The New York Times recently ran a story entitled "Left-Leaning Economists Question the Cost of Bernie Sanders's Plans." The article featured the views of economists who are, I believe, predominantly supporters of Hillary and would, I presume, like to work in her Administration.
I'm not a Sanders supporter. This said, I don't think political economists, by which I mean politically affiliated economists, can provide impartial analysis. Indeed, political economists working for people in both parties have badly served the profession. Consequently, when I see political economists attack the economic plans of political opponents, I immediately worry if they are putting their politics ahead of their economics.
Herman Cain's 9-9-9 plan is a good example. It was quickly dismissed by left-of-center economists as highly regressive. In fact, the plan embedded two significant wealth taxes and was far more progressive than these economists or Cain, himself, understood. Nancy Pelosi would likely have applauded Cain's 9-9-9 plan had it featured explicit rather than implicit wealth taxes, i.e., if the same plan had been conveyed with different words.
When I read the attacks on Herman Cain's tax plan, I wrote a column for Bloomberg.com to set the record straight. Doing so didn't mean I liked Cain as a candidate. On the contrary, he wasn't remotely qualified to become President. But he deserved to have his tax plan properly vetted.
Whether Sanders is qualified to be President depends, in part, on whether he can convert his high-minded objectives into policies that the country can afford and that the vast majority of Americans, which includes plenty of Republicans, will accept. When it comes to Medicare for All, the answer is yes, provided Medicare for All is correctly designed.
The Hillary-leaning economists featured in the NY Times article who roundly derided Sanders's Medicare for All plan as far too expensive might have pointed out these facts. Other developed countries provide universal healthcare at a national cost that is a 6 to 8 percentage-point lower share of GDP than what we spend. Furthermore, the quality of their care, as measured by health outcomes, is often higher.
These economists could have also prefaced their remarks by saying, "Gee, if we just run our healthcare system like the Swiss run theirs and call it Medicare for All, we could certainly pull off what Bernie is advocating."
They didn't do this and the NY Times reporter failed, it seems, to ask them about the Swiss or any other healthcare system that delivers excellent care at the far lower price that Sanders is referencing. And for those concerned about too much government, most of these foreign health care systems use private-sector provision, rather than having the government micromanage each and every health-sector decision.
This is important. When Sanders references a single payer system, many of the public equate this with a total government takeover of our healthcare sector. That's not what Sanders is proposing. Furthermore, the U.S. already has, to a large extent, a single-payer system. When you add up all the direct government payments for Medicare, Medicare, and Obamacare and include the huge tax subsidy to employer-based health care, you find that roughly 60 cents of every healthcare dollar spent in this country comes out of Uncle Sam's pocket, either directly or indirectly.
Before outlining a Sanders's Medicare for All plan that both the Democrats, including Sanders, and the Republicans, including, say, Donald Trump, should love and that is highly affordable, let me point out that we now have two versions of Medicare in place -- a version designed by Democrats and a version designed by Republicans. The Democrat's version is traditional Medicare (Parts A, B, and D). The Republican version is Medicare Part C, also known as Medicare Advantage.
Traditional Medicare is fee for service. You get the service and Uncle Sam pays the fee, or most of it. The problem with traditional Medicare is that no one stops you from using as many healthcare services as your heart desires. My mom is 96. If she wants (she doesn't) to see 5 docs and have 10 expensive tests every day, day in and day out, no one will stop her and Washington will keep paying. This is the system that isn't affordable in its current, let alone an expanded state.
Republicans don't like traditional Medicare in large part because of its escalating costs, which, over the decades, have grown much more rapidly than GDP. Notwithstanding a welcome Medicare-growth slowdown in the past few years, the Kaiser Foundation predicts growth in real (inflation-adjusted) Medicare per capital benefits of over 4 percent per year in the next decade, which exceeds projected growth in U.S. real per capita GDP by over 2 percentage points.
The Republican version of Medicare, Part C, pays private insurance companies to do what traditional Medicare would otherwise do -- ensure the participant against health expenses. But it does so at a set annual cost. Democrats don't like Medicare Part C because they think private insurance companies are inefficient and overcharge for their insurance. Furthermore, when people get really sick, the private insurers can structure their coverage and services to induce exit back to traditional Medicare (Parts A, B, and C). This, of course, is a form of cherrypicking. Finally, the set annual cost rises each year with the cost of traditional Medicare. So if the costs of traditional Medicare are running out of control, the cost of Part C will do the same.
