Sen. Bernie Sanders and supporters of single-payer health care have tried to sell their legislation as creating “Medicare for All.” But Section 901(a) of the House and Senate single-payer bills reveals some problems with the accuracy of that assertion:
(1) IN GENERAL.—Notwithstanding any other provision of law…
(A) no benefits shall be available under title XVIII of the Social Security Act for any item or service furnished beginning on [the effective date of the new program—two years after enactment in the House bill, and four years after enactment in the Senate bill].1
Title XVIII of the Social Security Act refers to Medicare, created as part of the Social Security Act Amendments of 1965, meaning this section of the legislation ends Americans’ entitlement to the current Medicare program.2 Section 701 of the House and Senate bills liquidates the dollars currently in the Medicare trust funds:
(d) TRANSFER OF FUNDS.—Any amounts remaining in the Federal Hospital Insurance Trust Fund…or the Federal Supplementary Medical Insurance Trust…after the payment of claims for items and services furnished under title XVIII of such Act have been completed, shall be transferred into the Universal Medicare Trust Fund under this section.3
These financial maneuverings reveal that the authors of single payer haven’t proposed expanding the current Medicare program to all Americans so much as abolishing it and instituting a new program. In short, instead of proposing “Medicare for All,” Sanders has proposed “Medicare for None.”4
Single-payer supporters might call this criticism little more than a silly argument over semantics. Sure, the legislation liquidates the current Medicare trust funds, but seniors—along with all Americans—will have access to better benefits than the current Medicare program provides. Who should complain about that?
First off, this kind of sleight-of-hand is inherently dishonest, and disingenuous. If Sanders wants to create a new program, he should say so outright, and call it for what it is. That he will not—just like Barack Obama knew, but would not admit, that some people would not be able to keep their health plans—speaks to the deceptive ways liberal politicians must sell their agenda to voters.5
But Sanders’s lack of candor about the true effects of his single-payer bill may well stem from understanding how its policies would harm current Medicare enrollees. Millions of seniors will lose the private health plans they have now, which provide more coordinated, and arguably better, care than the government-run Medicare plan.
Moreover, shifting dollars from the current Medicare program to fund the new national program undermines a promise made to seniors. Yes, the current Medicare program has funding shortfalls, which Congress should address urgently. But taking current Medicare dollars and diverting them into a larger scheme—the $30 trillion-plus cost of which liberals have little idea how to fund—betrays those trusting their elderly years to this long-running government program.
As the last chapter discussed, the House and Senate single-payer bills’ prohibition on private health insurance means that wealthy individuals, and even many millionaires, will not be able to opt out of the new government-run system. By liquidating the current Medicare trust funds, the single-payer bills would effectively take dollars from indigent seniors to fund the health care of affluent millionaires.
A large, and growing, number of seniors receive Medicare benefits not through the government-run Medicare plan, but through Medicare Advantage plans. These privately run insurance plans—whether Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), or special-needs plans for individuals with chronic conditions—deliver to enrollees the Medicare benefits prescribed by law, and often other benefits. The plans provide coordinated care for beneficiaries, and closely resemble the employer-based HMO and PPO plans that many individuals held prior to retirement.
