Single Payer: Will it Cost $32 Trillion or Save $2 Trillion?

August 03, 2018

A new analysis by the Mercatus Center of Sen. Bernie Sanders' (I-VT) “Medicare for All” proposal estimates federal health care spending would increase by $32.6 trillion over 10 years while simultaneously lowering overall health care spending by $2 trillion by reducing administrative costs—so what is likely to be the true net cost for employers and employees?

While Mercatus identifies the increase in federal spending and taxes required to implement Medicare for All, it does not assess the savings would that accrue to businesses and households that would no longer have to pay for health care benefits, insurance premiums, or out-of-pocket costs.  The question remains: how much of those savings would be shifted into the increased taxes that would inevitably result?

The study estimates administrative costs would decrease by $1.6 trillion over 10 years, which Sen. Sanders took the liberty to round up, but the Senator has not yet estimated how much federal taxes would have to increase to pay for his proposal—an issue that sank Vermont’s effort to implement a single-payer system in 2014.

Bottom line:  Total administrative costs would decrease, federal spending and taxes would increase, and business and household spending on health care would decrease, so the net increase or decrease in total health care spending will be much closer to Sen. Sanders' estimate than the Mercatus estimate.  However, a single payer system usually means a single price-setter—with all its unintended consequences—and the government has not yet shown it can effectively reduce substantial improper payments in the Medicare and Medicaid programs.