M4A Would Deliver Authoritarian, Unaffordable, Low-Quality Care

The far left has made “Medicare for All” its rallying cry. Medicare is the 55-year-old federal program that provides health insurance—if that’s the right term—to 58 million elderly and disabled U.S. residents. Sen. Bernie Sanders (I-VT) has introduced, and Sen. Elizabeth Warren (D-MA) has endorsed, legislation that would expand Medicare by enrolling all 319 million or so lawful permanent U.S. residents, subsidizing more health services (e.g., long-term care), and making all covered services “free” by eliminating all patient cost-sharing.

Attempting to describe the scope, costs, and political implausibility of Medicare for All tests the limits of human language. If Medicare for All has any merit, it is that so many of its costs are foreseeable that it will never become law. At least, not all at once. The true danger of Medicare for All is that it is acting as a stalking horse for piecemeal proposals that would end up in the same place but hide the costs until it is too late.

We will begin by deconstructing the ideological narrative—what Medicare for All supporters consider facts—upon which support for the idea rests.

Every Other Nation Is Doing It, So Why Can’t We?

The cornerstone of this ideological narrative is the idea that Medicare for All is feasible because every other advanced nation has already enacted it or something similar. Sanders’s web site 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.” In fact, not a single advanced nation has ever implemented what Medicare for All supporters propose.

Under Medicare for All, a single entity—the U.S. government—would administer a health care program that would centrally plan a $4 trillion health sector for a diverse population of 319 million souls. No advanced nation—not Canada, the United Kingdom, or even Sanders’s beloved Scandinavian countries—have a health system that compares to the scale, scope, and centralized decisionmaking of Medicare for All.

Medicare for All would control access to health care for far more people than any advanced nation’s system. The United Kingdom’s National Health Service covers a population one-fifth as large as the United States, with nearly eight times the population density. Canada’s system covers a population smaller than the state of California. Texas and California are each larger than the combined populations of Denmark, Finland, Iceland, Norway, and Sweden.

A Medicare for All program would control far more resources than any other nation’s health system. In terms of dollars, the U.S. health sector is three times as large as China’s, 10 times the size of India’s, and larger than the health sectors of the next 22 OECD countries combined.

It would centralize control over the health sector more than any advanced nation. Under Medicare for All, the national government would dictate a uniform set of benefits and dictate prices for all covered medical, dental, and long-term care services. Canada’s health system leaves many of those decisions to provincial governments, which make varying decisions based on local needs. Canada’s health system is less centralized than even the U.S. Medicaid program. The British and Scandinavian systems likewise delegate much decisionmaking to local authorities.

No advanced nation has a health system that is as closed as Medicare for All. Sanders’s bill would create a true single-payer system first by guaranteeing coverage of everything under the sun—and then outlawing private insurance that covers anything the government covers: “it shall be unlawful for a private health insurer to sell health insurance coverage that duplicates the benefits provided under this Act.” If a right to health care means anything, it means consumers must be free to pool their resources to obtain better health care. Medicare for All explicitly prohibits that right.

Advanced nations don’t treat their citizens that way. Just in case the government-run health systems in Denmark, Finland, Norway, Sweden, and the United Kingdom aren’t perfect, those governments leave consumers free to purchase private insurance. Millions of Danes, Finns, Norwegians, and Swedes seeking “greater choice of private providers” and “to avoid waiting lists for elective treatment” purchase supplemental coverage from private, for-profit insurance companies.

Not even Canada goes as far as Medicare for All in limiting the freedom to pool medical expenses. While Canada prohibits private insurance for services the government covers, its health system does not cover items that Medicare for All would. Canadians are therefore free to purchase, and a majority do purchase, coverage for such services as outpatient prescription drugs and dental care from (for-profit) private insurers. Even Canadians have more health freedom than Americans would under Medicare for All.

Iceland is an example of an advanced country with almost no private health insurance. But Iceland’s health system differs from Medicare for All in other important ways. It has cost-sharing for primary and outpatient care, and generally doesn’t cover dental care. More important, health spending in Iceland is 0.05 percent of U.S. health spending and its population is smaller than that of the 56th largest U.S. city (Honolulu). Iceland’s health system is at best a Medicare pilot program, and those tend not to scale. (More about why below.)

Medicare for All would be a titanic, unprecedented, and uncontrolled experiment with the health of every American.

