By: Abhinav Arumilli

Many of the Democratic nominees for the 2020 election have quickly backed Senator Sanders ambitious plan to provide medical service to everyone in the U.S.

To understand how this is to work in the U.S, we first need to look directly at Bernie’s campaign website and what he proposes.

“Joining every other major country on Earth and guaranteeing health care to all people as a right, not a privilege, through a Medicare-for-all, single-payer program.”



-Bernie Sanders

I agree with this sentiment, however, the problems with this proposal are not ideological or moral, but rather if it’s practical and is able to work in the U.S.

Continued: Bernie Sanders

“And to lower the prices of prescription drugs now, we need to:

Allow Medicare to negotiate with the big drug companies to lower prescription drug prices with the Medicare Drug Price Negotiation Act.

Allow patients, pharmacists, and wholesalers to buy low-cost prescription drugs from Canada and other industrialized countries with the Affordable and Safe Prescription Drug Importation Act.

Cut prescription drug prices in half, with the Prescription Drug Price Relief Act, by pegging prices to the median drug price in five major countries: Canada, the United Kingdom, France, Germany, and Japan.”





Let’s look at this plan carefully….

The first proposal is to make Medicare “negotiate” with drug companies. However, as seen in the status quo this simply has not been effective. “Negotiations” are successful in other countries, such as Europe, because it is not limited to only negotiating with big drug companies but rather negotiating with manufacturers themselves and by setting reference pricing standards. Essentially, this can not be a half-step in this situation as that leads to more incurred costs as seen by Medicare and Medicaid today. Instead, the way America should be combating this problem is through a system of reference pricing, where we group drugs of certain classes and give them a range of prices. This would lead to increased innovation as companies would try to develop drugs that are different from current drugs so it would not be subject to reference pricing. In turn, the profit that these companies make would lead to other companies producing similar drugs, thus overtime leads to new advancements being pushed into reference groups.

The second proposal stated is to import drugs from Canada and other industrialized countries. I agree wholeheartedly with this, not only specifically in the drug industry but across the economy as a whole. Specialization of economies due to free trade are important and should not be blocked by goverment proposals that tax outside goods (tariffs).

Finally, the third proposal mentioned is the Prescription Drug Price Relief where we peg our drug prices to other European countries. This is a step towards reference pricing, but a very bad step. Simply pegging our drugs to other countries would not work as much of the innovation for drugs (and therefore the costs) are done in America. By implementing a pegging system without any indexing to innovation costs would lead to less innovation and more prevalence of less quality, generic drugs. The only counter to this that would be practical is the argument that by placing the burden of innovation to other countries, we can enjoy the same cheap drug prices the European countries have off American innovation. However, this is a large gamble if no other country can pick up the slack leading to a stagnation in innovation for drugs across the world at a time where major steps towards curing deadly diseases, like cancer, is taking place.

But…. How do we pay for this plan?

Again, we have to take a look at Senator Sander’s proposals in an article for the Senate.

7.5 percent income-based premium paid by employers Revenue raised: $3.9 trillion over ten years.

Businesses would save over $9,000 in health care costs for the average employee under this option An employer’s first $2 million in payroll would be exempt from this premium protecting small businesses throughout the country.

This, at least to me, completely makes sense and it’s a perfectly viable way to bring in a large amount of money.

4 percent income-based premium paid by households Revenue raised: $3.5 trillion over ten years.

However, I completely disagree with the proposal above. I believe a “flat tax” on all of 4% goes against the idea of a progressive tax, which I support, and simply burdens the middle and lower economic class disproportionately. Increasing taxes on the middle along with the lower class also has the negative effect of reducing spending in the economy more than a similar tax on the rich due to the amount the rich save of thier income compared to the middle and lower classes.

Savings from Health Tax Expenditures

Essentially, what this does is take the tax exemptions that are in place due to the current system and eliminates them due to Medicare-For-All. This is a clean way to pay for it and also simplifies the tax code we have today.

The rest of the ways to do this is essentially to make the rich pay for it, and these policies will be discussed in a future article. We will also be discussing many of the critiques of the plan.

Recommended Reading:

https://www.sanders.senate.gov/download/options-to-finance-medicare-for-all?inline=file