Bernie Sanders health care plan under the microscope
Colorado Springs, CO
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Bernie Sanders "Medicare for all" health care plan has been attacked by many economists and politicians as "implausible". First assuming we elect a progressive, veto proof Congress, that will walk in step with his proposals, then he has to make the math work. On this issue he has been both evasive and defensive.
Jonathan Chait, New York Magazine, February 3, 2016: Bernie Sanders’s Health-Care Plan Does Not Add Up
Sanders claims his plan would immediately produce trillions of dollars in savings through lower health-care costs — not merely bending the cost curve down, as Obamacare has done, but snapping it sharply in the other direction. Kenneth Thorpe, a respected liberal health economist at Emory University, has estimated that Sanders’s plan is “completely implausible.” The Sanders campaign has called Thorpe’s estimates a “complete hatchet job” and, as Sanders’s supporters are wont to do, implied that he is bought and paid for by his corporate masters.
But the trillions of dollars in unspecified savings are not the only magic asterisk in Sanders’s plan. The Committee for a Responsible Federal Budget runs the numbers and finds that, even if you accept Sanders’s assumptions about his savings at face value, his plan would still fall several trillion dollars short of covering its expenses. The analysis also notes that Sanders would have to raise the top marginal tax rate to about 85 percent, which is above the level that economists Peter Diamond and Emmanuel Saez (who strongly support higher taxes on the rich) believe maximizes revenue.
I have read other articles questioning the assumptions and analyses in Sanders health care plan, and always Sanders, when questioned, is dismissive of the those questioning the realism of his plan. Okay, just to be clear, I would love to see a "Medicare for All" type of plan eventually approved by Congress, but to get there it will require some honest and open debate about the implications and costs. Sanders thus far has avoided that kind of in-depth debate. Sooner or later he is going to have to present a more persuasive argument about how he will be able to not only persuade a Republican controlled Congress but also the American people. His populist "political Revolution" for health care can come to a screeching halt if he is dishonest with the American people and cannot deliver on his promises.
I would like to see a health care forum of experts and politicians thoroughly review Sanders as well as other proposals (actually nothing more than ideas) put forth by Republicans. There is a lot of good things in Sanders plan, but we cannot seem to have an honest debate.
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As those who study actual operations know, the funds to pay taxes and buy government securities come from government spending (or lending). This is a point that the staff people in charge at the Fed, U.S. Treasury, and on Wall Street all recognize as reality, and more and more neoclassical types have come to embrace. So Bernie's taxes are not about "paying" for his healthcare plan, but about controlling inflation that the spending might cause without those tax increases. His plan might increase total health care spending, even while lowering per unit prices, by expanding total healthcare output. The question is what does it do to inflation? As far as I know, the BLS, CBO, and Fed have not been asked to investigate a credible inflation forecast about Bernie's plan. That would probably break protocol as their job is not to investigate proposals by candidates, but what the Congress instructs them to investigate.
Bernie is advised by Stephanie Kelton to some degree. Bernie's tax proposal is probably not based on Kelton's advice, but on assumptions about what the Congress might require, and what the American people readily believe. I'm a radical and would tell the American people the truth and where the Congress can stick it, but that's my view and I might be wrong. MMT gradualism might be the best course for Bernie as he is not up to answering all the questions that are involved, and it's not like this is actually a free society with a deliberative democracy, where this could be discussed on the merits, but a fascist oligarchy with inverted-totalitarian characteristics.
I would suspect we can probably do Bernie's MFA plan without any major tax increases on anyone, provided the right investments are made in the healthcare supply, and an overall output gap remains. I have been critical of his proposed tax increases. But I understand why he includes them as a matter of his political calculus. Nevertheless, they are probably overkill.
We are vastly oversupplied in terms of real resources to provide an abundant quality of life to every man, women, and child on this planet. The question or problem is always about the geographic and group distinctions that impact distribution, and what we are doing to the environment. Taxes in my view should be about protecting the environment and our stock of real resources. As such, taxes should be adaptive, not static, but optimized towards price stability with respect to the real resources used to supply output available for sale. The pre-distribution is the right place to regulate inequality, because it's currently what causes most of it. Government policy, for no public purpose, causes more inequality than nature disposes among individual men. Market outcomes are a consequence of the institutional structure created by government.
Activities that cause environmental harm need to be regulated for public purpose, whether by taxes that create disincentives for said activities or criminal statues. We are all personally responsible for our environment. Enforcement mechanisms are needed. So I'm against income and payroll taxes whether corporate or individual. That is the wrong way to regulate or balance the economy. Taxes should primarily be levied against economic land rents and activities that negatively impact the environment. If government is going to levy income and payroll taxes, it should enable some type of opportunity for tax payers to earn some type of inflation offsetting "green" or "public service" tax credits to eliminate said tax liabilities. I would contribute some hours of my otherwise free time at a recycling plant, for instance, to keep more dollars in my pocket than otherwise.
