Fresh off his surprisingly close challenge of Hillary Clinton in the 2016 primaries – and her ignominious defeat in the general election – Bernie Sanders has emerged as the leader of progressive activists in American politics. The Senator from Vermont went back to identifying as an independent almost as soon as the Democratic primaries ended, but his influence on the Left wing of the party has only grown stronger. Sanders plans to deploy that in service to his pet cause – a “Medicare for all” single-payer system. And he plans to force Democrats to either get behind it or face primary challenges of their own.
Some Democrats have begun to get nervous, Politico reports, over the pressure to embrace socialized medicine as their central policy. Others appear to have more enthusiasm for Sanders’ campaign, including the vanguard of the Democrats’ next generation of leadership, including Senators Kamala Harris, Cory Booker, and Kirsten Gillibrand. “Our view is that within the Democratic Party, this is fast-emerging as a litmus test,” former Sanders pollster Ben Tulchin told Politico.
The moment might be ripe for Democrats to act. Recent polling has shown that the idea of a Medicare-driven single-payer system has gained traction with voters. In February 2016, a CBS News poll showed voters split on the proposal, 44/47, a slight improvement over a 43/50 result in December 2014. In a Quinnipiac poll taken last week, however, a majority of registered voters thought it was “a good idea,” by a 51/38 margin. The collapse of the Republican effort to repeal ObamaCare may have opened a window for this long-desired progressive policy to gain traction in Congress.
If that’s the case, then why are some Democratic incumbents nervous about Sanders’ “litmus test”? They know it’s a trap – because they’ve seen the bill for single-payer systems, both on a federal and state level. Plus, more recent experience shows that it might end up hurting the people who can afford it least.
Sanders’ Medicare-for-all plan generated significant controversy even among Democrats. A nearly identical proposal from Rep. John Conyers would add $15 trillion in federal spending over and above current costs from medical entitlement programs, The Wall Street Journal reported nearly two years ago. At the time, Sanders’ called it a fair estimate of the cost of Sanders’ proposal, but it’s almost certain that the price will have gone up since then. Such a cost would increase annual federal spending by nearly 40 percent of levels proposed for the FY2018 budget, of which 40 percent already comes from borrowed funds.
Single-payer backers claim that the cost savings from socialized medicine would make up for part of the difference. The rest of the funds, they argue, would get raised by simply shifting insurance premiums to taxes, including employer contributions to group plans. However, that didn’t add up at the state level in either Colorado or Vermont, two states that nearly put single-payer systems into place.
Vermont actually passed a law to create a single-payer system, which had Governor Peter Shumlin’s enthusiastic backing – until he saw the bill. Faced with the need for adding a 9.5 percent income tax “premium assessment” to raise the minimum funds and lacking the federal guarantee to transfer Medicare funds into the system (during the Barack Obama administration, notably), Shumlin declared that the time was not right for socialized medicine. Colorado voters grasped the lesson, wisely and overwhelmingly rejecting a referendum to impose a single-payer system in their state.
California still hasn’t learned that lesson. Democrats want to recall their Assembly speaker for tabling a single-payer bill that had no plan for covering its annual cost of $400 billion. Like Vermont, the California plan assumes that the federal government will transfer current Medicaid spending into their new system without any guarantee of it, which still leaves an annual cost that outstrips the state’s entire budget for FY2018.
Cost issues alone will probably keep the Medicare-for-all proposal from being a litmus test. However, lawmakers should also consider another unintended consequence of expanding an entitlement program to fit a political need, especially in how it impacts those the program intended to benefit in the first place.
Medicare began as a means to give retirees and the disabled a backstop for basic medical costs. Medicaid followed suit by offering basic insurance coverage to the poor. When Democrats decided to revamp the individual insurance markets in 2010 to reduce the number of uninsured Americans, they relied on an individual mandate to buy insurance and an expansion of Medicaid for those between poverty and the capability to pay for coverage. Millions signed up for the Medicaid expansion in states that chose to participate.
What impact did that have on the poor who needed core Medicaid? It shifted allocations of resources dramatically to those who earned more, as Charles Blahous noted two months ago. Per-person costs ran higher in the expansion group than in the core group, and the Center for Medicare and Medicaid Services now project that they will rise faster, too. “In other words,” Blahous concluded, “expansion has made Medicaid spending more poorly targeted. We’re already spending a far greater share than expected on Medicaid’s relatively less needy participants, and this poor targeting is expected to grow worse.”
That has another impact as well. The higher costs come from a greater utilization rate for services at Medicaid providers. However, the number of providers in the Medicaid network has not expanded to meet that demand, and in fact fell after the implementation of the expansion. Fewer providers serviced higher demand, which means that the poorer Americans that Medicaid traditionally covered have found it harder to access care, as the per-person costs for each group suggest.
Given that history, it’s not difficult to guess what will happen when Medicare expands beyond the seniors and the disabled. Even if more providers buy into Medicare, which didn’t happen with Medicaid, a flood of patients will shift from their current providers to those in the Medicare network in order to avoid direct costs. That will have the same crowd-out results for the program’s original target population as seen in the Medicaid expansion. Seniors and the disabled will suffer the consequences of longer wait times and provider availability. And that will take place at precisely the same time as America’s baby boomer generation fully moves into Medicare, too.
And there’s no estimate yet of how many doctors will continue to opt out of the program as their patient burden increases and their payments flatten.
Single-payer isn’t a litmus test. It’s a dangerous vehicle for unintended consequences in practically every phase of public policy and private life. We should have safety-net programs targeted for populations truly at risk, and apply American ingenuity and innovation from the private sector to a market which the government has already demonstrated its incompetence to manage.