It Would Cost Less, If You Ignore History

A related foundational precept of this ideology is that Medicare for All would cause U.S. health spending to fall in line with the rest of the world.

This precept also has a patina of plausibility. Other advanced nations issue a government guarantee of access to care for all citizens, and even when we control for population and size of the economy, they all spend far less than the United States. Compared to the average for OECD countries, the United States spends nearly twice as much of its GDP (16.9 percent vs. 8.8 percent) and 2.7 times as much per capita ($10,586 vs. $3,994). Medicare prices, moreover, are lower than private-sector prices. Private insurers pay hospitals two to four times what Medicare pays for the same services. Since Sanders’s bill would pay providers current Medicare prices—including for patients who now fetch those higher private-payer prices—spending must go down. Even former Republican Medicare trustee Charles Blahous agreed in a study he did for the Koch-funded Mercatus Center. Q.E.D.

The first problem with this argument is the unstated premise that government is good at setting prices.

Though health care providers tend not to make a stink when it happens, Medicare is as likely to set prices too high as too low. Need an example? When progressives complain Medicare Parts B and D should reduce the prices paid for prescription drugs, they are admitting tacitly what libertarians acknowledge explicitly: the government is overpaying. Want another? Gundersen Health System in Wisconsin found its input cost for total knee replacements, including the surgeon and anesthesiologist, was “at most” $10,550. The average Medicare payment for that procedure (DRG-470) exceeded that amount in every state, reaching as high as 215 percent of it in Maryland and 238 percent in Alaska.

Markets also get the prices wrong—all the time. The difference is that while competitive markets constantly push prices toward marginal cost, government pricing errors do not self-correct. The Medicare Payment Advisory Commission (MedPAC) complains about this problem all the time. In 2018, the commissioners wrote of their “long-standing concern” that Medicare overpays procedure-based specialists and radiologists relative to primary care physicians. The decades-long fight over whether the government should “negotiate with drug companies”—as if it isn’t already negotiating, and losing—is another case in point.

Medicare for All supporters respond by pointing to the gap between Medicare prices and frequently higher private-sector prices, as if that spread somehow makes government look good. On the contrary, government itself widens that spread by doing lots of things to drive private-sector health care prices higher. Not least, the federal tax code encourages excessive insurance and discourages price-consciousness among the 178 million Americans with employer-sponsored insurance. Prices for hormones and oral contraceptives, for example, soared at the precise moment the federal government mandated 100 percent coverage of hormonal contraceptives. Even Medicare and Medicaid push private prices higher through various mechanisms. Medicare for All supporters are therefore lauding government and condemning markets for a problem that government largely creates.

A second problem is the mind-blowing assumption that Congress can hand health care providers the sort of pay cut Sanders’s bill envisions.

The Sanders bill proposes to pay all providers the same prices Medicare currently pays, which are more than 40 percent less than the prices they receive for privately insured patients. Warren assumes Medicare for All would increase health care consumption more than 20 percent yet leave total health care spending no higher than under current law. In other words, she assumes providers would deliver 20 percent more output—drugs, doctor’s visits, and hospitalizations—for zero additional pay. Blahous implies that—if Sanders’s bill were to pass Congress with those price cuts intact—U.S. health spending would fall. Whether Medicare for All would reduce health care spending is thus a question of how likely it is that such price reductions would pass Congress.

How likely is it? It’s not impossible, just highly improbable.

Members of Congress are hesitant in the extreme to do anything that cuts either government or private payments to doctors and other health care providers back home. My colleagues Charlie Silver and David Hyman wrote a book—Overcharged—that chronicles how the health care industry games Medicare and other government programs to keep excessive prices and payments coming their way. In November, they chronicled more than half a dozen ways the industry has worked all three branches of government in recent years to keep excessive Medicare payments flowing. As I write, I am marveling at a banner ad from an industry-backed conservative group that, in the name of fighting socialism, aims to prop up the excessive prices Medicare pays to drug companies.

