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No, Medicare for All Won’t Save Money

November 25, 2019 in Economics

By Charles Silver, David A. Hyman

Charles Silver and David A. Hyman

When the massive new health program known as Medicare was created in 1965, President Lyndon Johnson got health care providers on board by buying their support: He promised that the government would let them decide how much to charge and which services to deliver. In many countries with single-payer health systems, governments decide how much they will pay; when adopting Medicare, the U.S. let providers make that decision. It gave doctors and hospitals the keys to the U.S. Treasury and guaranteed their profits.

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Spending went through the roof as “ unrestricted cost reimbursement became the modus operandi for financing American medical care.” The costs wildly exceeded the government’s expectations at the time: A 1967 estimate by the House Ways and Means Committee predicted that, in 1990, Medicare’s total cost would be $12 billion. The actual cost was $98 billion—eight times as much.

Half a century later, we are still living with the consequences of the decision to put providers in charge of the payment system. A recent study by scholars at Johns Hopkins University estimated that in 2018, fully “48 percent of the entire U.S. federal budget” was spent on health care. That isn’t a typo, and it’s not an accident either: Industry groups lobby the government around the clock to maximize the number of taxpayers’ dollars they receive.

Medicare for All’s supporter promise that this time will be different. Once a single-payer program is implemented, they argue, the government will save billions of dollars by slashing payments to drug-makersdoctors, and hospitals.

Although cuts of that magnitude would severely affect patient care, there’s no need to worry. If past is prologue, they will never occur. Time after time, providers have blunted initiatives designed to economize at their expense. There’s no reason to think this Congress will succeed when virtually every past Congress has failed to reduce the flow of Medicare dollars.

Consider how, in recent years, a few attempts to save money fared:

  • In 1997, Congress tried to rein in spending increases by tying Medicare spending on physicians’ services to something called the Sustainable Growth Rate (SGR) formula. Whenever payments to doctors grew faster than GDP, the SGR was supposed to reduce them automatically. The formula triggered payment cuts in 2003 and every subsequent year—but the cuts …read more

    Source: OP-EDS

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