Back to healthcare: We have a healthcare clinician and provider SHORTAGE. No matter what type of payment or delivery system we have, we're screwed. Healthcare clinicians and providers are not BORN clinicians or providers, but PRODUCED by a society that values public investment in their education for public purpose. Bernie's Universal Education plan is, as far as I know, the only the plan by any major candidate that addresses this major issue on the supply side. And THERE IS NO ALTERNATIVE (TINA) to the public investments needed to produce the doctors, mid-levels, specialists, nurses, and allied health professionals that we need to have a 21st century healthcare system of any sort, public or private. So as far as I'm concerned, you are not serious about health reform unless you are addressing this FUNDAMENTAL issue in the labor supply. It would do Bernie's campaign well to point this out.
Furthermore, we have major private and public regulation issues that restrict the labor supply in healthcare that we have. We have 50+ different medical boards in the United States of America. They are doing all kinds of redundant double work, and not protecting the public in the same way that a national medical board could. We also have an issue from the private side in the form of Board Certification requirements for physicians. While ostensibly these requirements are to protect the public, health insurance companies use such requirements to reduce reimbursements; malpractice insurance companies may charge higher prices to insure or deny insurance to non Board Certified physicians; the physician lobby advocates it to keep their wages higher; and the different Board Specialties love it because it means they can charge physicians thousands of dollars to stay Board Certified. Meanwhile all kinds of Board Certified Physicians make major medical mistakes and commit all kinds of felonies. So color me skeptical of the intent of these private regulations. Are there "Free Market" reforms we can make to healthcare? Absolutely, government and the private sector is restricting the supply and flexibility of healthcare labor for no public purpose.
But so long as the merit of an idea is judged by the political contributions of those who espouse it, these issues will never be discussed. Bernie is the all-time leading CHAMPION of Campaign Finance Reform. Without CFR, there is no reformist ideology, conservative or liberal, that stands to change governance in America. We will only slip more deeply into ruin with each passing decade of waste and abuse. Bernie is a voice for those across the spectrum concerned with political corruption. It's no surprise that we see the repugnant Republican front-runners, Trump and Cruz, attempting to adopt Sanders' populist world-view on rampant political corruption. Meanwhile, Hill-Dog (Hillary Clinton) has no authentic way to capitalize on the aggressive populist wave driving voter registrations in both parties. She is not apart of that movement or club, and never will be. Hill-Dog's healthcare plan amounts to Bernie's during the healthcare debate for a public option. Hill-Dog is for Bernie's 2nd choice.
Full disclosure: I work in healthcare staffing. I've had to get on the phone with hospitals and clinics and teach them how to bill payers for physician reimbursements on too many occasions. In short, there's a lot that hospitals and clinics do not seek reimbursement for because they do not know how to do so correctly with their payers. Those costs have to be socialized or absorbed in some way. The amount of administrative time that clinics and hospitals spend on payer billing nonsense has likely never been thoroughly investigated on the macro scale required to accurately assess the true costs of the current system's multi-part billing system and requirements.
Furthermore, healthcare staffing agencies, such as my own, contribute to massive healthcare spending mark ups through market power; whereas, nationalized health staffing agencies could easily eliminate or reduce those costs with more efficient staffing outcomes.
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I don't yet know the specifics, but I assume Bernie has done at least some of the Math. With any GOP in Congress, it will be an uphill battle, but if the American people join us in "insisting" that Enough is Enough, and we really expect to get our due benefits after paying "too much" in taxes all these years, while the billionaires go AWOL with our money. How dare they put our U.S. money into foreign banks & hold it hostage, not letting us spend it for anything but more useless ignorant Wars. I'm fed up, & I think we should send "troops" over to the Cayman Islands, or Swiss Bank Accts, & demand our money back -- at gunpoint, if necessary. (ha) -- Or maybe WE should charge THEM (the big bankers) "interest" for using OUR money.
Colorado Springs, CO
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Carlitos -- Thank you for your well researched perspectives on the political issues confronting us, especially health care. I'll just make a few comments. First as you well know from your efforts to educate us on MMT, most Americans see the federal budget and deficits as the same as household budgets and deficits. The concept of fiat money and taxation in MMT terms is just not something that is understood. I think some Republicans understand it and don't worry about running up deficits for war and such. They use that to their political advantage.
On the issue of the Affordable Care Act versus "Medicare for All", I too would like to see some kind of universal health care coverage that is affordable. Several years ago I noted that Medicare's administrative expenses were in the order of 2-3 percent versus something like 15-20 percent for private health care. But my premise was flawed as I wasn't considering all the costs. As Ezra Klein pointed out in 2009, the Medicare administrative costs are more in the order of 5-6 percent. That would also compare to a cost of something like 7 percent for large employer based plans (and not the 15 to 20 percent) that I had previously cited. Certainly some private insurer plans do have high administrative costs in that 20 percent range, but these are being targeted by Obama for cost efficiency improvements by combining small plans into larger groups. I don't know to what extent that has been achieved, but it is the kind of "incremental improvements" that Hillary Clinton cites to bring down health care costs for small businesses.
