Health care costs in the U.S. are too high. We all agree on that. But it’s important to define the word “high” and put costs in proper context.
Sen. Bernie Sanders is promoting Medicare For All (M4A) to “solve” several problems with the current health care system. However, in 1987 the Senator was quoted as saying, “If we expand Medicaid [to] everybody — we would be spending such an astronomical sum of money that, you know, we would bankrupt the nation.“
What’s changed? Is expanding Medicare different than expanding Medicaid? Further, his latest proposal adds dental and vision coverage, leading to an even higher price tag.
There are at least three issues with the “emergency” declared for which M4A is the solution:
- Costs need proper context: Instead of Gross Domestic Product (GDP), the amount of health care spending should be divided by Household Disposable Income (HDI).
- Sen. Sanders has misrepresented projected M4A costs, a misleading claim that’s concerning.
- Sen. Sanders has promised thousands of dollars of savings to participants, reminiscent of President Obama’s promise of savings with Obamacare, which never materialized.
Household Disposable Income Provides Proper Context
Health spending is always measured as a percentage of GDP to show how the U.S. spends “too much” on health care.
But the following graph puts health care spending in better context:
This graph, developed by blogger Random Critical Analysis, explains U.S. health care spending better than any other. It shows spending is appropriate when compared to household disposable income (HDI). Health care spending in the U.S. as a percentage of HDI is reasonable, as the shaded area shows.
For example, the graph shows the U.S. spends nearly 20% of HDI on health care, much higher than the next highest country (second is Switzerland—CHE) at 16%. But the U.S. average HDI per person is 20% higher ($44,000 versus $37,000 for Switzerland). So, U.S. spending is above the projection line but within the gray range.
Household disposable income is the bottom line that affects decisions made by consumers, not the country’s GDP. Never have I said, “We’re all doing well collectively, so I can afford to spend more on my family’s consumption of health care.”
GDP is different than household income. In fact, the U.S. doesn’t even have the highest GDP per capita in the world (there are typically 10 countries with higher per-capita GDP than the U.S., including Switzerland, yet Switzerland’s HDI is 20% lower!) But the U.S. has the highest HDI of any country.
For decades, we’ve been told that the U.S. should not spend such a high percentage of GDP. But this graph says, “Yes, it should!” The difference is that GDP relates but indirectly correlates with health care spending. Household disposable income is so well correlated that this explains why the U.S. spends more on health care — because we have more available to spend.
At a minimum, HDI suggests an additional context to consider to GDP. At a maximum, using health care spending as a percentage of GDP as a measure of its context should stop.
Note that the data reflected is through 2015 for various comparison purposes — because my book uses 2015 for all data. Not much has changed since then (including the effect of Obamacare, where just 4% of the population is enrolled).
M4A Cost Estimates Have Been Misrepresented
Both proponents and opponents of M4A argue that the federal budget will increase by $32.6 trillion over the next 10 years (per the Mercatus Center at George Mason University).
But Sen. Sanders has quoted this $32 trillion figure as the total cost of M4A. It is not; it’s just the increase in the government portion. Further review of the Mercatus study shows that the total national health care spending, regardless of who pays for it, is projected to be $58 trillion over 10 years.
Sen. Sanders said on the 2020 campaign trail in June 2019: “The number $32 trillion is roughly probably right. That sounds like a lot of money, but do you know what happens if we keep the current system, which is the most wasteful and expensive system in the world? Estimates of the cost will be $50 trillion. Medicare for All will be less expensive than continuing the current dysfunctional health care system.”
I’m disturbed by this misrepresentation, comparing an apple and an orange as if declaring health care an emergency allows for solutions that may ultimately cost more in the long run. He implies M4A will save $18 to $26 trillion based on a vague comparison.
In fact, the Mercatus study has been misinterpreted by many that M4A spending could be $2 trillion lower than current spending (implying savings of 3% out of $58 trillion). However, the Mercatus study author Charles Blahous says that claim is false, writing “No, My Study Didn’t Find Medicare for All Would Lower U.S. Health Costs by $2 Trillion“. The study instead shows a range of projections, some of which cost more than the status quo, which is never mentioned by M4A proponents.
M4A Family Savings Have Been Misrepresented
Sen. Sanders also claimed, “Our proposal will save the average middle-class family thousands of dollars a year in health care.“
This sounds like the promise made under Obamacare, which never came to fruition. President Obama infamously stated, “The typical American family will save about $2,500 a year under Obamacare.”
I’m sure there was someone out there who saved $2,500. But a 2016 Kaiser Family Foundation report showed that premiums had increased almost $5,000 per person since Obamacare was enacted! And because we’ve heard the Obamacare lie before, we will never believe a lie again.
Health care in the U.S. is so desired that the best and brightest want to practice medicine here, it benefits patients exceptionally, it develops many amazing interventions and cures, and it’s well positioned to tackle complex problems in the future.
This is a wonderful time to be alive and to benefit from the one health care system that hasn’t succumbed to the pressures of cost and quality, to triage cases in the halls of hospitals like in the UK, and to be fooled by the falsehoods promoted about the cost emergency in our health care system.
There should be options, allowing people who want to save by spending less while others choose to spend more. Market options allow them to do that, instead of a one-size-fits-all government program.
Rich Yurkowitz is a health care actuary and author of the book, Medicare For All, Really?!