The $11 trillion question Chris Cillizza can't answer
Fact-checkers and political reporters in the mainstream media keep bungling their coverage of Medicare-for-all. CNN's Chris Cillizza wrote a recent inquisition of Alexandria Ocasio-Cortez, savaging her for not having a fully worked-out tax increase plan, while studiously ignoring her argument that you could pay for the program by scooping up the money currently going to insurance premiums. PolitiFact gave Florida Democratic gubernatorial candidate Andrew Gillum a "half true" for accurately describing a Mercatus Center report on Medicare-for-all.
The background assumption that saturates all this garbage coverage is that Medicare-for-all would mean a large increase in spending, and, therefore, the onus is on its advocates to provide detailed explanations of how it would be paid for.
But in reality, it is the status quo which is actually hideously unaffordable and projected to get much, much worse over time. If anyone should be interrogated about wasted money, it is centrist Medicare skeptics and their tut-tutting media enablers.
First off, putting together a workable Medicare-for-all payment plan is quite straightforward, as I outlined in detail here. The key thing to remember is that Americans already pay enough in taxes to fund a decent Medicare-for-all system — we just have a colossal amount of wasteful spending. Therefore, by comparison to peer nations, I argued that an aggressive Medicare-for-all plan could save roughly $160 billion in administrative costs, $260 billion in drug costs, and $400 billion at least in cuts to bloated service prices. Taken together, that would knock about 4 points of GDP off America's wildly excessive health-care spending, leaving only a modest tax increase of $210 billion to make up the remaining gap, which could be achieved with a 2-3 percent payroll tax or some other revenue stream. Hey presto, everyone gets covered with almost no cost-sharing at all.
This is obviously not a super-rigorous way of estimating things, but with such a gigantic reform, there's really no way of knowing what will happen with any degree of precision. That's doubly true because the price tag of Medicare-for-all will depend greatly on how the system is designed — especially how aggressive policymakers will get with cost controls. But we can say that my overall spending targets — which would merely erase most of the huge margin by which the U.S. system is the most expensive in the world, leaving it still in first place — is absolutely realistic. We're talking about methods and prices that are demonstrated to work in other rich countries (plus a comfortable margin of error), not some radical, untested utopian policy.
That brings me back to the status quo. This year the Centers for Medicare and Medicaid Services estimated that total U.S. health-care spending (that is, all public and private sources combined) was $3.5 trillion, or 17.9 percent of GDP. The agency also projected that it would increase at 5.5 percent per year through 2026, at which point it would cost $5.7 trillion per year, or 19.7 percent of GDP. That gives a total cost of $45 trillion over 10 years.
It's often lost in the discussion, but half the point of Medicare-for-all is to bring the ludicrous expense of the American health-care system under control. Americans spend outrageously more than other rich nations on health care, for no health benefit whatsoever — because we are ripped off by some providers and drug companies, and because our irrational, complicated, and fragmented system means wasting vast sums on pointless administrative complexity.
So how much would Medicare-for-all save over the unaffordable status quo? It's hard to say with complete certainty, but let's walk through an estimate.
Under my sketched proposal, I presume Medicare-for-all would account for all health spending, since it would be so generous. (There might, in fact, be some private spending, but for the purposes of a rough estimate, they would be negligible.) Let's say cost control measures succeed in cutting health spending down to an initial 13.9 percent of GDP, or $2.7 trillion in 2017. (This figure is different than my previous one, because I originally used GDP estimates from the Organization of Economic Co-operation and Development, not the CMS.)
Next, let's conservatively presume that spending continues to grow at the same 5.5 percent per year as the CMS estimate. (If other countries are any guide, it should be far lower, but let's not cut Medicare-for-all any breaks here.) Starting with an initial cost of $2.7 trillion, that means an increase to $4.17 trillion by 2026, for a total cost of $33.8 trillion over 10 years.
So that means an aggressive Medicare-for-all program could save something like $11.2 trillion in total national health expenditures over the decade starting in 2017, relative to the projected status quo. And very likely it could be a lot more than that if policymakers decided to really crack down on abusive provider pricing schemes.
This is the background one must keep in mind whenever the very serious fact checker brigade starts harrumphing into their Beef Wellington about the costs of socialism. Under the status quo, the United States will dump something like $11 trillion over a decade directly into the garbage disposal because we don't have enough socialism in the health-care sector. That $11 trillion could easily fund a generous paid leave scheme, top up Social Security and disability benefits, and pay for a solid green infrastructure program, with a lot left over.
To get that money, we'll have to drastically restructure the health-care system and pay a bit more in taxes. But make no mistake, the national savings would be tremendous.