Vermont’s health-care sector would face a 31 percent cut.
Vermont senator Bernie Sanders, along with other single-payer advocates, has argued that the federal government could cover all Americans’ medical needs for much less than they currently spend privately. Much attention has focused on the impact of dramatically reducing payments to health-care providers, and on the magnitude of the tax increases involved. But “Medicare for All” would also lead to an enormous redistribution among states — cutting the health-care resources available to Sanders’s state by almost a third.
Senator Sanders has suggested that private health insurance is responsible for America’s inflated medical costs, arguing that “in 2015, the United States spent almost $10,000 per person for health care; the Canadians, Germans, French and British spent less than half of that.” Single-payer advocates claim that savings from reductions in privately financed health-care spending could be used to fund an expansion of benefits to the uninsured and the elimination of out-of-pocket costs for those who already have coverage.
Single-payer advocates concede that replacing private health insurance with Medicare for All would represent an enormous redistribution of resources among individuals, requiring much higher taxes to replace premiums and out-of-pocket costs. But it would also impose much geographic redistribution — starving medical providers of funds in states where revenues from private payers are currently relatively high, to support those in which they are relatively low.
Disparities in health-care spending within the United States are just as great as those among countries. In 2014, Sanders’s own state of Vermont spent almost twice as much ($10,190) per capita on health care as Utah ($5,982). If all health-care spending were reallocated in a budget-neutral way, according to Medicare’s relative spending levels in each state (adjusted for demographic differences), Alaska’s health-care sector would face a fall in revenues of 34 percent, North Dakota’s of 32 percent, and Vermont’s of 31 percent. Massachusetts (down 14 percent), Pennsylvania (11 percent), Ohio (10 percent), and New York (7 percent) would also lose out. The biggest winners would be Utah (up 19 percent), Nevada (25 percent), and Texas (25 percent).
In this respect, the impact of “Medicare for All” would ironically resemble that of the tax and health-care bills proposed by the GOP in the past year, which liberals denounced as “Robbing Blue States to Pay Red.”
In reality, the political interests of Democratic politicians make such a single-payer reform clearly impossible. And if single-payer advocates are unable to achieve steep cuts in revenues to medical providers in high-spending blue states, they will be unable to extend comprehensive coverage to individuals in states that currently spend little.
And while they overestimate the efficiency of reform, single-payer advocates underestimate the value received by high-spenders under the status quo.
Wealthier communities tend to spend more on health care. This is true over time, across states, and across countries. Hospitals serving affluent and well-insured populations are able to spend more on cutting-edge equipment and are well-staffed by a broader range of expensive specialists — and they tend to save lives through a higher level of treatment intensity. Individuals in states with more physicians and costly specialists per capita receive a better quality of care, and states with higher levels of private spending on health care have better medical outcomes. When the federal government tightened caps on Medicare payments to hospitals in 1997, relative heart-attack mortality increased at the facilities subjected to the steepest cuts.
If it were possible to fund an expansion of coverage through the public purchasing of all care, it could have been done at the state level. But Vermont’s 2011 legislation to establish such an arrangement had to be abandoned last year, when its Democratic governor calculated that it would double spending under the state’s budget.
There is undoubtedly much inefficiency and inequity in American health care. There would be much sense in better targeting federal assistance at the states that have the greatest needs, so that public health-care spending supplements rather than supplants private spending. But there is no free lunch to be had by simply truncating hospital revenues, and an obsession with reducing total spending on health care is likely to mean that there is less to go around. Senator Sanders’s own constituents would likely suffer most from a failure to understand this.
This piece originally appeared at National Review Online
Chris Pope is a senior fellow at the Manhattan Institute. Follow him on Twitter here.