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Medicare for All Could Save $318 Billion a Year

Dennis Kucinich cemented my conversion from slogan-swilling Republican to real-world, pragmatic Democrat with his long-standing argument that universal health care would save lives and save money. Bernie Sanders and Elizabeth Warren offer the same argument: covering every American with a public health insurance program not only fulfills moral and public-health obligations better than America’s current patchwork coverage system but also offers the chance to divert hundreds of millions of dollars a year from health care expenses to other private and public goods and services.

The Congressional Budget Office supports this pragmatic contention with a new analysis of five scenarios in which we insure every American through some expansion of Medicare. In every scenario, by 2030, Americans spend hundreds of millions less out of pocket for health care each year. In all but the most expensive scenario (including long-term services and supports—i.e., nursing home coverage), the nation saves between $42 billion and $743 billion each year:

Congressional Budget Office, "How CBO Analyzes the Costs of Proposals for Single-Payer Health Care Systems That Are Based on Medicare's Fee-for-Service Program," December 2020, p. 12.
Congressional Budget Office, “How CBO Analyzes the Costs of Proposals for Single-Payer Health Care Systems That Are Based on Medicare’s Fee-for-Service Program,” December 2020, p. 12.

People’s Policy Project chief Matt Bruenig notes that Option 3 in the chart above most closely resembles the Medicare for All plans we hear from sensible Democrats. Option 3 saves $650 billion in 2030. Adding coverage for long-term care (which, holy cow, we’d better!) to Option 4 changes the overall change in spending from a decrease of $42 billion to an increase of $290 billion, indicating the cost of adding long-term coverage is $332 billion. Add that to Option 3, and we still come out saving $318 billion in 2030.

Every American gets health insurance. Every American can go to the doctor or the nursing home and not worry about going bankrupt. Every American can switch jobs without stressing about how much it will cost to add her family to the new employer’s plan or whether the new employer’s plan includes her usual doctor in its network. And we all, health care consumers and taxpayers alike, end up spending less on health care, to the tune fo $318 billion in one year.

$318 billion—in 2030, according to CBO’s September projection, $318 billion would pay for the Department of Education, Department of Transportation, Department of State, International Assistance Programs, Department of the Interior, Environmental Protection Agency, the Judicial Branch, the Legislative Branch, FDIC, the Smithsonian, and at least a dozen other broad budget lines. $318 billion would cover the Postal Service’s recent average annual shortfalls for 36 years. It would cover the full year’s budget of the Department of Veterans Affairs.

Or we could use that $318 billion to write every taxpayer a $1,000 survival check for the next pandemic.

No matter which way we’d slice it, $318 billion is a huge savings that could do a lot of good for the federal budget and the U.S. economy.

The CBO estimates that over $400 billion a year in savings from single-payer would come from reducing administrative costs. Hospitals and other health care vendors spend a lot of time filing paperwork and figuring out who pays for what, meaning that 12% to 18% of privately insured health expenditures go toward administrative costs, not actual health care. Medicare reduces that paperwork and loses only 2% to administrative overhead. Put everyone on a single-payer plan, eliminate the need to determine eligibility, and CBO says Medicare for All would lower administrative overhead to between 1.5% and 1.8%:

The thing that stands out the most to me in this comparison is CBO’s deep dive into administrative costs. Medicare for All advocates have historically pointed towards the 2 percent administrative costs of traditional Medicare as what we should expect in a Medicare for All system. Critics of this view have typically argued, among other things, that Medicare’s low administrative costs are a mirage driven by the fact that their per-enrollee administrative costs are being divided by disproportionately large per-enrollee health care utilization.

This rebuttal never really made any sense. Private Medicare Advantage plans have a similarly sick and elderly enrollment population, but manage to spend a whopping 13.7 percent of their revenue on administrative expenses. The CBO’s analysis, which starts with the current Medicare administrative costs and then determines how each element of those costs would go up or down in a single-payer system, seems to put this claim to bed once and for all.

Indeed, the CBO finds that the current Medicare administrative costs that are often touted by advocates are actually higher than the administrative costs you would expect in a single-payer system because a large share of those costs are tied up in tasks like eligibility determination and collection of Medicare Part B premiums that would no longer exist in a Medicare for All system.

Thus, the payer administrative costs we could expect under single-payer are not the 6 percent touted by Urban and Mercatus. They are not even the 2 percent of the traditional Medicare program. Rather, they are more like 1.5 to 1.8 percent. These other estimates are therefore missing hundreds of billions of dollars of savings per year on this item alone [Matt Bruenig, “CBO: Medicare for All Reduces Health Spending,” People’s Policy Project, 2020.12.11].

Save lives, save money! Secretary Becerra, once you help President Biden eradicate coronavirus, tell your boss to expand Medicare to cover every American!

