"Let's just say, hypothetically, you are self-employed, and you have - you've got a husband and two kids, OK? Family of four. You know how much that family is paying today for health care? $Twenty-eight thousand dollars a year."
"Are people going to pay more in taxes? Yes. But at the end of the day, the overwhelming majority of people are going to end up paying less for health care because they aren't paying premiums, co-payments or deductibles."
– Sen. Bernie Sanders, I-Vt., remarks during a Fox News town hall , April 15, 2019
During a town hall on Fox News, 2020 presidential hopeful Bernie Sanders said his Medicare-for-all plan would save most Americans money by reducing the cost of health care. According to Sanders, any tax increase as a result of his plan would be less than what an average family currently pays in premiums, co-payments and deductibles for health insurance.
As an example, Sanders told the audience that the average self-employed family of four would pay less for health care under his plan than the $28,000 a year they currently pay. That estimate comes from the 2018 Milliman Medical Index. The index estimates the total cost of health care for an average family of four and includes fees usually covered by an employer. Leaving out this aspect, as well as referring to the family as self-employed, makes Sanders's claim misleading.
Sanders's campaign told the Fact Checker that he misspoke when he said "self-employed," rather than making clear that the family gets insurance via an employer. Sanders has tweeted this $28,000 figure without the "self-employed" qualifier, but even so, he's leaving out important information.
Employers cover about 57 percent of that $28,000. So to an average family of four, the cost of health care appears to be $12,000. (Basic economics says the employer contribution is part of the overall paycheck, but most people don't "feel" that money.)
So if Sanders wants most families to feel as if they're saving money, any tax increase from Medicare-for-all would have to be less than the visible cost of health care - that is, that $12,000. But that's going to be difficult, no matter how you run the numbers.
As a reader service, we will identify four aspects of Sanders's Medicare-for-all proposal - or any health-care proposal, for that matter - that dramatically affect its cost and could make it difficult to deliver the promised savings: provider payments, health-care benefits, cost-sharing and administrative savings from a consolidated system.
Continuing to pay hospitals and doctors at private insurance rates would make Medicare-for-all significantly more expensive than the current system, so Sanders assumes payments would be lower. Although paying hospitals and doctors at Medicare rates would make Medicare-for-all cheaper than the current system, providers warn it could significantly hurt their ability to provide adequate, widespread care. A recent report from the Congressional Budget Office reinforces this concern: "Such a reduction in provider payment rates would probably reduce the amount of care supplied and could also reduce the quality of care."
However, what if to mitigate this, hospitals were still paid at current rates and only doctors saw their rates reduced? According to a study from the Urban Institute (and a follow-up paper), Medicare-for-all would still add $32.6 trillion to national health spending over 10 years. The study goes on to state that Sanders's proposed tax increase would be insufficient and that additional revenue would be needed.
The benefits package
Sanders proposes to have a generous benefits package, including dental coverage and long-term care (except nursing homes, which would still be covered by Medicaid). Long-term care, even without nursing-home care, can be costly.
In the current health system, covered individuals usually are required to pay monthly premiums, deductibles and some sort of co-payment when receiving care. Under Sanders's plans, these would all be eliminated, adding significantly to the overall cost. Analysts warn that eliminating co-payments and similar expenses could lead to overuse of the health system, leading to long waits for basic care.
According to a study by Charles Blahous of the Mercatus Center, the combined effects of eliminating cost-sharing, increasing the range of covered services and wider use of the health-care system would add $435 billion to annual national health spending. The generous benefits and the elimination of cost-sharing also sets Sanders's plan apart from single-payer-type health systems in many other countries.
Administrative cost savings
Finally, advocates for Medicare-for-all say a single-payer system would be more efficient, leading to savings on administrative costs. Medicare is often cited as being cheaper to run than private insurance plans. However, as the Fact Checker has explored before, estimates of Medicare's efficiency are disputable. Both the Urban Institute and the Mercatus Center found that costs of Medicare-for-all rise above current health spending despite administrative savings.
The Sanders campaign cites two studies as support for its claim that Medicare-for-all will be cheaper, one from the University of Massachusetts at Amherst and one from Rand Corp. Both studies assume generous, optimistic scenarios for each of the factors mentioned above. The University of Massachusetts study assumes significant administrative and pharmaceutical cost savings and uniform Medicare rates for all health providers.
Rand examined a plan for single-payer health care in New York state. Its study found that, assuming cost-sharing is eliminated, health-care spending would go down if providers are paid at lower rates, and there are significant administrative and drug cost savings. The study says "the results depend on assumptions about uncertain factors," reinforcing that cost savings cannot be promised. While it's possible Medicare-for-all could save most Americans money, one generally has to assume a best-case scenario.
"Tax burdens would fall progressively and equitably such that most Americans are paying less, as found in multiple studies of the single-payer system," a Sanders campaign aide said. "By eliminating premiums, deductibles, networks and surprise bills, middle-class families will save on health-care costs in total under Medicare-for-all."
There is really only one certainty when making big changes to the health-care industry: There will be unintended consequences. Medicare-for-all would involve disruption in the health-care market much larger than what the United States experienced with the implementation of the Affordable Care Act, Medicaid or the original implementation of Medicare.