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The Unseen Costs of “Medicare For All”

Summary:
Authored by Bradley Thomas via The Mises Institute, Most of the attention on Bernie Sanders’ proposed “Medicare for All” plan has focused on the financial costs of its implementation. This is understandable, given that some estimates project costs toexceed trillion over its first ten years, and that Medicare is already suffering massive losses – more ...

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Authored by Bradley Thomas via The Mises Institute,

Most of the attention on Bernie Sanders’ proposed “Medicare for All” plan has focused on the financial costs of its implementation.

The Unseen Costs of

This is understandable, given that some estimates project costs toexceed $32 trillion over its first ten years, and that Medicare is already suffering massive losses – more than $130 billion since 2008 – along with facing unfunded liabilities in excess of $30 trillion.

But what about the non-financial costs like doctor shortages, foregone treatment due to lack of access to care and tens of thousands of deaths due to overly aggressive care?

Will Supply Meet Demand?

Basic economics, and common sense, tells us that when the marginal cost to the consumer for a good or service at the point of sale is reduced to zero, demand will increase significantly.

Under Sanders’ Medicare for All plan, there will be no payment made by patients when they receive treatment. Medical care consumers will no doubt make more frequent visits to doctors, specialists and emergencies rooms – often times for unnecessary treatments – because, after all, it won’t cost them anything.

Moreover, because people will be taxed to help finance the plan and pay the same amount of tax regardless of their usage, people will feel obligated to “get their money’s worth” and flood doctors’ offices with more frequent check-ups and testing.

The question then becomes: will there be sufficient supply to meet this spike in demand?

Most indicators say no.

According to the American Association of Medical Colleges, the U.S. can expect a doctor shortage of up to 120,000 physicians by 2030, thanks in no small part to our nation’s rapidly growing senior citizen population – and this is without factoring in accelerated demand by Medicare for All.

Doctors are already struggling to keep up with current demand. According to this 2018 survey by the Physicians Foundation, a stunning 80 percent of physicians claim to be “at capacity or overextended.”

The future doesn’t look bright, either. A 2016 Physicians Foundation survey found 48 percent of physicians planning to cut back hours, retire, or take other steps toward limiting patient access to their practices.

Burnt out and semi-retired doctors is not a reliable pool of providers upon which to throw a sizeable spike in demand for services that Medicare for All would usher in.

Pay Cuts Would Make the Shortages Worse

Medicare reimbursement rates fall well below the costs of providing care. In 2017, payment shortfalls to hospitals for Medicare services totaled a whopping $54 billion.

In treating Medicare patients, hospitals only receive about 87 cents in reimbursement for every dollar they spend in care.

If all patients become Medicare patients, how will medical providers stay in business?

Indeed, Medicare reimbursements have been estimated to be 40 percent lower than private insurance payments.

If you think the doctor shortage is bad now, what will happen when doctors are forced to take a 40 percent pay cut on all their former private insurance patients?

Lack of Access Will Bring Unhealthy Results

With greater demand straining a system with dwindling supply, a new cost to patients will emerge: time.

Wait times will inevitably increase substantially, bringing with it a human toll in the form of prolonged suffering of symptoms as well as the mental anguish over the uncertainty that comes with a lack of regular access to care.

And an inability to schedule check ups and other preventative services on a regular basis will cause patients to delay seeking care and treatment, resulting in greater suffering and preventable deaths.

Moreover, like underage college kids who binge drink on the unpredictable occasions they are able to score beer, when patients finally do see a doctor they will be more likely to seek overly aggressive care and excessive testing and treatment. After all, there’s no telling when they’ll get another appointment, and it’s free.

Excessive testing and treatment is already a significant problem in our current system which features a majority of medical services being paid for by a third party. According to this Health Care Finance News article, “Some experts estimate that at least $200 billion is wasted annually on excessive testing and treatment.” Compare this to the roughly $30 billion in charity care for the uninsured we hear so much about as supposedly being a major driver of rising healthcare costs.

Even more significant is the harm caused by overly aggressive and excessive treatment, which generated “mistakes and injuries believed to cause 30,000 deaths each year.”

Imagine the added financial and human toll of excessive care if we transitioned to a Medicare for All system.

Black Markets Will Cause Unequal Treatment

One of the purported benefits of a Medicare for All plan is that it would make access to quality care more equitable. When everyone is covered, the poor will have the same level of care as the rich, goes the argument.

But doctor shortages and long lines under Medicare for All will make access to care exceedingly rare, and in high demand. Such conditions would create a black market in which the rich would pay under the table for quicker service and to avoid the Medicare line.

The rich would have timely access to quality care, while the poor would be left to compete against each other for what little facetime they can get with a doctor. The goal of equity will be unfulfilled.

Myth of Administrative Cost Savings

Advocates of Medicare for All claim that big administrative savings will allow more generous payments to doctors, and thus help avoid shortages. No worries about long wait times and a lack of access to care, they assure us.

But such hopes are fool’s gold.

Most of the projected administrative cost savings are based on faulty interpretations of data. Medicare for All supporters point to data showing that Medicare administrative costs are lower than those of private insurance companies – as a percentage of total costs per beneficiary.

But Medicare patients tend to be older and sicker, and Medicare spends nearly two and a half times more per beneficiary compared to private insurance plans. Calculating administrative costs as a percentage of costs of care paints a highly misleading picture.

Indeed, according to this Heritage Foundation analysis, administrative costs per person are about 12 percent higher in Medicare compared to private insurance.

Switching millions of people from private insurance onto Medicare will drastically increase administrative costs, making it even less likely for Medicare to adequately reimburse doctors and hospitals.

Moreover, when scarce resources are allocated by government bureaucracy rather than the market price mechanism, rationing by administration tends to take over.

As shown in the chart below, thanks primarily to the federal government’s increasing intervention into the healthcare market, the number of healthcare administrators has exploded by more than 3,000 percent since 1970, compared to a growth of physicians of less than 200 percent.

The Unseen Costs of

Conclusion

The well-reported price tag for Bernie Sanders’ Medicare for All plan is eye-popping. But of greater concern is the unseen price that will be paid in the form of human suffering and even death as a result of doctor shortages, lack of access to care, and overly aggressive “binge” treatment and testing.

Questions about how to pay for this single-payer plan can be easily answered in the minds of many with the old mantra “tax the rich.”

But how to answer for the human toll of Medicare for All is a far more difficult chore for advocates. Opponents would be wise to make these unseen costs far more visible.

Tyler Durden
Tyler Durden (a pseudonym) represents the idea that a return to truly efficient markets is a possibility and a necessity. After having experienced the inner workings of capitalism at various asset managers and advisors, Tyler believes that the current model is flawed and a deleveraging at every level of modern society is needed to reinspire the fundamental entrepreneurial spirit. Visit his blog: ZeroHedge (http://www.zerohedge.com/)

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