News Release

Even Koch-Backed Think Tank Finds Medicare for All Would Cut Health Care Spending

The Intercept reports: “Koch-Backed Think Tank Finds That ‘Medicare for All’ Would Cut Health Care Spending and Raise Wages. Whoops.”

The Intercept and other media reporting on this are citing the work of Drs. David Himmelstein and Steffie Woolhandler. They are distinguished professors of health policy at the City University of New York at Hunter College and lecturers in medicine at Harvard Medical School. They have written an analysis of the work of the Koch-backed think tank, the Mercatus Center at George Mason University, and it is now posted in full at the accuracy.org blog.

They write: “The Mercatus Center’s estimate of the cost of implementing Sen. Bernie Sanders’ Medicare for All Act (M4A) projects outlandish increases in the utilization of medical care, ignores vast savings under single-payer reform, and fails to even mention the extensive and well-documented evidence on single-payer systems in other nations — which all spend far less per person on health care than we do. Moreover, the Mercatus Center admits that universal first dollar coverage under Sen. Sanders’ bill would cause little increase in the nation’s total health expenditures; it would merely shift expenditures from private to public sources.

“We outline below some of the most glaring errors in the Mercatus Center analysis of Medicare for All, which was led by Charles Blahous.

“1. Administrative savings, Part 1: Blahous assumes that insurance overhead would be reduced to 6 percent of total health spending from the current level of 13 percent in private insurance. Although overhead in Canada’s single payer system is only 1.8%, Blahous justifies his 6 percent estimate by citing Medicare’s current overhead, which include the extraordinarily high overhead costs of private Medicare HMOs run by UnitedHealthcare and other insurance firms. However, Sen. Sanders’ proposal would exclude these for-profit insurers, and instead build on the traditional Medicare program, whose overhead is less than 3 percent. Moreover, even this 3 percent figure is probably too high, since Sanders’ plan would simplify hospital payments by funding them through global budgets (similar to the way fire departments are paid), rather than the current patient-by-patient payments. Hence a more realistic estimate would assume that insurance overhead would drop to Canada’s level of about 1.8 percent. Cutting insurance overhead to 2 percent (rather than the 6 percent that Blahous projects) would save approximately $2.9 trillion more than Blahous estimates over a 10-year period. …

“Moreover, even Blahous admits that Sanders’ program would cover all of the uninsured, and upgrade coverage for the vast majority of Americans who currently have private insurance or Medicare, with little increase in total spending for the nation. For instance, even his inflated cost projections foresee a NET increase of only $17 billion in 2022, equivalent to about a one-third of one percent increase in national health spending. In effect, Blahous admits that covering the uninsured and upgrading coverage for most others could be achieved at virtually no additional cost through a single payer reform.”

DAVID HIMMELSTEIN, STEFFIE WOOLHANDLER, M.D., himmelhandler at comcast.net, @swoolhandler