The Affordable Care Act still has a way to go to work out inequities and get costs down. I think Republican obstructionism is the only thing standing in its way. Bernie Sanders selling points on his plan is to eliminate all those private insurer health care premiums and move those costs to a tax...in effect a single payer system where the middle man, the health insurance companies go out of business (putting their employees on the unemployment roles). In the process he would also shift much of the new tax burden to the wealthiest Americans thereby keeping tax premiums lower for middle class workers. However, for those large employers that have been working efficiently to keep their health care costs down, the savings from Sanders plan may not materialize.
Sanders also cites trillions in savings on health care costs not from slowing the rate of cost increases as the Affordable Care Act has done, but rather by rolling back costs of medical providers across the board...true cost reductions, kind of like Walmart or retailers "rolling back" prices. In other words, every doctor, nurse as well as everyone associated with health care including hospitals and clinics would get big pay cuts to put their fees and salaries on par with those of Canada or Europe. That would be a hard concept to sell and implement except to those supporters of his political revolution. Sure it would not be done overnight, but it would be a political hot potato once the reality of the Sanders plan becomes known, or maybe I should say highly politicized. I hate to see Hillary Clinton as the one that has to attack Sanders plan because she is then cast as the villain in the eyes of Sanders supporters.
Which gets us to your other point...the shortage of doctors. President Obama has indeed addressed the doctor shortage on many occasions including his 2014 budget:
Obama budget calls for $5 billion to fight physician shortage
In addition, he has proposed improvements in the way doctors are utilized:
Obamacare isn't creating a doctor shortage, it's solving it
Well one might argue with the effectiveness of his programs as outlined in these articles, and there are obstructionists not only in Congress but also the medical profession who engage in fear mongering. The question that I pose though, if Obama has had a tough time selling his initiatives to Congress, how will Bernie Sanders fare any better? He will need to have his band of progressives to take complete control of both the House and Senate and that means a veto proof majority in the Senate. Will his political revolution be expansive enough to elect "think a likes" across the nation...a 50 state strategy? For me that would really be a miracle.
There are a few more comments I might make, but I'll stop now. All I'm really asking for is an honest, intelligent dialogue in this campaign, and thus far I have not seen it. There is, of course, a reason for that. Americans as a whole would not be able to comprehend the nuances of the debate. Hell, many of them still do not understand the Affordable Care Act and its many benefits accrued to them.
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Thanks, Schmidt. Great stuff over the years now.
It's important to note that the administrative costs are not just on the payers, but on the practices, clinics, and hospitals.
Having 20 or more different payers, each with different protocols, rules and, requirements, is a nightmare to keep up with.
No telling how much this impacts healthcare outcomes, and what those second-ordered costs are.
Salaries for providers and clinicians have been growing at rates way outside most other professions for decades.
With free education and reduced administrative time, physicians and midlevels could be better off with lower wages, and tax cuts for providers could work to reduce their income losses. Always got to be thinking about net-incomes.
The people that should be getting paid in healthcare are the ones providing healthcare, not the nonclinical administration regimes. CEOs of non-profit Federally Qualified Health Centers should not be making millions of dollars per year. Turn and burn medicine in the style of waiting tables is not patient centered primary care. There are fundamental issues in healthcare delivery that need to be addressed with national resources. Suits skimming millions off the top from the C-Suite are a fundamental obstacle.
I'm just talking crazy here, but politically MoslerCare" rel="nofollow" target="_blank">huffingtonpost.com/warren-mosler/a-prog... would be an easier sell to everyone. and if tax increases cannot be avoided for political reasons, levy taxes on stuff that make people sick or kill them, and legalize marijuana and put the tax proceeds to healthcare. Tax guns for healthcare. Tax big polluters that destroy our rivers and streams. If you have an environmental problem, you have a healthcare problem. We are going to have a large healthcare wage bill because we have a lot of poor and sick people in this country. Have to tax what makes people sick and provide tax incentives for healthy living and fitness.
Given the nation's huge demand leakages, abundance, and capacities, the fiscal space is there to do Sander's single payer plan without any new taxes and with no aggregate cost savings. It would constrain the fiscal space moving forward, and tax increases might be needed in later years, but it would mean a very healthy boom to the U.S. economy.
I do not believe there is a politically salvageable way forward for single payer without an open discussion about operations and back-to-basics economics. We shouldn't have to fiscally constrain what the U.S. economy can produce to extract new taxes that match new single payer healthcare expenses. That is not "paying for" healthcare. That makes healthcare even more expensive in real terms!