Last week, Charles Blahous at the Koch-funded Mercatus Center at George Mason University published a study suggesting that Bernie Sanders’s single-payer health-care plan would break the bank. But almost immediately, various observers—including Sanders himself—noted that according to Blahous’s own estimates, single payer would actually save Americans more than $2 trillion over a decade. Blahous doubled down on his argument in The Wall Street Journal, and on Tuesday, The Washington Post’s fact-checker accused Democrats of seizing “on one cherry-picked fact” in Blahous’s report to make it seem like a bargain.
The Post is wrong to call this a “cherry-picked fact”—it’s a central finding of the analysis—but it is probably right that single-payer supporters shouldn’t make too much of Blahous’s findings. After all, his analysis is riddled with errors that actually inflate the cost of single payer for taxpayers.
First, Blahous grossly underestimates the main source of savings from single payer: administrative efficiency. Health economist Austin Frakt aptly demonstrated the “bewildering complexity of health care financing in the United States” in The New York Times last month, citing evidence that billing costs primary-care doctors $100,000 apiece and consumes 25 percent of emergency-room revenues; that billing and administration accounts for one-quarter of US hospital expenditures, twice the level in single-payer nations; and that nearly one-third of all US health spending is eaten up by bureaucracy.
Overall, as two of us documented recently in the Annals of Internal Medicine, a single-payer system could cut administration by $500 billion annually, and redirect that money to care. Blahous, in contrasts, credits single payer with a measly fraction of that—or $70 billion—in administrative savings.
Our profit-driven multi-payer system is the source for this outlandish administrative sprawl. Doctors and hospitals have to negotiate contracts and fight over bills with hundreds of insurance plans with differing payments rates, rules, and requirements. Simplifying the payment system would free up far more money than Blahous estimates to expand and improve coverage.
Next, Blahous lowballs the potential for savings on prescription drugs. He assumes that a single-payer system couldn’t use its negotiating clout to push down drug prices, ignoring the fact that European nations and the US Veterans Affairs system achieve roughly 50 percent discounts relative to the US private sector. (Single payer’s only drug savings, he argues, will come from shifting 15 percent of brand-name prescriptions to generics.) Hence Blahous foresees only $61 billion in drug savings in 2022, even though tough price negotiations would likely achieve threefold higher savings.
Third, Blahous underestimates how much the government is already spending on health care. For instance, he omits the $724 billion that federal agencies are expected to pay for employees’ health benefits over the 10 years covered by his analysis, which would simply be redirected to Medicare for All. He also leaves out the massive savings to state and local governments, which would save nearly $3.6 trillion on employee benefits and another $5.3 trillion on Medicaid and other health programs. Hence, much of the “new money” needed to fund Sanders’s reform is already being collected as taxes.
Yes, there will need to be some new taxes—albeit much less than Blahous estimates. But those new taxes would just replace—not add to—current spending on premiums, co-pays, and deductibles. Additionally, at least some of the new taxes would be virtually invisible. For instance, the $10 trillion that employers would otherwise pay for premiums could instead be collected as payroll taxes. Similarly, Medicare for All would relieve households of the $7.7 trillion they’d pay for premiums and $6.3 trillion in out-of-pocket costs under the current system.
It’s easy to get lost in the weeds here. But at the end of the day, even according to Blahous’s errant projections, Medicare for All would save the average American about $6,000 over a decade. Single payer, in other words, shifts how we pay for health care, but it doesn’t actually increase overall costs—even while providing first-dollar comprehensive coverage to everyone in the nation. The Post’s fact-checker is wrong: Single-payer supporters can and should trumpet this important fact.
Of course, the most important benefits of single payer are altogether invisible in economic analyses like the one performed by Blahous. No matter what injury or illness we faced, we would be forever freed from one great worry: the cost of our care. It’s hard to put a price tag on that kind of freedom. Yet, paradoxically, even the slanted analysis of a libertarian economist provides evidence that it would be fiscally responsible.
