Thanks to recent primary victories and an enormous shift in momentum, Vermont Senator Bernie Sanders is back in the race for the Democratic presidential nomination. However, Sanders has recently come under attack for one of his most important policy proposals: the implementation of a single-payer healthcare system. According to healthcare experts, Sanders is off on his cost projections for a national Medicare system by over a $1 trillion, a mistake that means the difference between providing aid to millions of Americans and crippling them financially.
In debates and speeches, Senator Sanders has described his single-payer plan as a panacea, the end to all of America’s healthcare problems. “Under Bernie’s plan, Americans will benefit from the freedom and security that comes with finally separating health insurance from employment,” the Sanders website explains. This freedom will “help the American people live happier, healthier and more fulfilling lives.” In many ways, the Sanders campaign is correct. A national single-payer system would provide coverage to every American, remove cost barriers to treatment, encourage preventative care and allow workers greater freedom of employment, since they no longer rely on employer-based insurance. Single-payer would create a more efficient, effective healthcare system, moving the United States toward the model that has worked so well for countries like Canada and the United Kingdom.
However, a single-payer system will be very costly, far more costly than the Sanders campaign is advertising. In a recent study, healthcare expert Kenneth Thorpe of Emory University concluded that Senator Sanders’ plan would cost an average of $2.47 trillion per year from 2017 to 2026, a significant increase from the $1.377 trillion per year estimated by the Sanders campaign. In order to finance a national medicare system, Thorpe projects that the government would need to enact a 14.3 percent payroll tax on employers and a 5.7 percent income-based premium. This combined 20 percent tax dwarfs the combined 8.4 percent projected tax proposed by the Sanders campaign. And this figure makes all the difference.
The disparity in numbers calls Thorpe’s credentials into question. Thorpe does not analyze Bernie’s plan from the perspective of a conservative skeptic or a Heritage Foundation economist but rather as a single-payer proponent who was hired by the Vermont legislature in 2006 to analyze and promote the state’s single-payer plan. Thorpe was one of the bill’s biggest proponents — alongside Senator Sanders — arguing that a single-payer healthcare system would save Vermont $1.1 trillion over 10 years.
However, Vermont too underestimated the costs of implementing a single-payer system. In order to finance the system, the state would have had to implement an 11.5 percent payroll tax on businesses and sliding individual premiums of up to 9.5 percent of individuals’ income. Governor Peter Shumlin was forced to admit that this financial burden, far close to what Thorpe projects, “might hurt our economy.”
In the wake of that failure, Senator Sanders has taken his single-payer proposal to the national stage. But according to Thorpe, there are a number of errors in Sanders’ plan. One of the best arguments for a single-payer system is that government-operated healthcare boasts lower administrative costs than private healthcare. The United States currently spends twice as much as Canada on administrative costs. Domestically, administrative costs account for about two percent of Medicare spending, compared to 17 percent administrative costs incurred by private insurance companies. This type of efficiency in the public sector factors heavily into Sanders’ plan, which predicts that lower administrative costs will account for $438 billion in savings. However, for a plan that effectively overhauls a century of practice and one of the country’s largest industries, a reduction 16 percent reduction in healthcare spending is incredibly ambitious. Thorpe projects a more measured decline of 4.7 percent in healthcare costs.
Senator Sanders also assumes that, since the government will be able to bargain down the costs of prescription drugs, the country will benefit from $324 billion per year in prescription drug savings. However, as Thorpe notes, “in 2014, private health plans paid a total of $132 billion on prescription drugs and nationally; we spent $305 billion.” So Sanders’ campaign would be projecting negative healthcare spending. While the campaign revised its projections down to $241 billion after an article in Vox, this oversight is concerning.
However, perhaps the greatest flaw in Senator Sanders’ single-payer projections is that his plan assumes huge healthcare cost savings while creating incentives for people to consume more healthcare, not less. A single-payer plan eliminates cost-sharing and cost-control mechanisms like deductibles, coinsurance and copayments. Doing so will encourage Americans to go see the doctor more regularly, creating the type of preventative care that catches illnesses before they become more costly and deadly. This saves money. But, according to Thorpe, the Sanders campaign is underestimating how much more care Americans would consume under a single-payer system. Thorpe assumes a 10 percent increase in healthcare consumption, while Sanders estimates a six percent increase, as well as $216 billion per year in savings due to better care.
After all costs are incurred, Thorpe sees Sanders’ single-payer system placing a far greater burden on the American people than the senator projects. Sanders believes that savings from reduced healthcare costs will more than offset increased taxes, saving a family of four an average of $5,800 per year. But Thorpe’s estimates find that 71 percent of households would be worse off under Sanders’ single-payer system. 71 percent of working households, 65 percent of young adults and 85 percent of working households on Medicaid would pay more, even after healthcare cost reductions.
If Donald Trump has all the best words, Senator Sanders has all the best ideas. Bernie has won seven of the last eight primaries on a platform of smart, evidence-based reforms that build on the successes of the Obama administration and guide our country toward progressive reform. However, throughout the campaign, Sanders has not demonstrated the nuanced policy knowledge and political strategy necessary to implement his platform. It is not Sanders’ ideas that I doubt. It is his execution.
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