As of 2019, Medicare Advantage plans enrolled 22.8 million beneficiaries—more than one-third (37.8%) of the 61.3 million beneficiaries enrolled in Medicare.6 The Medicare actuary projects that over the next decade, Medicare Advantage enrollment will continue to rise—both in absolute terms, and as a percentage of overall Medicare enrollees. By 2028, Medicare Advantage enrollment will reach an estimated 30.7 million seniors, or 40% of the estimated 76.7 million Medicare beneficiaries.7
Ironically, Medicare Advantage enrollment has continued to rise in recent years, even after Obamacare significantly reduced payments to Advantage plans. According to Congressional Budget Office estimates at the time of the law’s enactment, Obamacare would reduce Medicare Advantage payments by $205.9 billion from 2010 through 2019.8 At the time, the Medicare actuary predicted that these payment reductions would cause Advantage enrollment to decline from 11.7 million, and 24.7% of all Medicare enrollees, in 2010 to 8.2 million enrollees, and only 13.2% of the entire Medicare population, in 2019.9
Medicare Advantage has gained in popularity, rather than losing enrollees after Obamacare’s reductions to the program, in large part because it provides better benefits to seniors.10 Study after study demonstrates the advantages of the privately run Medicare Advantage:
Critics claim that Medicare Advantage plans game the system, either by selecting healthier patients, or via healthier patients who self-select into Medicare Advantage, giving the private program an unfair edge.23 However, that claim misses an important point: If some individuals do self-select into Medicare Advantage, that selection only occurs because government bureaucrats have (unsurprisingly) made government-run Medicare the default option for seniors. Medicare Advantage plans could provide infinitely better care to seniors at a much lower cost—but do such considerations matter more than the leftist ideology that proclaims, “Government good, private bad?” Of course not.
The liberal criticism speaks to the Left’s inherent bias in favor of government-run care, and against private options. First they sabotage private plans, by making it tougher for them to enroll seniors. Then they attack the plans by criticizing the seniors Medicare Advantage insurers do get to enroll. If you think this system seems rigged against private insurance and in favor of government-run Medicare, you’d be correct.
Liberal attacks notwithstanding, most evidence strongly suggests that Medicare Advantage’s coordinated care provides better benefits at a lower cost. Most seniors see many physicians, but Medicare Advantage plans do a better job of coordinating care—making sure the primary care physician speaks to, and works closely with, specialists like the cardiologist treating a patient’s heart failure, or the orthopedist performing a senior’s hip replacement.
Traditional Medicare has established demonstration projects to try and coordinate seniors’ care, including several created by Obamacare. However, Medicare Advantage plans have undertaken such coordinated care for years—and largely succeeded at it. At a time when more and more seniors have joined Medicare Advantage, and when uncoordinated care helps keep health spending high, policy-makers should work to ensure that all seniors—and all Americans—have the coordinated care that Medicare Advantage provides.
But instead of allowing private plans to continue—whether for seniors enrolled in Medicare, or the under-65 population—single payer will make them “unlawful,” and throw nearly 23 million seniors off their Medicare Advantage plans. All this so single-payer advocates can use the current Medicare program as a slush fund to try to finance government-run health care for all Americans, which has a terrible track record.
Liquidating the current Medicare Trust Funds to finance a new single-payer program changes prior practices only in degree. President Obama’s eponymous health-care law also raided Medicare to fund its new entitlements.
According to the Congressional Budget Office, Obamacare lowered Medicare spending by a total of $529 billion from 2010 through 2019.24 (Some Republicans attacked these reductions as spending “cuts”; however, they did not reduce spending in absolute terms, but merely slowed Medicare’s projected growth rates.) The law also increased Medicare payroll taxes by a total of $87 billion over the same period.25
The Obama administration and congressional Democrats attempted to use trust fund accounting to claim that these spending reductions could improve the solvency of the Part A (Hospital Insurance) Medicare Trust Fund by twelve years while supposedly funding the new coverage expansions under Obamacare. Asked at a House Energy and Commerce Committee hearing whether the provisions were being used to “save Medicare” or to “fund health care reform,” Health and Human Services Secretary Kathleen Sebelius replied, “Both.”26
The idea that one set of spending reductions could fund two programs at once defied not just common sense, but the analysis of non-partisan budget experts. The Congressional Budget Office called out this tactic as a budget gimmick:
The savings to the [Medicare] trust fund under [Obamacare] would be received by the government only once, so they cannot be set aside to pay for future spending and, at the same time, pay for current spending….To describe the full amount of [Medicare] trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings and thus overstate the improvement in the government’s fiscal position.27
The Medicare actuary agreed with CBO, writing that “in practice, the improved [Medicare] financing cannot be simultaneously used to finance other federal outlays (such as coverage expansions under [Obamacare]) and to extend the [life of the] trust fund, despite the appearance of this result from the respective accounting conventions.”28
To put it another way: When Democrats used the Medicare savings on Obamacare’s new entitlements, they did so at the opportunity cost of true entitlement reform. The Medicare program looked better on paper, but became worse in reality, because Obamacare spent money that could otherwise have gone toward improving the program’s long-term solvency, or allowing Americans to control more of their own earnings.
