)
So, how much does this raise? Politifact again:
[T]hose making more than $200,000 — roughly the top 5 percent of income earners — would contribute about $117 billion to the single-payer system, while everyone else would pay in $126 billion. Payroll taxes yield an additional $432 billion for a total of $675 billion.
So, $675 Billion. You can already see a big problem. That number is almost $1.2 trillion short of the amount he would have to raise in order to pay for a national single payer health care system, based upon the analysis I gave above.
Bernie, to date, hasn’t come up with any additional funding sources for single-payer that I’m aware of. Maybe one of the reasons he has not is because he’s already proposed all kinds of other revenue raisers (taxes) that he’s pledged to his other big projects.
These figures are taken from Bernie Sanders campaign website:
- Bernie plans to spend $100 billion a year on infrastructure over 10 years. He pays for it by “making corporations pay taxes on all of the “profits” they have shifted to the Cayman Islands and other offshore tax havens . . . .”
- Bernie wants to pay for free college education for anyone who wants to go to college. He says that will cost $75 billion/year, and imposes a financial transactions tax to raise (he claims) $300 billion to pay for it. (Some economists have said it may only raise as little $177 billion, but we will use Bernie’s number).
- He plans to extend the solvency of Social Security by “lifting the [SS payroll tax] cap on taxable income above $250,000.” He estimates that will raises $120 billion/year.
- He wants to create a $5.5 Billion youth jobs program by “ending the carried interest loophole . . . .” That raises, he estimates, $1.5 Billion/year.
- He wants 12 weeks of paid family & medical leave for all workers, “[p]aid for by a payroll tax that would total $1.61 a week for the typical American worker.” The 0.2% payroll tax increase would raise $32 billion/year
- He says he wants to prevent pension cuts for 1.5 million Americans, by “closing two tax loopholes that allow the wealthy to avoid taxes on money they inherit and expensive artwork they collect.” This would raise $2.9 billion a year.
- He also wants to invest in renewable energy and clean jobs, by ending oil and as subsidies. This would raise $13.5 Billion a year.
- And finally, as a general revenue raising measure, he wants to impose a 21.4 Billion/year estate and inheritance tax.
All told, Bernie plans to raise an additional $590 Billion in additional taxes, not counting the ones he’s proposed for single-payer. But, even if Bernie decided to pledge every penny o the new taxes he’s listed on his website to the single-payer plan, he’s still $610 billion A YEAR short of paying or his plan. And, if he did pledge all of this revenue to Single-Payer, he couldn’t provide college for all, protect pensions, invest in clean energy, make Social Security actuarially solvent, create a youth jobs program, or fix our crumbling infrastructure. In other words, Single-Payer would basically make it impossible to pay for anything else he’s proposing.
My guess is that Bernie will probably try and find additional money by cutting military spending, and raising income taxes on the wealthy. But, its very probably he’s going to have to increase the payroll taxes on the middle class. How much of that tax burden will fall on them, or businesses, we just don’t know at this point. But, Bernie hasn’t explained how he’s paying for any of this.
This isn’t a perect world.
All of the above analysis was based upon an idealized situation where Bernie has the cooperation of a friendly Congress, and Supreme Court. And, he doesn’t meet virulent opposition from entrenched interests, such as Doctors, hospitals, insurance companies and Big Pharma. All of whom will go to war with Sanders over an abrupt shift to single payer.
Moreover, there are millions of people who work for private health insurance companies. To say that switching abruptly to single-payer would be disruptive to that industry, would be an understatement. The majority of those people will be left without a job, and taking over $1 trillion out of our GDP in a short period of time would be incredible contractionary for our economy, no matter how much we may benefit from it in the longer term.
And, even the cost savings we dream about from single payer may not materialize as much as we expect. To take one example, politicians can’t even reduce health care provider Medicare reimbursement rates without caving into the very powerful physicians lobby. And that’s ignoring all of the potential downsides to a single-payer system, such as longer waiting times for non-emergency procedures and tests.
This is why President Obama, a former champion of single payer, said:
“If I were designing a system from scratch, I would probably go ahead with a single-payer system…. [But] [g]iven that a lot of people work for insurance companies, a lot of people work for HMOs. You’ve got a whole system of institutions that have been set up….
People don’t have time to wait. They need relief now. So my attitude is let’s build up the system we got, let’s make it more efficient, we may be over time—as we make the system more efficient and everybody’s covered—decide that there are other ways for us to provide care more effectively.”
And even Elizabeth Warren has hedged on her former unequivovcal support for single payer. I apologize for the source of this quote, but it illustrates my point:
HOST: If you were the tsarina, something like single-payer, government run health care, far lower administrative costs, that sort of thing, would be the Senator Warren prescription, would it not?
ELIZABETH WARREN: I think right now what we have to do--I’m serious about this--I think you’ve got to stay with what’s possible. And I think what we’re doing–and look at the dust-up around this–we really need to consolidate our gains around what we’ve got on the table.
HOST: But you do support single-payer, do you not?
WARREN: No, what I’ve got right now…
HOST: You’ve wrote repeatedly that you have, have you not?
WARREN: Oh! I think you need to go back and take a look.
HOST: I have a paragraph: ‘The most obvious solution would be universal, single-payer health care. Single-payer care would also free families from dependents on an employers’ plan and make certain that everyone is covered whether or not – you wrote that with a co-author from Ohio.
WARREN: I wrote that with two. Two I think. That’s exactly right. But the point is, what we’ve got to do, is we’ve got to keep moving in the direction of getting more families covered and bringing down the costs of health care, and I think we’ve taken a big step in that direction.
And, we have a real world example of the costs of such a plan running head on into political reality in Bernie’s home state of Vermont. To much fanfare in progressive circles, Vermont and its Governor, Peter Shumlin (a Hillary supporter, BTW) passed a statute to implement — after a study — single-payer healthcare within that State.
After 4 years, however, the enterprise collapsed due to the high costs.
I agree with both President Obama and Elizabeth Warren (and Hillary Clinton) that in an ideal world, if we were building a system from scratch, single-payer would be the way to go. But, we don’t live in that world. We live in this one. And the incrementalist approach is better. Let’s protect our gains in THIS election, and start building toward Single-Payer by taking back Congress, and State Legislatures. And, most importantly, protect what we have by retaining the White House in 2016.
This leads me to my last point.
Despite general election match-up polls to the contrary, I think Bernie Sanders will be destrpyed in the General election once his plans start getting scrutiny. His glaring failure to pay for his biggest idea, thus far, is ripe for a fusillade, and $300 million in attack ads. We can;t afford to take such a massive risk, on such an unlikely payoff. All of the things Bernie wants to do, which are listed above, are supported in many ways by Hillary Clinton too.
So, are you willing o risk losing in 2016 just for the pipe dream of single-payer, which has almost no chance of passing within the next 10 years? I’m not.