It is difficult to overstate how incapable Congress is of limiting health spending at all, much less to the extent Medicare for All supporters are promising. The New York Times reports the debate over surprise medical bills offers “a miniature version” of a debate over Medicare for All. There, opposition from a small share of physicians who would see their incomes fall just 20 percent was enough to scuttle legislation that would have saved consumers money by curtailing surprise medical bills. Reporter Margot Sanger-Katz summarizes:

Even when you have bipartisan support, bicameral support, support from the White House, support from really important and influential consumer groups, and the health insurance industry spending millions itself to advocate for this policy, and employer groups spending money trying to advocate for the policy[, and] the public polling being so overwhelmingly in favor of this, and the fact that this is not really harming all doctors or all hospitals, it really is harming a subset of doctors, a subset of hospitals, many of whom are doing something shady and unscrupulous—[it] still couldn’t happen.

A representative of the left-leaning group Families USA lamented that “not getting surprise bills done does not bode well” for Medicare for All’s ability to restrain spending.

The Affordable Care Act reinforces the point. The only way it was able to overcome provider opposition to its reductions in the rate of growth of future Medicare spending was to offset every $1 in forgone payment increases with $2 in new subsidies to providers. Even then, many of the limits on provider incomes did not survive. The Obama administration gutted a quality-improvement program in a way that also gutted the ACA’s lower payments to private insurers participating in Medicare (more on that below). The Cadillac tax, the Independent Payment Advisory Board, and other provisions died bipartisan deaths in Congress. The lesson of the ACA is that government has to spend $2 just to save $1, and even then it often doesn’t work.

It is no mystery why Congress keeps Medicare spending excessively high and cannot enact the sort of cuts Medicare for All supporters keep promising. The benefits of excessive Medicare spending fall on highly organized interest groups: health care providers (who spend money on lobbying and contributing to political campaigns) and seniors (who vote). Though these groups constitute a minority of the population, they spend and vote on health issues far more than the rest of us. So Congress caters to them, whether or not it’s good for the nation as a whole.

This dynamic is so intractable, even some who advocate single-payer in general oppose enacting it here. The late Princeton University health economist Uwe Reinhardt helped the Taiwanese government implement a single-payer system. Yet he had a very particular reason for counseling against adopting single-payer in the United States:

I have not advocated the single-payer model here because our government is too corrupt. Medicare is a large insurance company whose board of directors accepts payments from vendors to the company. In the private market, that would get you into trouble.

U.S. health care spending is excessive because of Medicare, not in spite of it.

A “Right”—to Expensive, Dangerously Low-Quality Care

The final fairy tale we will examine here is the notion that expanding Medicare to the entire population would guarantee access to care by making health care “a right, not a privilege.” On the contrary, Medicare for All would trample health care rights. The only right it would guarantee is a right to dangerously low-quality medicine.

President Barack Obama may have been both incorrect and insincere when he endlessly pledged that “if you like your health plan, you can keep your health plan” under the Affordable Care Act. Nevertheless, the reason he made that false promise is that he and other Americans intuitively sense that the most important health care right is the right to make one’s own health care decisions. As Obama put it in an address to Congress, the ACA “would preserve the right of Americans who have insurance to keep their doctor and their plan” (emphasis added).

As noted above, Medicare for All would leave Americans with even less freedom to buy private insurance than Canadians—and Canada’s Supreme Court held that country’s ban on private insurance to be a human rights violation.

Indeed, prohibiting private insurance would be—to coin a phrase—a Medicare for All-sized violation of Americans’ health care rights, quickly throwing nearly 200 million Americans out of their private health insurance plans. The employer-sponsored plans that cover 178 million Americans? Gone. The individual-market plans that cover 14 million Americans? Gone. (The 20 million, or one third, of Medicare enrollees and the 54 million, or two thirds, of Medicaid enrollees in “private” plans don’t exactly have a right to have the government subsidize private insurers on their behalf. Still, those plans? Gone. Good luck selling that to 56 percent of Minnesota seniors.)

Taxes also infringe on the right to make one’s health care decisions. Blahous estimates that even if Congress doubled all federal individual and corporate income taxes, it would not be enough to pay for Medicare for All. The Council of Economic Advisors estimates the necessary tax increase would leave the economy 9 percent smaller than otherwise. (The Great Recession erased just 4.3 percent of GDP.) The CEA projects “free” health care would leave households with $17,000 less to spend on non-health items. Free health care sounds great. But if the taxman leaves you penniless, you’re not really the one calling the shots.