The single-payer bill would take the Obamacare gimmick one step further, by taking one program (the current Medicare entitlement) that already lacks funds and transferring it into another program with an even larger funding shortfall. Rather than working to fix Medicare’s existing insolvency, the single-payer bills would instead undermine it. This would drop seniors into a new program with even more fragile funding.
The Medicare trustees report quantifies the current program’s funding shortfalls. From 2019 through 2028, the Medicare actuary’s office predicts that the program’s Hospital Insurance (Part A) trust fund will take in $4.13 trillion in payroll tax and other revenue, while paying out $4.55 trillion in benefits.29 The program’s income does not meet expenses—a problem, to be sure, not least because the trustees project the trust fund will become exhausted (i.e., have a zero balance) by 2026. However, over the coming decade, estimated revenue can fund the lion’s share—90.9%, to be exact—of the program’s estimated expenses.
But what if you believe that the accounting gimmicks Obamacare exploited create an unrealistically rosy view of Medicare’s finances? The Medicare trustees report issued in 2009, the last year before Obamacare’s enactment, provides some sense of the program’s solvency without relying on accounting gimmicks, albeit with older data.
That report indicated that, over the 25 years from 2009 through 2033, the Medicare trust fund would receive a total of 3.47% of the nation’s taxable payroll in income, while paying out a total of 4.88% of taxable payroll in benefits.30 Under this scenario, Medicare could fund only about two-thirds (3.47% divided by 4.88%, or 71.1%) of its estimated expenses through 2033.
Compare these two scenarios to a potential single-payer program, which both liberal and conservative organizations believe would cost well over $30 trillion. In 2016, the left-leaning Urban Institute published an analysis estimating federal spending would increase by $32 trillion between 2017 and 2026.31 Two years later, the right-leaning Mercatus Center published a study estimating that federal spending under a single-payer plan would rise by $32.6 trillion from 2022 through 2031.32 At a time when federal deficits are projected to approach $900 billion during the current fiscal year, and will total an estimated $11.4 trillion in the decade beyond, this proposed new spending would render our federal government’s obligations utterly impossible, since they are already unsustainable.33
In calculating the tax increases necessary to finance single-payer’s increased spending, the Mercatus Center’s study helpfully quantified the new program’s under-funding. During the decade from 2022 through 2031, the study estimates that federal health expenditures under the single-payer program would total $54.6 trillion.34 By comparison, the paper uses Congressional Budget Office estimates for federal spending on health care—net federal spending for Medicare, Medicaid, and Obamacare subsidies, along with the tax subsidies provided for employer-sponsored health insurance—to quantify the existing resources that the bill would re-purpose toward the new program.
That spending totals $21.9 trillion—or only 40.2% of the total estimated spending on the single-payer program.35 As the Mercatus study also notes, current corporate and individual income tax rates would have to more than double to pay for all this proposed new spending, at a time when our nation already faces trillions of dollars in deficits to pay for existing government spending.
Moreover, the Mercatus Center study uses a series of assumptions very favorable to single-payer supporters.36 The Mercatus study does not assume any increase in spending from “benefit tourism”—that is, individuals traveling to the United States, whether temporarily or permanently, to access “free” health care. However, it does assume that the new single-payer program can 1) drive down drug costs by increasing usage of generic drugs, 2) generate significant savings through lower administrative costs, and 3) force both hospitals and doctors to accept lower, Medicare-level reimbursement rates.
