As the former chief economist at the International Monetary Fund, Simon Johnson has done his share of broad-scale economic forecasting. Now a professor at MIT, he and other experts were asked by Elizabeth Warren’s campaign team to vet the revenue and cost estimates of her much-awaited plan to pay for Medicare for all.
“This was very analogous to an assignment where you meet with representatives of a country and they have plans, and your job is to understand what are the plans and do they add up,” notes Johnson. For Warren’s plan, they do, according to Johnson and coauthors of two letters to the campaign. “Somebody said the hardest thing to forecast is the future,” says Johnson, “and that’s true for short-term macroeconomic forecasts (of one to two years out), too.”
It sure is. That’s based on the various projections of how much Medicare for all could cost. Including Warren’s proposal, there are at least 11 different forecasts of what the 10-year price tag would be. They run from a low of $13.5 trillion to a high of $47.6 trillion, with Warren’s plan falling near the bottom third at $20.5 trillion.
There are several ways to size up these estimates, such as the total economic cost of Medicare for all compared with the existing system. The lens here is how much more the federal government will spend on health care over a 10-year period compared with the $16 trillion it is projected to spend without Medicare for all.
‘Lite’ Medicare for all
“Any 10-year forecast, including any official baseline forecast, has error bands around it because you don’t know exactly what’s going to happen,” says Johnson. However, in defense of the economic impact projections for Warren’s plan, he emphasizes, “it meets a fairly strict set of criteria,” including no new taxes on the middle class.
Johnson collaborated with Donald Berwick, who served as CMS administrator during the Obama administration, on his analysis. Johnson emphasizes that he does not work for the Warren campaign but was asked as an independent expert to review it. Berwick helped Warren formulate her Medicare for all plan, according to many media reports. Johnson has cowritten a second analysis, with Betsey Stevenson of the University of Michigan and Mark Zandi of Moody’s Analytics, that assesses Warren’s plans to raise enough revenue to properly fund Medicare for all.
Both of Johnson’s analyses used static scoring, which, he says, means “no magic”—or deus ex machina-like events without any factual or statistical basis—entered in. Static scoring measures immediate and direct changes to fiscal policy without accounting for longer-term responses to those changes.
Johnson explains that the cost analysis he did with Berwick used the Urban Institute’s estimates of what a single-payer system (aka Medicare for all) would cost as a benchmark.
The bottom line, he says, is that the revenue-raising and cost-cutting estimates in Warren’s proposal, relative to the Urban Institute’s estimates, are credible. “Every projection has to deal with some uncertainty, but we feel confident there is less here because we were evaluating very specific and plausible policy choices,” Johnson says. “The baseline government forecast of what will happen to costs under the current law is considerably more likely to be wrong on the downside—that is, in being too low—than Warren’s plan for the simple reason that in a single-payer system, you can control health care costs,” he says.
The left-leaning Urban Institute came out with its estimates about two weeks before Warren released her plan. The institute calculated the cost of a single-player “lite” system that would cover the ACA essential health benefits and have no premiums but would have income-based cost sharing. It also crunched the numbers for a more generous system that is closer to what Bernie Sanders has proposed and would cover dental, vision, and hearing services, and long-term care without premiums or cost sharing. The institute’s price tag for the lite system was an additional $17.6 trillion in federal health care expenditures over 10 years and for the more generous system, $34 trillion.
Just before Warren’s plan came out, the Committee for a Responsible Federal Budget, a nonpartisan fiscal policy watchdog, chimed in with its estimate that Medicare for all would cost the federal government an extra $30 trillion in health care spending. The group also came out with a menu of eight different ways to fund the additional spending dollar for dollar, which included a 32% payroll tax, a mandatory public premium of $7,500 per capita, or “impossibly high taxes” on high earners, corporations, and the financial sector.
Last year, the Political Economic Research Institute, a policy group at the University of Massachusetts, came up with a lowball estimate of $13.5 trillion in increased federal spending from 2017 to 2026 for the Medicare for All plan proposed by Sanders. Their math for arriving at that figure is a projected $37.8 trillion in total costs through 2026 minus the $24.2 trillion in existing revenues.
Estimates from the right
Researchers from groups on the conservative side of the spectrum have also run the numbers. Charles Blahous, a researcher at the conservative Mercatus Center, has estimated that federal spending would increase by $32.6 trillion from 2022 to 2031 if Sanders’s Medicare for all bill became law. That puts him in the same ballpark as the other forecasters. His number assumes significant administrative and drug cost savings and a whopping 40% cut in provider payments from existing commercial payers. But this, his high-end estimate, is probably too low, Blahous wrote in his 2018 research report, and he points to the problem of funding it. “Doubling all currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan,” he wrote. Interestingly, the UMass group and Mercatus are close on their projections of increased utilization levels if Medicare for all came to pass. The UMass estimate is an increase of 12% and Blahous’s is 11.3%.
Also on the high side are estimates from the center-right Center for Health and Economy, which in 2016 looked at Sanders’s plan before it was formulated into legislation and concluded that it would increase federal spending by $34.7 trillion between 2017 and 2026. However, with more generous benefits, the group said the tab could run up to $47.55 trillion. The low estimate translates into deficits of $1.1 trillion a year, even with new taxes.
Medicare for all would expand insurance coverage, but there might be some pain for people working in health care. Warren’s plan has some cost cutting, including paying physicians at Medicare rates and limiting administrative costs of 2.3% of total program costs, matching what Medicare spends today. The Sanders plan projects a reduction in annual health care spending of nearly 10%, according to the Political Economic Research Institute analysis. Both Warren’s and Sanders’s plans are predicated on negotiating prices with drugmakers, so pharma is one of the many powerful interests that will mount the barricades if either Warren or Sanders get a chance to push their proposals. The politics of Medicare for all are tricky. Many commentators say Warren’s campaign went flat when she came out with her plan. But for Sanders, Medicare for all seems to attract supporters.
Medicare for all is about tradeoffs, says Marc Goldwein, a senior vice president and senior policy director at the Committee for a Responsible Federal Budget. “It’s about making sure we have enough money for the spending, and that we’re spending as little as we have to but as much as is needed to make sure that the system works,” he says. That means a system that’s more progressive but that might hinder economic growth or a system that imposes taxes on people who aren’t paying premiums today but might be better for overall economic growth, Goldwein says.
Right now, though, tradeoffs just aren’t a concept with much traction on the campaign trail, although the nature of those tradeoffs factor into the true cost of Medicare for all. And while the estimates are all over the place, there’s one thing they all have in common: They are definitely large.
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Paul Lendner ist ein praktizierender Experte im Bereich Gesundheit, Medizin und Fitness. Er schreibt bereits seit über 5 Jahren für das Managed Care Mag. Mit seinen Artikeln, die einen einzigartigen Expertenstatus nachweisen, liefert er unseren Lesern nicht nur Mehrwert, sondern auch Hilfestellung bei ihren Problemen.