Did conservative study show big savings for Bernie Sanders' Medicare for All plan?

When a free-market think tank published its analysis of Sen. Bernie Sanders’ single-payer health care plan, Republicans took to social media to tout the report’s most eye-popping finding.

Sanders’ Medicare for All would cost $32.6 trillion over 10 years, an amount they framed as crushingly large.

Sanders, however, found good news for his idea in the generally skeptical report.

In a video he shared on social media July 30, he pointed out one of the report’s findings that others had overlooked. Sanders tweaked the Koch brothers, the conservative donor family that has supported the Mercatus Center at George Mason University in Virginia.

Sanders said, "Let me thank the Koch Brothers of all people for sponsoring a study that shows that Medicare for All would save the American people $2 trillion over a 10-year period. … That is what is in the study of the Mercatus Center."

Sanders’ plan would essentially expand Medicare to cover everyone, rather than just those older than 65. Individuals (and their employers) would no longer need to shoulder co-pays for medical care or premiums for private insurance coverage. Instead, the government would pay everyone’s medical bills.

Sanders and his allies say this would end up saving money, because it would remove the middle-man of insurance companies, which drive up administrative costs, and and enable the government to use new bargaining power to rein in costs by providers.

Skeptics counter that those savings are not guaranteed, and the lack of a monetary incentive for patients to hold back on services could lead to increased use of the system, adding to the overall cost. In addition, with the government having to raise revenue to pay everyone’s bills, taxes and the federal debt could go dangerously high, potentially canceling out or exceeding the money that individuals and families would save in higher take-home pay and lower health-care expenses.

In this article, we’ll look at something much more narrow: whether Sanders is right that the Mercatus report says that single-payer would save the United States $2 trillion in health care outlays.

In a way, Sanders is right, though his assertion glosses over some caveats.

The Mercatus report included a table summarizing the financial effects of Sanders’ bill. With a minimum of arithmetic, it’s not hard to find the $2 trillion in question.

It’s the difference between the Department of Health and Human Services’ projection of the amount of total health care spending in the United States, and what Mercatus thinks that number would be under Sanders’ Medicare for All proposal. (See Table 2.)

Under Mercatus’ projection for Medicare for All, the total amount of health expenditures would actually fall compared to what is expected under a continuation of the current system.

Specifically, total health care expenditures would fall by $2.054 trillion over 10 years, according to Mercatus.

So there’s definitely something to what Sanders said.

The Mercatus report’s author took issue with Sanders’ focus on that figure.

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Charles Blahous said that to come up with that estimate, Mercatus used a relatively generous assumption about how well Sanders’ plan will end up controlling health care costs. It assumes that provider payment will be reduced to Medicare levels, that negotiation with prescription drugmakers will generate significant savings, and that administrative costs will be cut from 13 to 6 percent.

However, in an alternative scenario in which cost-control works less effectively (see Table 4) Mercatus found that over the same 10-year period, national health expenditures would actually increase by $3.252 trillion compared to current law.

So while the number Sanders chose really does appear in the report, he’s cherry-picked the more flattering of two estimates.

Sanders’ bill "indicates that health providers would be paid at Medicare’s payment rates, which are about 40 percent lower than those paid by private insurance," Blahous said. "Obviously, immediately cutting payments to health care providers by roughly 40 percent would lower national health spending."

But would cuts that large actually occur (and without other negative consequences, such as mass retirements of doctors unwilling to accept lower fees)? This is where independent experts express caution.

Sustained cuts as deep as those projected in the Mercatus model Sanders pointed to are "not likely feasible," said John Holahan, a fellow in the health policy center at the Urban Institute. His Urban Institute colleague, Linda Blumberg, agreed, saying it’s a "pretty heroic assumption to say that you can dial payment rates down to those levels system-wide politically."

In addition, even if the switch to Medicare for All does end up cutting the total amount of money spent on health care in the United States, the legislation places more of those costs on the federal budget. In an era of rising debt and an aging Baby Boom generation, that could be a problem.

Josh Miller-Lewis, a spokesman for Sanders, focused instead on the impact on individuals, many of whom will end up ahead. "Under Medicare for All with a progressive tax system, the vast majority of people will save money on health care," he said.

In cheekily thanking the Koch brothers, Sanders said a study they indirectly sponsored "shows that Medicare for All would save the American people $2 trillion over a 10-year period."

The $2 trillion figure can be traced back to the Mercatus report. But it is one of two scenarios the report offers, so Sanders’ use of the term "would" is too strong. The alternative figure, which assumes that a Medicare for All plan isn’t as successful in controlling costs as its sponsors hope it will be, would lead to an increase of almost $3.3 trillion in national health care expenditures, not a decline. Independent experts say the alternative scenario of weaker cost control is at least as plausible.

We rate the statement Half True.