The Journal knows only costs, not values

By Gerald Friedman

The Wall Street Journal cited Gerald Friedman’s research on single-payer healthcare in it’s recent hit piece on Bernie Sanders. The Journal made great mention of the $15 Trillion dollar price tag for single payer health care, and omitted Friedman’s finding that single-payer health care would replace $20 Trillion dollars in private health care spending, for a net savings of $5 Trillion dollars.

 

It is said of Economists that they know the cost of everything but the value of nothing.  In the case of the article “Price Tag of Bernie Sanders’s Proposals: $18 Trillion,” this accusation is a better fit for the Wall Street Journal that published it.  The WSJ correctly puts the additional federal spending for health care under HR 676 (a single payer health plan) at $15 trillion over ten years.  It neglects to add, however, that, by spending these vast sums, we would, as a country, save nearly $5 trillion over ten years in reduced administrative waste, lower pharmaceutical and device prices, and by lowering the rate of medical inflation.

These financial savings would be felt by businesses and by state and local governments who would no longer be paying for health insurance for their employees; and by retirees and working Americans who would no longer have to pay for their health insurance or for copayments and deductibles.  Beyond these financial savings, HR 676 would also save thousands of lives a year by expanding access to health care for the uninsured and the underinsured.

The economic benefits from Senator Sander’s proposal would be even greater than these static estimates suggest because a single-payer plan would create dynamic gains by freeing American businesses to compete without the burden of an inefficient and wasteful health insurance system.  As with Senator Sanders’ other proposals, the economic boom created by HR 676, including the productivity boost coming from a more efficient health care system and a healthier population, would raise economic output and provide billions of dollars in additional tax revenues to offset some of the additional federal spending.

Appendix: Summary of 10-year projections.  

Because of the nearly $10 trillion in savings, it is possible to fund over $4.5 trillion in additional services while still reducing national health care spending by over $5 trillion.  With these net savings, the additional $14.7 trillion in federal spending brings savings to the private sector (and state and local governments) of over $19.7 trillion.

Projected 10 year impact of HR 676 in billions

Additional revenue from progressive taxation $  17,568 Projected revenue over 10 years from the financial transactions tax, the high-income surtax, the tax on non-wage income, and the payroll taxes.
Deficit reduction $    2,889 I designed the taxes to raise more money than needed to allow margin-for-error.  These funds could be used for deficit reduction, other spending, or tax cuts.
Additional federal spending for health care Medicare for All $  14,679 The rest of the funding for HR 676 comes from current federal health spending including tax expenditures.
Total savings (gross because they do not take account of extra spending) $    9,634 These are savings from administrative economies, lower pharmaceutical prices, and lowering the rate of medical inflation.
Reduced private spending $  19,759 This is the 10 year savings on private health insurance premiums, reduced out-of-pocket spending, and other private health spending.
Spending on additional services $    4,553 This is the cost of covering everyone, establishing uniform pricing for Medicaid services, and eliminating copayments and deductibles so there will be more utilization of health care services.  
Net reduced national health spending $    5,081 This is the 10 year reduction in health care spending

 

10-year estimates of spending with the current system and HR 676 (in $ billions):

Projected total Nation Health Expenditure (personal health care) with ACA (current system): $  42,914
Projected total Nation Health Expenditure (personal health care) with Conyer’s Bill (single payer): $  37,834
Projected total with Conyer’s Bill includes additional spending to provide universal access and cover uninsured $    4,553