If any of the Mercatus Center’s very favorable assumptions about single payer prove incorrect, total spending on the new program would rise significantly. For instance, the Urban Institute’s estimate included $2.9-$3.6 trillion in spending on long-term supports and services—services not included in the Mercatus study, but recently added to the single-payer bill.37 Including this additional spending would raise the cost of the single-payer program even further—and worsen its under-funding.
To put it another way, the single-payer bill would transfer seniors from a Medicare program currently funded at between 71% (using unfavorable assumptions) and 91% (using favorable assumptions) of its expenses over the next 10-15 years, and place them in a new program with proposed funding of 40% (at best) of its obligations over the coming decade-plus. This would clearly make seniors’ health care less secure.
Some might find the above analysis pointless, for a variety of reasons: The studies in question use different time horizons; insolvency really only applies to one part of Medicare (Part A); and Democrats will propose tax increases to pay for the rest of the single-payer bill (maybe).38 What’s the point?
Ultimately, the question comes down to priorities. As with Obamacare a decade ago, the Left wants to use Medicare as a piggy bank to pay for yet another welfare state expansion. But that piggy bank is already coming up empty to pay for existing programs. Adding more recipients would only empty the piggy bank faster. As with the peanut butter on the proverbial slice of bread, spreading resources too thin will satisfy no one—and will only undermine everyone’s security.
Surprisingly, one leading Democrat made an eloquent case for setting priorities opposite to the philosophy underpinning single payer. In September 2009, Rep. Steny Hoyer (D-MD)—then, as now, the House majority leader—rose in opposition to legislation designed to forestall a temporary Medicare premium increase for some seniors. In his speech, Hoyer explained that the majority of seniors who would benefit from the legislation had relatively high incomes. As a result, Hoyer concluded that, with deficits and debt rising, Congress had better priorities than to provide additional subsidies to the affluent:
At some point in time, my friends, we have to buck up our courage and our judgement and say, if we take care of everybody, we won’t be able to take care of those who need us most. That’s my concern. If we take care of everybody, irrespective of their ability to pay for themselves, the Ross Perots of America, frankly, the Steny Hoyers of America, then we will not be able to take care of those most in need in America. [Emphasis added.]39
“If we take care of everybody, we won’t be able to take care of those who need us most.” Few politicians want to make such an admission. Some seem pathologically incapable of doing so. Most politicians run for office because they want to be liked; telling citizens “No” doesn’t come naturally. Telling people “No” won’t help politicians’ re-election odds either.
But single payer takes saying “Yes” to impossibly absurd levels. Because the bill bans private insurance, most individuals will have to use the government-run system. And it will take Medicare dollars currently earmarked for seniors to subsidize this health coverage for the affluent.
Abolishing the current Medicare program to fund wealthy individuals’ health care sounds like the kind of accusatory claim that a socialist like Sanders would level against Republicans. But in reality, his single-payer legislation would do just that. Sanders’s socialist utopia would not only further jeopardize the security past generations expected of Medicare, it would also cost all taxpayers more than we can bear.
1 Section 901(a)(1) of H.R. 1384 and S. 1129, the Medicare for All Act of 2019.
2 P.L. 89-97, as subsequently amended.
3 Section 701(d) of H.R. 1384 and S. 1129.
4 Chris Jacobs, “Sanders Proposes Medicare for None,” The Wall Street Journal January 18, 2018, https://www.wsj.com/articles/sanders-proposes-medicare-for-none-1516233970.
5 Lisa Myers and Hannah Rappleye, “Obama Administration Knew Millions Could Not Keep Their Health Insurance,” NBC News, October 29, 2013, https://www.nbcnews.com/news/world/obama-administration-knew-millions-could-not-keep-their-health-insurance-flna8C11485678.
6 Centers for Medicare and Medicaid Services, “2019 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds,” April 22, 2019, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2019.pdf?mod=article_inline, Table IV.C1, Private Health Plan Enrollment, p. 148.
