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Analysts Say Sanders’ New ‘Medicare For All’ Bill Could Create a Care Gap

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What You Need to Know

  • Sen. Bernie Sanders says the bill he just introduced would reduce administrative costs while covering all Americans.
  • A single-payer system would increase the unmet demand for health care by 2%, according to the CBO.
  • Charles Blahous of the Mercatus Center says the CBO's assumptions are too optimistic.

Health policy experts are starting to look at what moving the United States to a pure government-run health finance system would do to the supply of care.

Witnesses talked about the impact of “single-payer” health finance proposals Thursday, at a hearing the Senate Budget Committee held on the “Medicare for all” proposals introduced by Sen. Bernie Sanders in the Senate and Rep. Pramila Jayapal, D-Wash., in the House.

On Thursday, Sanders introduced S. 4204, the Medicare for All Act of 2022 bill with 14 Democratic co-sponsors.

Sanders’ bill would eliminate the current Medicare program, Medicaid and all current forms of private health insurance and create a government program that would pay for health care. It’s similar to other single-payer health system bills Sanders has introduced in the past.

Congressional Budget Office Director Phillip Swagel suggested that, in single-payer health care scenarios the CBO analyzed, the increase in the gap between the amount of care promised and the amount of care actually delivered could be modest.

Charles Blahous, a domestic policy analyst at George Mason University’s Mercatus Center, argued that the CBO analysts are too optimistic about how much a shift to a single-payer system would cut administrative costs.

In the real world, a single-payer system with a somewhat bigger administrative burden could end up meeting little of the newly created demand for health care, Blahous said at the hearing, which was held in Washington and streamed live on the web.

“Lawmakers would be very unlikely to tolerate that outcome and would probably address it by paying providers more,” Blahous said.

Increasing provider pay could help close the care supply gap but make the new single-payer system much more expensive than proponents are predicting, Blahous said.

The Backdrop

Sanders — a Vermont independent who caucuses with the Democrats, and who chairs the Senate Budget Committee — argued that the case for shifting to a single-payer health care system is clear.

“The American people understand, as I do, that care is a human right, and not privilege,” Sanders said.

The United States has a more expensive system than other countries, and 70 million Americans are either uninsured or underinsured, Sanders said.

“This is unacceptable,” Sanders said. “This is un-American.”

Sanders acknowledged that the kinds of “Medicare for all” bills he and Jayapal have introduced would be expensive.

“But, while providing comprehensive health care for all, it would be significantly less expensive than our current dysfunctional system,” Sanders said.

Dr. Adam Gaffney, a critical care physician affiliated with Harvard’s medical school, testified that private insurers, profits and overhead eat up 12% of current insurance premiums.

“Much of that overhead is spent on contesting claims and denying care to patients,” Gaffney said.

The CBO’s View

One response from critics is that promising to pay for care is different from actually delivering care.

The original Medicare program uses deductibles, co-payment requirements and coinsurance requirements to manage patients’ use of care. Government-run health care systems in other countries often do the same.

Sanders’ proposals would eliminate patient premiums and cost-sharing requirements. The main constraint on the amount of care provided would be the amount of cash allocated to pay hospitals, physicians and other care providers.

Private insurers now pay providers at least about twice as much as Medicare pays for typical services. In a single-payer system, a government program would be the only payer, and single-payer system designers often assume the new payment rates would be similar to Medicare payment rates.

Swagel said CBO analyses show that a single-payer system could have effects that would work to increase the supply of care as well as to hold down the supply of care.

“The supply of health care would increase because of fewer restrictions on utilization, less money and time spent by providers on administration and providers’ responses to increased demand for care,” Swagel said.

But, at the same time, efforts to cut provider pay could hold down the supply of care, Swagel added.

“The increase in unmet demand for care would correspond to increased congestion in the health care system,” Swagel predicted.

In written testimony, Swagel shows that, in one scenario analyzed, with relatively high provider pay rates, the CBO found that a single-payer health care system could reduce hospital pay 13%, reduce physician pay by 7%, and increase the unmet demand for care by 2%.

In that scenario, overall national health expenditures would be 9% lower than if the current system stayed in place, according to the CBO.

“In the long term, payments lower than those projected under current law might cause fewer people to enter health care professions and fewer new drugs to be developed,” Swagel said. “If providers were unable to adjust to slower growth in payment rates by operating more efficiently and remaining financially viable, they could cease to operate, possibly leading to greater congestion in the health care system.”

Blahous’ View

Blahous — who was the deputy director of President George W. Bush’s National Economic Council — said that the CBO assumes that a single-payer system would cut nurses’ administrative burden by 80%, and that this is likely overly optimistic.

If a single-payer system cut the administrative burden by 80% and limited physicians and hospitals to earning reimbursement rates similar to Medicare rates, 97% of any newly generated demand for care could go unmet, Blahous estimated.

Pictured: Sen. Bernie Sanders, I-Vt. (Photographer: Graeme Jennings/Washington Examiner/Bloomberg)