On Wednesday, the Center for a Responsible Federal Budget, a nonpartisan Washington think tank, released an analysis of Sanders’ proposal to replace existing health insurance arrangements with a single, government-run plan that would look something like Medicare.
Sanders has said that his plan would pay for itself, partly by making the U.S. health care system more efficient and partly by raising revenue through a series of new taxes. In the end, Sanders has promised, the vast majority of Americans would actually be better off financially, paying less in taxes under his program than they would pay in premiums plus out-of-pocket expenses under the current system.
The center's report disputes that finding. In particular, it says, the taxes that Sanders has sketched out wouldn’t produce as much revenue as Sanders thinks -- creating a shortfall of about $3 trillion over 10 years, or much more if it turns out the program also spends more on insurance benefits than Sanders expects.
Like most analyses that circulate during presidential campaigns, this one is rough. And the Sanders campaign is challenging the report by assailing the credibility of the source -- something it also did last week, when a prominent health care economist released a similarly critical analysis.
But if the findings from this new report are even in the right ballpark, then either the benefits Sanders has promised would have to be smaller, the taxes for the plan would have to be higher, or the program as a whole would create huge new deficits.
One way or another, that would change the calculus of how many people end up better off and how many end up worse off -- maybe dramatically.
What The New Report Says
Nobody disputes that the plan Sanders touts would be an expensive proposition. If the proposal became law, the federal government would be paying the medical bills of everybody in America, with zero cost-sharing for most services. According to an independent estimate that the Sanders campaign commissioned, the price tag for providing so many people with such generous coverage would come to something like $13.8 trillion over 10 years.
Such a program would increase total federal spending -- that is, the cost of everything that the government does, from food stamps to defense spending -- by somewhere between one-fourth and one-third.
Sanders has said that a single-payer system can offset some of that new cost by reducing what the U.S. spends on medical care -- partly by eliminating administrative expenses related to billing and partly by forcing the suppliers of treatment and supplies, particularly the makers of prescription drugs, to lower their prices. As proof, he has cited the relative record of single-payer systems abroad, where governments cover everybody while spending less than the U.S. does.
To provide the remaining financing, Sanders would seek new taxes. Some of these levies, like a higher tax rate on large estates, would fall exclusively on the wealthy. Two others, a new 6.2 percent payroll tax on employers and a 2.2 percent “income-related premium,” would apply to all workers. Although the tax increases together would dwarf any increase in recent history, Sanders says the money most people save from the elimination of premiums and (most) out-of-pocket expenses would be even bigger.
But those calculations are flawed, the new report says. A big problem, the center’s analysts explain, is that the Sanders campaign fails to account for the ways wealthy people avoid taxes when rates reach the levels that Sanders has in mind. Altogether, the report says, the plan’s taxes would produce revenue short of the official Sanders projection, to the tune of $3.1 trillion over 10 years -- or about one-third of the program's total official cost.
The report is the second in two weeks to scrutinize the arithmetic of Sanders' health plan. The previous report, from Emory University professor Kenneth Thorpe, suggests that estimates of health care savings in the Sanders plan are even more off the mark. Among the reasons: Such severe reductions in hospital payments would cause closures and shortages that neither the industry nor the public would tolerate.
What The Sanders Campaign Says
The Sanders campaign has stood by its original estimates, which University of Massachusetts economist Gerald Friedman produced, by citing a letter of general support from 100 advocates and experts on economics or health care -- as well as a separate analysis from the co-founders of Physicians for a National Health Plan, the nation’s leading advocate for single-payer insurance.
Campaign officials have also questioned the credibility of critics -- noting that Thorpe, who served in the Clinton administration, has in the past done work for health industry clients.
On Wednesday, Warren Gunnels, policy director for the Sanders campaign, responded to the latest report in much the same way -- by citing its ties to Pete Peterson, a Wall Street tycoon known for his advocacy of balanced budgets and concerns over entitlement spending. (Peterson serves on the organization's board of directors; the Peter G. Peterson Foundation provides some of its funding.) “It's disappointing but not surprising that a group funded by Wall Street billionaire Pete Peterson would issue a misleading and inaccurate report attacking Sen. Sanders health care plan,” Gunnels said.
But the center's analysts have a reputation for intellectually sound work. They are relying on the same theories about tax policy that economists at the Congressional Budget Office and Joint Committee on Taxation use. And they are hardly the only respected experts raising questions about the assumptions in the Sanders plan -- and whether those assumptions are realistic.
Most of these students of health policy have praised single-payer systems before, because they realize the model really does produce more coverage at less cost overseas. But they doubt that transplanting that system into the existing American health care infrastructure would deliver similar results -- and they don't think Sanders and his advisers have accounted for that.