7 Ibid.
8 Congressional Budget Office, Cost Estimate for H.R. 4872 (Final Health Care Legislation), March 20, 2010, https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf, Table 5, Estimate of the Effects of Non-Coverage Health Provisions of the Reconciliation Proposal Combined with H.R. 3590 as Passed by the Senate, p. 27 and p. 32.
9 Centers for Medicare and Medicaid Services, “2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds,” August 5, 2010, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2010.pdf, Table IV.C1, Private Health Plan Enrollment, p. 198.
10 Much of the research in the following section was originally conducted by Christopher Pope in “Enhancing Medicare Advantage,” Manhattan Institute, February 28, 2019, https://media4.manhattan-institute.org/sites/default/files/R-CP-0219.pdf.
11 Roy A. Beveridge, et al., “Mortality Differences Between Traditional Medicare and Medicare Advantage,” Inquiry, June 2017, https://journals.sagepub.com/doi/pdf/10.1177/0046958017709103.
12 John Z. Ayanian, “Medicare Beneficiaries More Likely to Receive Appropriate Ambulatory Services in HMOs than in Traditional Medicare,” Health Affairs, July 2013, https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2012.0773.
13 Elizabeth E. Chen and Edward A. Miller, “A Longitudinal Analysis of Site of Death: The Effects of Continuous Enrollment in Medicare Advantage Versus Conventional Medicare,” Research on Aging, September 2017, https://journals.sagepub.com/doi/abs/10.1177/0164027516645843?journalCode=roaa; David G. Stevenson, “Service Use at the End of Life in Medicare Advantage versus Traditional Medicare,” Medical Care, October 2013, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3804008/.
14 Vilsa Curto et al., “Health Care Spending and Utilization in Public and Private Medicare,” National Bureau of Economic Research Working Paper 23090, January 2017, http://www.nber.org/papers/w23090.pdf.
15 Bruce E. Landon, et al., “Analysis of Medicare Advantage HMOs Compared with Traditional Medicare Shows Lower Use of Many Services During 2003–09,” Health Affairs, December 2012, https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2012.0179.
16 Mark Duggan, Jonathan Gruber, and Boris Vabson, “The Consequences of Health Care Privatization: Evidence from Medicare Advantage Exits,” American Economic Journal, February 2018, https://dspace.mit.edu/openaccess-disseminate/1721.1/114042.
17 Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, March 15, 2019, http://medpac.gov/docs/default-source/reports/mar19_medpac_entirereport_sec.pdf?sfvrsn=0, Table 13–2, Access to Medicare Advantage Plans Remains High, p. 353.
18 Amanda Starc and Robert J. Town, “Externalities and Benefit Design in Health Insurance,” National Bureau of Economic Research Working Paper 21783, April 2018, http://www.nber.org/papers/w21783.pdf.
19 Gretchen Jacobson, Anthony Damico, and Tricia Neuman, “A Dozen Facts about Medicare Advantage,” Kaiser Family Foundation data note, November 13, 2018, https://www.kff.org/medicare/issue-brief/a-dozen-facts-about-medicare-advantage/.
20 Curto, et al., “Health Care Spending and Utilization.”
21 Yevgeniy Feyman and Austin Frakt, “The Persistence of Medicare Advantage Spillovers in the Post-Affordable Care Act Era,” SSRN Working Paper 3072604, November 16, 2017, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3072604.
22 Katherine Baicker, Michael Chernew, and Jacob Robbins, “The Spillover Effects of Medicare Managed Care: Medicare Advantage and Hospital Utilization,” National Bureau of Economic Research Working Paper 19070, May 2013, http://www.nber.org/papers/w19070.pdf.
23 Gretchen Jacobson, Tricia Neuman, and Anthony Damico, “Do People Who Sign Up for Medicare Advantage Plans Have Lower Medicare Spending?” Kaiser Family Foundation issue brief, May 7, 2019, https://www.kff.org/medicare/issue-brief/do-people-who-sign-up-for-medicare-advantage-plans-have-lower-medicare-spending/.
