News flash: Medicare and Social Security, the nation’s two largest entitlement programs, are on the fast track towards bankruptcy. Indeed, according to a recent report, Medicare will be insolvent by 2026 and Social Security by 2035. Given the dire circumstances of these two huge programs, common sense would dictate both should be reformed ASAP.
However, if you have been paying attention to the Democratic 2020 presidential nomination circus, one would assume Medicare and Social Security are more financially sound than Jeff Bezos’ bank account.
Yes, several Democratic candidates, most namely Sen. Bernie Sanders (I-VT), are calling for a massive expansion of Medicare. In fact, if Sanders, and many other Democrats, have their way (assuming Congress gets on board as well), all Americans would get on the Medicare train (wreck).
In case you missed it, Sanders’ Medicare for All (M4A) plan is estimated to cost a meager $32 trillion over its first decade. Defying logic, many Democrats actually think it is a good idea to saddle American taxpayers with an all-new entitlement program that would add tens of trillions to the already colossal U.S. national debt, which is more than $22 trillion, and rising every second.
So, how would the government come up with an extra 30-something trillion over the next 10 years to pay for M4A? Say hello to more taxes. Even Sanders admitted that his plan would include a hefty tax hike. While campaigning in New Hampshire earlier this year, Sanders said, “What it will probably end up looking like is a payroll tax on employers, an increase in income tax in a progressive way for ordinary people—with a significant deductible for low-income people who pay nothing for it.”
At the first Democratic debate last week, Sanders was even more candid about his tax plan. When pressed whether or not middle-class Americans would be forced to pay more in taxes to fund M4A, Sanders said, “Yes, they will pay more in taxes.”
In other words, Sanders admitted that his loony M4A plan is nothing more than wealth redistribution on an epic scale. However, what Sanders fails to admit is that when he refers to “ordinary people” this means virtually all Americans who actually work (and hence pay taxes) would be in for a wicked surprise when they file their taxes if M4A actually comes into being.
As if a mountain of debt and a throng of new taxes were not enough to sell you on the merits of M4A, surely the fact that health care services would be drastically worse for the vast majority of Americans will seal the deal. Although Sanders and friends will likely never admit to it (barring a heavy dose of truth serum), under M4A, all Americans will receive lousier health care. Why? The answer is simple: If M4A goes into effect, the government will reimburse providers (doctors, nurses, etc.) at a much lower rate than private insurance companies currently do.
Believe it or not, this is already happening. In fact, Medicare reimbursement rates are already pitifully low. According to the Medical Group Management Association, 67 percent of Medicare claims are reimbursed below the cost to actually deliver the care. This means providers are losing money on the vast majority of Medicare patients they serve.
Just in case you were wondering, the reimbursement rate for Medicaid (the other government-run health care debacle) is even worse. According to a 2017 Urban Institute study, “Medicaid programs paid physicians fees at 72 percent of Medicare rates.” No wonder more and more providers are refusing to accept Medicaid patients. Health care providers, like all businesses, need to make a profit or they will go out of business. Would you expect any other industry to serve millions of customers who pay less than the cost of the service? Of course not.
In fact, the only reason providers can accept Medicaid and Medicare patients (while staying in business) is because they then charge private insurance companies higher prices for the same services to make up the difference. According to the Congressional Budget Office, “private insurance pays physicians much more than Medicare, particularly for brain MRIs, intensity-modulated radiation therapy, abdominal MRIs and knee arthroscopy. The highest physician payments for those services were at least 350% higher than Medicare payments. The average for those procedures was more than 200% higher for private payers compared to Medicare.”
In other words, those on private insurance are totally subsidizing those on Medicare and Medicaid. In Sanders’ M4A plan, private insurance would be eliminated, and all Americans would be enrolled in a Medicare/Medicaid-like program.
If this nightmare actually comes true, the consequences would be catastrophic for the American health care system. Providers would go out of business in droves, which would drive down the supply of medical services. Meanwhile, demand would skyrocket because health care would be “free.” No doubt rationing and lower-quality care would be all but inevitable.
Of course, the current state of the American health care system is far from perfect. However, a wholesale government takeover would make matters infinitely worse—for all.
Chris Talgo (ctalgo@heartland.org) is an editor at The Heartland Institute.
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