Here's a plan that Sanders, Trump, Clinton, Cruz, Kasich, Rubio, Bush, and Carson (Did I miss anyone?) should like. I won't call it the Medicare for All plan, which Sanders would like, or the Medicare for None plan, which Cruz might like. I'm calling it the Purple Health Plan, a title reds and blues can both like since purple combines both colors.
If you go to www.thepurpleplans.org, you'll find that the Purple Health Plan has been endorsed by five Nobel Laureates in Economics and a slew of other top economists, none of whom has a political ax to grind. The plan has two hot-button words. One is single-payer, which Blues love and Reds hate. The other is voucher, which Reds love and Blues hate. I'm using these words as bait -- to, on balance, keep both sides reading. But please don't get too hung up on those words. If you don't like them, substitute their, say, Russian equivalents and focus on the following principles and features of this incredibly simple plan:
Principles of Healthcare Reform
1. All Americans need a basic health plan and should be free to purchase supplemental health insurance coverage.
2. Healthcare should be privately provided with people free to choose their doctors and hospitals.
3. All who can pay for their health plans should do so through a combination of existing tax payments and health plan co-payments.
4. The government's projected healthcare costs must be strictly capped and fiscally affordable on a long-term basis.
5. Health plans should be affordable regardless of one's pre-existing health conditions or risk.
6. The system must provide strong incentives to prevent overuse of healthcare services and discourage bad healthcare behavior.
7. Medical malpractice reform is needed to keep providers from engaging in unaffordable defensive medicine.
The vast majority of Americans would surely agree with this list of principals. Ok, but how do we implement them? Here's the answer.
The Purple Health Plan
1. All Americans receive a free voucher each year to purchase, in full, the Purple Plan (which provides all basic medical coverage) from the insurance company of their choice.
2. There in only one Purple Plan. It covers the same medical services and drugs for everyone. This will turn the provision of basic health insurance into a basic commodity (like wheat) and produce intense competition among insurance companies to provide this commodity.
2. The vouchers are individually risk-adjusted (By the way, such risk-adjustment software already exists.) to fully protect those with pre-existing conditions; those with higher expected healthcare costs, based on documented medical conditions, receive larger vouchers. Since the poor are in worse health than the rich, this makes The Purple Health Plan highly progressive.
3. While the vouchers will ensure that insurers have no incentive to turn anyone away, they will be also be formally prohibited from denying coverage to anyone.
4. Each year a panel of doctors sets the coverages of the standard plan subject to a strict budget, namely that the total cost to the government of the vouchers not exceed 10 percent of GDP. Switzerland and Germany, by the way, spend 11 percent of their GDP for all healthcare. Hence, 10 percent is a huge number. The panel can, each year, expand as well as limit what's covered under the Purple Plan to strictly adhere to their 10 percent of GDP budget.
5. Insurance companies providing the Purple Plan contract with private providers to cover their plan participants.
6. Americans choose doctors and hospitals included in their insurance company's network.
7. Plan providers compete and provide incentives to improve participants' health and limit bad personal health practices. Since they are paid a fixed amount by Uncle Sam each year, they have no incentive to overtreat patients. But if they undertreat patients, they won't get return customers and will lose their profit margin that is included in the calculation of the voucher.
8. Plan providers offer supplemental plans to their participants and cannot deny supplemental insurance coverage to their participants.
9. Medicare, Medicaid, Obamacare, and all tax breaks to employer-based health insurance are eliminated. Employer-based health insurance will disappear over time since everyone will receive free basic coverage under The Purple Plan.
10. Pending passage of the Purple Tax Plan, funds now used to finance Medicare, Medicaid, and Obamacare as well as the additional revenues from eliminating the tax exclusion of employer-provided health insurance premiums, are used to finance the vouchers. If additional revenues are needed to cover the costs of the vouchers prior to the passage of the Purple Tax Plan, the ceiling on the FICA payroll tax would be raised.