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November 22nd, 2018

Insight

Have free marketers and the far left finally found something they can agree on?

Megan McArdle

By Megan McArdle The Washington Post

Published August 1,2018

Have free marketers and the far left finally found something they can agree on?
One hardly expects, in the course of normal politics, to see Sen. Bernie Sanders, I-Vt., thanking the billionaire brothers Charles and David Koch. And yet here we are. "Thank you, Koch brothers," his Monday night tweet began, "for accidentally making the case for Medicare for All!"

You see, the market-oriented Mercatus Center, which takes funding from the Kochs, has a new report out on the costs of the senator's pet project. Under certain assumptions, the report found, Medicare for All would reduce total U.S. health expenditures by about $2 trillion over a 10-year period.

Are we witnessing the inaugural meeting of the Wolf-Sheep Friendship Association? Have free-marketers and the far left finally found something they can agree on?

Er . . . not quite. Charles Blahous, the report's author, seems to be trying to meet leftists halfway - to show them how far they still have to go if they want to pass Medicare for All. Where he has to make assumptions, he is as generous as possible to the Sanders plan. He assumes, for example, that it would pay all providers at the current reimbursement rates set by Medicare, rather than by the higher rates that private insurers pay; that there would be substantial savings in administrative costs; and that Medicare can save lots of money on drug prices.

Having stacked the deck in favor of "M4A," as Sanders calls his proposal, Blahous then comes up with a price tag: By 2031, the federal government would be spending an additional $4.2 trillion a year. For reference, the amount is slightly more than the total the U.S. government expects to spend this year. Suddenly doubling the federal budget has happened once before in modern history: during World War II.

Medicare for All advocates will protest: Think of all the money that people wouldn't need to spend on premiums! But the advocates already face an uphill battle persuading people to give up their current insurance - which 70 percent of Americans say they're quite happy with, according to Gallup - for a massive Medicare expansion that might not suit them as well. The climb would be stiff indeed after people found out that their taxes were being doubled to pay for it. Which leaves M4A dead in the water, unless Sanders can arrange for Aetna to bomb Pearl Harbor.

And that's if you make generous assumptions about costs - assumptions that are not very realistic, as Blahous notes. Particularly the assumption that health-care providers can be forced to accept Medicare reimbursement rates that are, according to the author, an average of 40 percent below the rates paid by private insurers.

When the Affordable Care Act was being debated years ago, its supporters went on a quest for what I started calling the "magic pot of money": many billions of dollars that could be taken out of existing health-care spending without either lowering the quality of patient care or angering some large and powerful interest group, such as cancer patients or health-care workers.

Obamacare's boosters were convinced that the magic pot of money existed, and they searched for it everywhere. Excessive use of emergency rooms. Preventive care. Overpayments to Medicare Advantage. Unnecessary back surgery. The list went on and on.

In every case, when the boosters got to the end of the rainbow, no pot of money was waiting. A study of Oregon's Medicaid expansion showed that emergency-room usage went up, not down, after people received health-care coverage. Preventive care, while excellent for patient health, costs more in extra visits and tests than it saves in serious illness. And overpayments turned out to be providing care that patients valued and providing excellent livings to millions of health-care workers, who were prepared to march on Washington if their incomes took a serious dent.

That's why the government has been struggling for years to lower Medicare payment rates for doctors and hospitals; whenever government made more than token cuts, the lobbies fought back and largely won. It turns out there is no magic pot of money. There are only hard choices.

Blahous shows with his study how hard the choices are, even when making generous allowances for the M4A plan. Leftists can mock him all they want for trying to meet them on their own turf, but if Democrats at some point actually try to pass Medicare for All, the Congressional Budget Office would perform much the same calculations, with much the same results. And laughter won't make the hard numbers, or the hard choices, go away.

Alas, the Wolf-Sheep Friendship Dinner will have to be canceled until further notice. Sanders, the keynote speaker, would have been anyway unable to attend; he's still off chasing rainbows.

Megan McArdle is a Washington Post columnist who writes on economics, business and public policy. She is the author of "The Up Side of Down." McArdle previously wrote for Newsweek-the Daily Beast, Bloomberg View,the Atlantic and the Economist.

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