10 Comments

  1. Eve Fisher 2020-12-31 13:06

    Not to mention it would save lives. I remember the years before Medicare all too well.

  2. jerry 2020-12-31 13:56

    Operation warped speed has so many wrinkles and valley’s that our current health delivery system is not up to the task of simply vaccinating us. We will probably have to activate the military to get the job done as the republican failures will have denied us something so simple. Look to Europe to see how universal healthcare delivers.

    We need Medicare for all to make sure that our rural hospitals, our rural nursing and assisted living locations have the protection they richly deserve as well as providing needed healthcare for all of our citizens. The only way to get funding is for a complete overhaul of our current system is through Medicare for All. We can only get that through Medicare for all and Medicaid Expansion. We can easily afford it as the numbers show, it will pay for itself in short order.

  3. jerry 2020-12-31 14:09

    Bloomberg says we ain’t happy with republican shenanigans. You just know they’re gonna screw us after Joe takes office too, just like before.

    “A gauge of U.S. consumer sentiment dropped last week to a four-month low as Americans grew more pessimistic about the state of the national economy and the resurgence of Covid-19 cases.

    The Bloomberg Consumer Comfort Index fell 2.4 points in the week that included Christmas to 44.6, the lowest since the period ended Aug. 23, data released Thursday showed. The sentiment measure is now only a third of the way back from its pre-pandemic level.”

    Medicare for all would diminish the anxiety and get people more health conscience knowing that the things going on with them can be treated before they blow up.

  4. Jason 2020-12-31 14:37

    Medicare For All is a very popular idea among Democratic voters. Almost 90% of D voters support it. About half of R voters support it. I would like to see Pelosi put it up for a vote asap. If we can’t pass universal health care during a pandemic at least we can identify those who stand in the way and primary them out of office.

  5. Mark Anderson 2020-12-31 15:21

    Come on folks, you don’t like having your health care tied to your job? This pandemic should have made everyone realize how stupid that is but there’s an awful lot of stupid out there. Even Orwell was a democratic socialist pubs. So many people are conned into trickle down economics it’s hard to imagine passing anything other than by statewide initiatives. The pubs are locked in to stupid and revel in it and will keep the bakesale healthcare trade flourishing while they are in charge. Unfortunely thats a whole lot of cookies and pubs believe it all comes from them.

  6. Jake 2020-12-31 17:18

    I can’t ever understand how/why those other countries can have Health Care for All and we struggle and slog onward and downward in our insurance driven, money eating system! We are (according to the pundits and Republicans) the richest, most powerful country in the world to date-yet have such an antiquated system that makes money for the upper class but at the expense of the middle and lower classes. Innovation and high-tech medical inventions? Probably just as many in other countries as here. I recall the Covid vaccine from Pfizer widely in use now was developed in Germany.
    All told, the Republican party is being a drag on our economy-slowing it down from what it could be. With national health-care, more people not beholden to employees for health care for themselves and families would strike out on their own and develop businesses–pulling themselves up by their bootstraps as they benefit society as a whole.
    The money is there, the savings are there, but there is no THERE there until the GOP finds it in their best interest to do as Americans want them to do! Until then, they will say they have the best health care plan ‘just around the corner”, just trust us!

  7. jerry 2020-12-31 17:45

    Jake, we clearly choose not to believe the truth because we think we are the greatest and that no one else in the world can do anything like our greatness can do. Case in point, China. Look where we are and then look to where they are. Not even close man, not even close. We seem to be capable of only making sweet cakes and bombs.

    “China’s comparative success in controlling the pandemic astonished the West. After some early bumbling by local party officials, China used its real-time locational data for smartphones to isolate individual cases, and fed this mass of information from smartphones into artificial intelligence servers which calculated the probability of new infection clusters. A Chinese government think tank published a detailed report on Beijing’s high-tech response on March 24, ignored at the time by a West that couldn’t believe it was happening. China reportedly has had virtually no new Covid-19 cases since April, apart from a few localized outbreaks quickly isolated and extinguished. Western commentators no longer gloat about China’s “Chernobyl moment.” Asia Times 1/1/2021

    Be prepared for at least 2 more years of failed republican leadership in Washington and so goes South Dakota. We can only hope for the mid terms to help right this sinking barge.

  8. robin friday 2020-12-31 19:45

    We WERE great, as a country, not so long ago. I think we’re no longer there.

  9. SD is 20 per cent nonwhite 2021-01-01 04:52

    Is this on the ballot next year as a ballot question? It can pass.

    Don’t complain. Build and vote!

  10. Richard Schriever 2021-01-01 09:15

    Jake “…..the Covid vaccine from Pfizer widely in use now was developed in Germany.” – BY a refugee immigrant scientist from Turkey.

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