When a libertarian think-tank published a study of Sen. Bernie Sanders’s (I-Vt.) Medicare for All plan last month, it said that Sanders’s plan would cut payments to providers such as hospitals and doctors by 40 percent.
The number suggested Sanders’s plan was wildly unrealistic, and that his plan for achieving universal health care relied on either massive cuts to doctors and hospitals or would prove far more expensive than he was otherwise saying.
But Sanders’s supporters say the figure is misleading, and that doctors and hospitals could absorb cuts to their payments under the plan, which also would extend free government health insurance to every American in the country.
The author of the report, the Mercatus Center’s Charles Blahous, has noted Sanders plan proposes cutting by about 40 percent the payments made by private insurers. But many providers that rely on other forms of insurance, such as Medicaid, would see their reimbursement rates go up under Sanders’s plan, or see a significantly smaller cut than the 40 percent decrease on payments from private insurers.
In a recent email, Blahous said he has not calculated the overall payment cut that providers would receive from Sanders’s plan. Matt Bruenig, the founder of a socialist think-tank the People’s Policy Project, puts that number at 11 percent. The Urban Institute, a centrist think-tank, found the number is closer to 13 percent.
Republicans have seized on the Mercatus study to discredit single-payer, citing its high estimates of government costs. The idea has gained increasing traction among Democratic lawmakers over the past year, winning the backing of several of its likely presidential contenders such as Sens. Kamala Harris (D-Calif.), Cory Booker (D-N.J.), and Kirsten Gillibrand (D-N.Y.).
Under the current U.S. insurance system, about half the country receiving private insurance through their employer, and millions more rely on a government program such as Medicare, Obamacare, or Medicaid. Another 30 million or so Americans have no insurance.
Sanders’s plan proposes moving every American in the country onto a single government-run insurer that charges no deductibles or premiums. Doing so would massively increase government expenditures -- by as much as $33 trillion by 2031, according to Blahous’s report -- while offering health insurance to the Americans who currently lack it and preventing millions more from being forced into medical bankruptcy. It would require enormous tax increases to finance, although Sanders maintains they would be offset by zeroing out every family’s spending on premiums and deductibles.
In scoring Sanders’s plan, Blahous’s study produces one scenario in which it reduces national spending on health care by $2 trillion over 10 years, despite dramatic increases in government health-care expenditures. Sanders’s supporters seized on that finding, arguing it showed their plan was a bargain for the nation.
But Blahous dismissed the $2 trillion in savings as unrealistic, since it would only occur under assumptions of dramatic reductions in drug prices and administrative costs, as well as the 40 percent drop in provider payments for those receiving private insurance.
“Over 80 percent of hospitals would immediately be put into negative margins,” Blahous said in an email, citing data from the Centers for Medicare and Medicaid Services’s Office of the Actuary.
But single-payer looks much less daunting if providers nationally face an 11 percent rather than a 40 percent cut, Sanders’s supporters say.
Bruenig, of the People's Policy Project, notes one key selling point of a single-payer system is it spares physicians the reams of paperwork they have to do under the current system for private insurance companies. If America’s physicians could reduce their administrative costs to Canadian levels, he said, health care spending would fall by well over 11 percent. (Canada has a single-payer health system.)
“The overhead costs here are substantially low because you don’t have to hire administrative clerks and billing experts to chase after money,” said Danielle Martin, a Toronto Women’s College Hospital physician who supports Sanders’s legislation. “What matters to people is their net income, not their reimbursement rates.”
Then there are the doctors and physicians whose reimbursements would go up under single-payer. Richard Bruno, a doctor in east Baltimore who primarily sees low-income Medicaid patients, said low reimbursement rates make it difficult for his clinic to purchase the equipment he needs, like replacement microscopes.
“We could do so much with higher levels of Medicaid reimbursements,” said Bruno, 38. “We’d be able to explore much better models for providing care.”
But to other experts, even an 11 percent cut in provider rates could present serious challenges for private hospitals and physician practices operating on tight margins. A number of prestigious hospitals -- such as New York University, the Stanford University Medical Center, and the Ronald Reagan UCLA Medical Center -- are especially reliant on patients with private health care and would likely see average cuts bigger than 11 percent, according to Larry Levitt, a health-care expert at the Kaiser Family Foundation.
“When people talk about the disruption that Medicare for All would cause, this is a big piece of it,” Levitt said.
Dean Waldman, a former pediatric cardiologist at University of Chicago, doubts providers could adjust to the new reality without going out of business, noting he was able to treat many Medicaid patients in part because of the excess money brought in by patients on private plans.
“When you’re talking about a 40 percent cut, you’re talking well below the cost of doing business,” said Waldman, a single-payer opponent. “The money has got to come from somewhere – and if it doesn’t, the public will simply not have doctors.”
Sanders’s plan proposes slowly phasing in Medicare for All over the period of four years, giving hospitals and doctors time to adjust to the new spending levels. And his staffers do not necessarily mind the prospect of hospitals earning slightly less in the long-run, with spokesman Josh Miller-Lewis saying “this bill is not designed to make shareholders of for-profit hospitals wealthier.”
But even those sympathetic to Sanders plan recognize that it may be difficult to instantly cut provider payments. Physicians across the country may not face a 40 percent pay cut, but Sanders is hoping thousands of doctors and hospitals can absorb cuts to their payment rates without going out of business. Polling from last year suggests they’re warming to the idea.
“We can’t whole hog pick up a system and get it there overnight,” Linda Blumberg, a health expert at the Urban Institute, said. "Thinking of a glide path from where you are today [in provider payments] to down to something lower is going to be really critical.”