The False Lure of the Sanders Single-Payer Plan

The False Lure of the Sanders Single-Payer Plan

by Paul Starr (Princeton University)

Wouldn’t it be great if we could just go to the doctor and not pay any bills? After all, isn’t that what they do in other countries, and don’t those countries have lower health-care costs than the United States does? And aren’t private insurance companies the only reason we don’t have that kind of system?

This is the appeal of the Bernie Sanders single-payer health plan. Free health care, with none of the frustrating paperwork of today’s insurance, and with taxes that cost less than insurance premiums—what could be better than that? Of course, the single payer in the Sanders plan is the federal government, which implies concentrating payment and therefore power over health care in Washington. But, at least in this area, many Democrats don’t seem worried about that prospect.

Sanders doesn’t just call for incremental steps toward single-payer. He’s proposing to shift all of health care to federal taxes in one fell swoop. That’s one reason for the enormous, sudden increase in taxes the plan would require—$1.38 trillion on top of existing federal spending, according to Sanders’ own estimates. As Harold Pollack has pointed out, that $1.38 trillion is just about equal to total federal income and estate tax collections in 2014—in other words, the plan would require doubling that revenue. Sanders insists that he’s shown how he would pay for it through a 6.2 increase in payroll taxes (which he calls an “income-based premium paid by employers,” though the cost will fall on employees); a 2.2 percent increase in income taxes on everyone; higher estate taxes; taxing capital gains and interest as ordinary income; limiting tax deductions for the rich; and higher income-tax rates on the upper brackets (which, combined with other increased taxes he’s also calling for, would bring the top marginal federal rate to 77 percent, as Dylan Matthews shows at Vox).

But Sanders’s estimate of the needed increase in taxation, despite its whopping size, is too low. The plan would actually cost another $1.1 trillion a year, according to an analysis by Kenneth Thorpe, a health-care economist at Emory University, who has long experience working with single-payer proponents. In 2006, the Vermont legislature hired Thorpe to cost out a single-payer proposal, and in 2014 progressive legislators in Vermont hired him again. So this is not an estimate from an economist generally opposed to universal health care or to single-payer. Thorpe’s estimates indicate that workers would have to pay an additional 20 percent of compensation to pay for Sanders’s plan.

At Vox, Matthews has probed both Thorpe and the Sanders campaign on some of the specific areas where their numbers diverge. Here’s one stunning detail: When the Sanders campaign released its plan, it estimated $324 billion in annual savings on prescription drugs—until Thorpe noted that the United States spent only $305 billion for that purpose in 2014. (If Trump can expect Mexico to pay for a wall on the border, I suppose Sanders can expect drug companies to pay consumers instead of the other way around.) When Matthews pointed out that it was impossible to save $324 billion out of $305 billion, the Sanders camp cut their savings estimate to $241 billion, while conveniently increasing other projected savings to make up the difference. But $241 billion in drug savings are still implausible, and as the entire episode indicates, the Sanders campaign is simply pulling numbers out of the air.