After repealing your health care rights, Medicare for All would replace them with dangerously low-quality health care. Part of the problem is rationing by waiting, a problem that plagues health systems in United Kingdom, Canada, and elsewhere. The Congressional Budget Office projects that the Sanders bill would create “a shortage of providers, longer wait times, and changes in the quality of care.” But there’s a larger problem inherent in any single-payer system, whether it exhibits waiting lists or not.

Health care is so complex that every method of paying health care providers creates perverse incentives. Promoting all dimensions of quality requires open competition among multiple payers with different payment and delivery systems. A single-payer system, no matter what form it takes, cements in place one set of perverse incentives and eliminates the competitive pressures that would otherwise rescue patients from the low-quality care that results.

Take Medicare, which is the largest purchaser of health care services in the United States and likely the world. Medicare has spent five decades rewarding low-quality care and punishing high-quality care. Former Medicare administrator Tom Scully complained, “Everyone with an M.D. or D.O. degree gets the same rate [from Medicare], whether they are the best or worst doc in town. Every hospital gets the same payment for a hip replacement, regardless of quality.”

It’s worse than that. MedPAC warns that Medicare traditionally has not rewarded doctors and hospitals who reduce medical errors, hospital acquired infections, medication errors, or unnecessary re-admissions, and often it punishes them instead: “Medicare often pays more when a serious illness or injury occurs or recurs while patients are under the system’s care.” Medicare thus has a “neutral or negative” impact on the quality of care. And we wonder why preventable medical errors are the third-leading cause of death in the United States.

Primary care is relatively simple, right? In 2018, MedPAC wrote, “The Commission has also become concerned [Medicare’s physician] fee schedule—with its orientation toward discrete services that have a definite beginning and end—is not well designed to support primary care, which requires ongoing care coordination for a panel of patients.” Note the recency of “become.” Medicare for All would turn the entire health system over to central planners who took 50 years to notice they were rewarding low-quality care, and who still haven’t fixed that glitch.

Pilot programs to improve quality or reduce spending in Medicare usually flop, and those that succeed don’t scale. Decades after markets developed health systems that maximize incentives to reduce hospital acquired infections, Medicare is still only taking baby steps in that direction. In one Medicare quality-improvement program, one fifth of the hospitals that received bonuses had below-median quality scores. When the ACA combined cuts to Medicare-participating private insurers with bonuses for those that provided high-quality coverage, Medicare rescinded the cuts and sabotaged the quality incentives by offering the bonuses meant for high-quality plans to mediocre plans, too. On and on it goes.

Some argue Medicare for All would better prepare the United States to fight pandemics like the current coronavirus (SARS-CoV-2/COVID-19) outbreak. Yet many British doctors argue the NHS is unprepared, and cite tens of thousands of unfilled clinician positions. Medicare has spent 55 years discouraging efforts to contain infections by shifting the financial cost of preventable infections from health care providers to taxpayers. Medicare pays ambulatory surgical centers regardless of whether they give their clinicians flu vaccines; as of next year, it won’t even measure whether they do. Health systems like Kaiser Permanente internalize those costs and thus tend to do a better job of vaccinating both their enrollees and clinicians. Medicare for All would eliminate that superior model, subsidize the model that discourages efforts to fight contagion, and—at least under the Sanders bill—it would result in less health care capacity, including fewer hospital beds.

Conclusion

What is it about a president who doesn’t understand how viral immunity works and a vice president who is coy about whether he thinks organisms mutate and evolve that makes Medicare for All supporters think letting the government control the entire health system would better prepare us for pandemics?

People who understand the current Medicare program have a difficult enough time defending it, let alone arguing we should expand it. When Medicare supporters talk about Medicare becoming an “active purchaser,” they are tacitly acknowledging that after 55 years, Medicare is still rewarding high-cost and dangerously low-quality care. When they complain about fragmentation and talk about the need for medical teams and coordinated care, they are complaining about Medicare. When they complain about unnecessary re-admissions, or the lack of electronic medical records and comparative-effectiveness research, they are complaining about Medicare. They promise that reform is on the way. And they are right: reform is always on the way. It never arrives.

That’s why even many Democrats oppose the idea. Rep. Donna Shalala (D-FL), who ran the Medicare program as Secretary of Health and Human Services under President Clinton, says, “No one I have met who supports Medicare for All understands the Medicare program.” A left-leaning scholar of international health systems was more blunt when he bellowed into my ear, “Bernie knows absolutely nothing about health care!”