24 Congressional Budget Office, Cost Estimate for H.R. 4872, Table 5.
25 Joint Committee on Taxation, “Estimated Revenue Effects of the Manager’s Amendment to the Revenue Provisions Contained in the Patient Protection and Affordable Care Act, as Passed by the Senate on December 24, 2009,” Publication JCX-10-10, March 11, 2010, https://www.jct.gov/publications.html?func=startdown&id=3663.
26 Testimony of Health and Human Services Secretary Kathleen Sebelius before the House Energy and Commerce Subcommittee on Health, March 3, 2011, video available at https://www.youtube.com/watch?v=ukaIZ7pmabo.
27 Congressional Budget Office, “Effects of the Patient Protection and Affordable Care Act on the Federal Budget and the Balance in the Hospital Insurance Trust Fund,” December 23, 2009, https://www.cbo.gov/publication/25017.
28 Solomon Mussey, “Estimated Effects of the Patient Protection and Affordable Care Act, as Amended, on the Year of Exhaustion for the Part A Trust Fund, Part B Premiums, and Part A and B Co-Insurance Amounts,” Centers for Medicare and Medicaid Services Office of the Actuary memorandum, April 22, 2010, https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/PPACA_Medicare_2010-04-22.pdf.
29 Centers for Medicare and Medicaid Services, “2019 Trustees Report,” Table III. B5, Estimated Operations of the HI Trust Fund during Calendar Years 2018-2028, under Alternative Sets of Assumptions, p. 57.
30 Centers for Medicare and Medicaid Services, “2009 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds,” August 5, 2009, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2009.pdf, Table III.B8, HI Actuarial Balances under Three Sets of Assumptions, p. 65.
31 John Holahan, et al., “The Sanders Single Payer Health Care Plan: The Effect on National Health Expenditures and Federal and State Spending,” Urban Institute, May 9, 2016, https://www.urban.org/sites/default/files/publication/80486/200785-The-Sanders-Single-Payer-Health-Care-Plan.pdf.
32 Charles Blahous, “The Costs of a National Single Payer Health Care System” Mercatus Center, July 30, 2018, https://www.mercatus.org/system/files/blahous-costs-medicare-mercatus-working-paper-v1_1.pdf.
33 Congressional Budget Office, May 2019 budget baseline, https://www.cbo.gov/system/files/2019-05/51118-2019-05-budgetprojections.xlsx, Table 1: CBO’s Baseline Budget Projections, by Category.
34 Blahous, “The Costs,” Table 2, Financial Effects of Medicare for All Act, in Billions of Dollars, p. 7.
35 Ibid.
36 Chris Jacobs, “Bernie Sanders Supporters Admit His Socialized Medicine Plan Will Ration Care,” The Federalist August 2, 2018, http://thefederalist.com/2018/08/02/bernie-sanders-supporters-admit-socialized-medicine-plan-will-ration-care/.
37 John Holahan and Linda Blumberg, “Estimating the Cost of a Single Payer Plan,” Urban Institute, October 9, 2018, https://www.urban.org/sites/default/files/publication/99151/estimating_the_cost_of_a_single-payer_plan_0.pdf, p. 2. The $2.9 trillion estimate covers the 2017-2026 budget window in the original Urban study, while the higher $3.6 trillion number covers the (later) 2022-2031 budget window in the Mercatus paper.
38 Medicare Part A is funded largely by payroll taxes, and therefore has a more narrowly defined funding mechanism. By contrast, general revenues fund Medicare Parts B and D; their unlimited draw on the Treasury makes the insolvency of these specific programs a moot point, although the programs’ ever-rising unfunded obligations weigh heavily on the federal budget.
39 Floor Remarks of Rep. Steny Hoyer on H.R. 3631, Medicare Premium Fairness Act of 2009, Congressional Record, September 24, 2009, https://www.congress.gov/congressional-record/2009/09/24/house-section/article/H9908-1, pp. H9913-14.