The study’s lead author, Alison Galvani, is the director of Yale University’s Center for Infectious Disease Modeling and Analysis. The paper discloses that Galvani served as an “informal, unpaid advisor” to Sanders’s Senate office as it developed the Medicare For All Act. None of the other authors disclosed any outside or competing interests.
All told, the study concludes, a single-payer system akin to Sanders’s plan would slash the nation’s health-care expenditures by 13 percent, or more than $450 billion, each year. Not only that, “ensuring health-care access for all Americans would save more than 68,000 lives.”
In their breakdown of the numbers, researchers applied the existing Medicare fee structure across the entire health-care system and found it would save about $100 billion annually. Keep in mind that this basically represents less money going to doctors and hospitals, a major sticking point for medical groups that oppose Medicare-for-all. But those declines would be more than offset by several hundred billions in savings from reduced administrative and billing costs, Galvani and her colleagues estimate. The lack of patient billing under a Medicare-for-all system would also eliminate the roughly $35 billion a year that hospitals now pay to chase down unpaid bills.
The authors estimate an additional $219 billion in savings from reduced “administrative overhead” that the current decentralized system creates, including “the elimination of redundant corporate functions and the truncation of the top-heavy salary architecture of health insurance corporations.” For instance, the plan would replace dozens of health insurance executives, many of whom make well over $20 million a year, with one administrator paid the same salary as the current Secretary of Health and Human Services.
Finally, letting the national Medicare system negotiate pharmaceutical prices would save about $180 billion, according to the analysis.
Add it all up and here’s what you get: a new system that would cost about $3 trillion a year, instead of the $3.5 trillion that is being spent now.
Galvani and her colleagues estimate that to fully fund Medicare-for-all, the federal government would have to bring in an additional $773 billion a year relative to current revenue levels. They estimate this could be paid for, in part, by a 10 percent payroll tax that would bring in $436 billion annually. Given that current employer contributions to health care work out to about 12 percent of payrolls, this would still be about $100 billion less than what employers currently pay.
The remaining funding could be paid via a 5 percent tax on household income, yielding $375 billion a year. Again, with the elimination of employee contributions to existing health insurance premiums, the average household could expect to save well over $2,000 a year — and have no co-pays or deductibles to worry about.
Galvani’s $3 trillion estimate is lower than the annual spending estimates produced by some other observers, including the libertarian Mercatus Center ($3.8 trillion per year) and the more centrist-oriented Urban Institute ($4.2 trillion per year) and RAND Corporation ($3.9 trillion).
All of these estimates — Galvani’s included — are built on various assumptions about how costs and payments and patient behaviors would work in the real world with a Medicare-for-all plan in place: How much would doctors and hospitals actually save on administrative overhead? How many people would increase their use of medical services once they’re paid for? Would a single-payer system make it easier to detect medical fraud?
Experts answer those questions differently, which is reflected in their final cost estimates. And though we can’t predict the future, we do have plenty of data on what’s happening in the American health-care system right now. Relative to people in other wealthy nations, Americans are less likely to be in good health and more likely to die of preventable causes. Our babies and mothers are more likely to die after child birth, and our lives are shorter overall.
Lack of a universal health-care system means that regular medical care is unaffordable for many Americans: Fully one-quarter of us have put off needed care because of cost. More than 8 million Americans have started a crowdfunding campaign to pay for medical care, with approximately 1 in 5 Americans contributing to somebody else’s medical crowdfunding campaign. Ninety percent of those campaigns will fail to raise the necessary funds.
By addressing these and other problems, Galvani and her colleagues estimate that regardless of cost, Medicare-for-all would save about 69,000 lives each year. They end their paper by calling on the medical community to answer “the moral imperative to provide health care as a human right, not dependent on employment or affluence.”
Correction: The total cost figures of the estimates from the Urban Institute and Mercatus Center studies have been updated to provide a better apples-to-apples comparison with the new Galvani estimate.