Charles Blahous of George Mason's Mercatus Center specializes in domestic economic policy and retirement security (with an emphasis on Social Security), as well as federal fiscal policy, entitlements, and health care programs. Blahous’s research The Costs of a National Single-Payer Healthcare System has been used by both proponents and opponents of Medicare-for-All. I interview Dr. Blahous on the 2020 September-October NSDA Public Forum Debate Resolution:
"Resolved: The United States federal government should enact the Medicare-For-All Act of 2019."
Dr. Blahous made clear that he does not view himself professionally as an advocate or opponent of the bill, but rather as a humble data analyst. With that being established, that he is neither for or against the resolution professionally, here are some key findings from his aforementioned estimates: "Actual federal cost increases under M4A are likely to be substantially higher than the estimated $32.6 trillion over its first ten years. . . The increased demand that would arise under M4A’s expanded coverage is substantial — adding an estimated $5.7 trillion to projected national health spending from 2022–31 all other things being equal, an increase of more than 11 percent. . . As the idea of M4A is discussed, financing the unprecedented federal cost should be considered whenever and wherever there is a discussion of its potential benefits." Dr. Blahous and I discuss his research and M4A in the following Q&A:
A.J. Camacho: In your opinion, should the United States federal government enact the Medicare-For-All Act of 2019? If you'd rather not disclose your opinion, what are, in your opinion, the most compelling arguments on either side?
Chuck Blahous, Mercatus Center: The question of what the federal government should do in any policy area involves subjective value judgments beyond the purview of data analysts, and which only elected representatives can make on behalf of voters. That said, it seems appropriate to observe that the federal government cannot realistically finance the cost of Medicare for All, that the fiscal and economic damage of enacting such legislation would be severe, and thus that it would be highly irresponsible to attempt it.
A.J. Camacho: How much would the Act cost?
Chuck Blahous: I studied the cost of the Medicare for All Act of 2017, which would impose additional federal budget costs somewhere in the range of $32.6-$38.8 trillion over its first ten years. A few specifications are in order with respect to those estimates. One is that these numbers do not represent the total cost of Medicare for All, but rather simply the additional cost to the federal government, above and beyond currently projected federal expenditures. A second is that we have more information now than when my study was performed, which indicates that costs are unlikely to be toward the lower end of the range ($32 trillion) and more likely to be toward the higher end ($39 trillion). A third important qualifier is that I studied the 2017 version of the legislation, which did not include a long-term care benefit. Since then, most Medicare for All bills introduced, including the M4A legislation of 2019, would include a long-term care benefit. This would add, approximately, a further $4.3 trillion to the ten-year cost. It’s thus reasonable to guess that new federal costs would be somewhere in the range of $37-$43 trillion over the first ten years. For perspective, consider that even the initial lower-bound estimate of $32.6 trillion is more than could be financed by doubling all currently projected federal individual as well as corporate income taxes. In other words, imagine that you, as an American at any income level, had your income tax obligation doubled. This still would not be nearly enough to finance Medicare for All.
A.J. Camacho: Numerically, would the benefits outweigh the costs?
Chuck Blahous: Again, this question involves subjective value judgments, and the answers would vary according to the person involved. For some people, the benefits would outweigh the costs – for example, a low-income person without income tax liability who is currently uninsured. This person would gain health benefits without incurring additional financing obligations. However, for Americans in the aggregate, the costs would clearly outweigh potential benefits. Even under the most optimistic projection scenarios in which M4A succeeds in slightly decelerating the rate of national health cost growth, the financing requirements would be such that M4A would create a net drag on the economy and make Americans poorer on average. For example, even in an optimistic projection scenario in which national health spending decreases by $X over time relative to current projections, the reduction in total economic growth would be far greater than $X under M4A. The reason for this is that the federal government would not finance M4A in the manner that we currently finance private health insurance; rather, the federal government would rely on progressive taxation measures, such as income taxes, wealth taxes, taxes on financial returns, and so forth. Under such financing methods, one’s financing burden is not a function of an individually-carried premium obligation, but is a tax liability that increases with income. There is an ample economics literature demonstrating the subtractive effect of such taxation on total economic growth, and thus the reductions in total US economic well-being would far exceed any savings M4A might (and more likely would not) generate in health cost savings.
A.J. Camacho: Which plans, if any, could successfully finance the legislation? Warren's Wealth Tax? Sanders's 9-point plan? etc.
Chuck Blahous: No plan has been offered that would come close to successfully financing M4A. This is one reason we can be relatively certain in saying that the federal government would not be able to do so. Normally, what Congress as a whole is willing to enact is something different/less than what sponsors of a proposal originally endorse. But in this case, even M4A’s most ardent supporters have been unable to say realistically how they would finance it. The “plans” that have been put forward by the leading advocates of M4A have not come close to financing its actual costs; instead they simply wave away the preponderance of the actual costs, in order to reduce the plans’ apparent financing requirements. Realistic estimates of the costs of M4A – mine, as well as those from the Urban Institute, Rand, Center for Health and Economy, and Ken Thorpe – all show costs that much greater than those any M4A sponsor has been willing to try to finance. Notably, the M4A plans that have actually been introduced in Congress do not provide any financing at all. No one has any idea how to finance M4A, and no one has made a serious attempt to do so.
A.J. Camacho: What do you foresee as likely consequences if the bill were passed? Do you imagine the people would react with a backlash to would the plan be popular?
Chuck Blahous: The most obvious consequence would be that the federal fiscal situation would immediately become untenable, as the government would have taken on additional cost obligations that dwarf the entirety of current federal obligations in large budget categories (such as all annual federal appropriations, including both domestic and defense; M4A alone would be roughly twice as big as all that spending combined). It’s highly unlikely that the voting public would consent to have its federal income tax burdens more than doubled overnight, so federal indebtedness would begin to metastasize, ultimately precipitating a debt crisis. Another result voters may not anticipate is that actual federal costs would most likely be greater than previous estimates, because the federal government is highly unlikely to follow through with the constraints on provider payment levels that M4A advocates envision. Once health consumers’ sensitivity to health prices is completely eliminated by having M4A provide first-dollar coverage of every service, the federal government would have reduced incentive to contain costs in a way that would further limit patients’ access to care. More likely, federal lawmakers would try to ensure continued access by paying providers more than originally envisioned. This leads to another effect we should expect to see: an insufficiency in health service supply relative to demand. Due to the expansion of coverage to include the currently uninsured, and to making insurance for the currently insured more generous, we would expect total US demand for health services to increase significantly – by at least 10%. At the same time, the supply of health providers is unlikely to expand sufficiently to meet this additional demand, unless M4A pays much higher payment rates than currently estimated. Thus, there would be disruption in the timeliness and quality of health service access, though no one can say how much. There would undoubtedly be some backlash as patients are unable to receive the timely access to care Americans have received in the past.
A.J. Camacho: Is there anything you have not yet said that you think debaters might find useful and/or ought to know before debating the topic?
Chuck Blahous: There’s a general lack of realism in much national discussion of M4A. There is a tendency on the part of some to simply glide past certain issues, such as the implausibility of the federal government’s immediately absorbing the cost of all health services now financed by private insurance, by states, and by individuals out of pocket. Those who say “we are already paying for this health care in other ways” are glossing over important consequences of attempting to finance all this through the federal government. Imagine by way of analogy, for example, that the federal government were to suddenly take on the burden of providing every government service now provided by state and local governments; just saying “we’re already paying for this at the state/local level” doesn’t overcome the reality that having the federal government take over all these functions, and dismantling state/local administration of them, would be an unrealistically cumbersome nightmare. There is a lot of magical thinking in the M4A discussion; to date it has been a political talking point, offered by politicians who have no plan to actually enact, administer or finance it.
Charles Blahous is the J. Fish and Lillian F. Smith Chair and Senior Research Strategist at the Mercatus Center at George Mason University.
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