Democratic presidential hopefuls are at it again — promising free college tuition, forgiveness of student debt and to dramatically lower what individuals pay for health care. Like President Obama, if any lands in the Oval Office, the country could be saddled with another albatross — the Affordable Care Act has not tamed health care costs but it has so radically altered the marketplace that voters are afraid to dismember it.
Sen. Bernie Sanders recently unveiled his 2019 edition of Medicare for all and Sens. Cory Booker, Kamala Harris, Kirsten Gillibrand and Elizabeth Warren jumped on the bandwagon, but other contenders for the Democratic nomination remain skeptical and promise to mostly tinker with the ACA.
The socialist wing of the Democratic Party is fond of reminding Americans that guaranteed, taxpayer-funded health care is something every other advanced nation provides, but that is simply not true. Germany has a mandatory private insurance system, similar to the ACA before Congress repealed the individual mandate. And Mr. Sanders is advocating something similar to the British and Canadian systems, but his Medicare for all would hardly be free for most middle-class families.
In the U.K. and Canada, most doctors remain self-employed, though in the U.K. most services are provided at government-owned facilities, whereas in Canada non-profits play a large role. The systems cost about half what ours does because medical service and drug prices are tightly controlled.
Medicare as it stands now is neither free nor as comprehensive. Part B covers doctors and other medical professionals. Those enrolled pay basic monthly premiums to the government, depending on their income, ranging from $133.50 to $460.50, face co-pays, deductibles and coverage limitations, and usually purchase private Medigap policies that can cost an additional $200 a month. A similar structure applies to prescription drugs with combined premiums ranging between about $20 and more than $100 a month — plus some quite hefty co-pays for a significant number of drugs.
Estimates vary greatly but enrolling everyone in the Sanders plan and eliminating all those premiums, deductibles and co-pays would likely cost about $3 trillion a year. That’s about 15 percent of GDP, and no tax on the wealthy could possibly raise that much money. And just printing money as advocates of the Modern Monetary Theory who advise him would drive health care inflation through the roof.
Americans pay nearly twice as much for medical care than folks in similarly affluent nations, mostly because we are charged much higher prices for everything from a doctor’s visit to prescription drugs to the administrative fees imposed by our highly regulated insurers.
Mr. Sanders promises to make the latter largely extinct — his proposed law would enroll all U.S. residents at birth and make the sale of competing private plans virtually illegal. However, how he expects to compensate the shareholders of United Health Care, Aetna and others — which count among their numbers many elderly folks and others saving for retirement through their IRAs — is a mystery whose ending the senator chooses to keep secret.
More fundamentally, federal efforts to control prices have been an absolute bust.
Medicare sets rates so low that few doctors could make their practices run on those alone. Many won’t accept new patients who cannot afford to pay more than Medicare reimbursements and that’s why so many elderly purchase the above noted supplemental policies.
Medicare imposes few restrictions on what drug companies can charge, and pharmaceutical companies have proven quite adroit at gaming Medicaid purchasing rules. Overall, prescription drug prices have risen at twice the general rate of inflation — and pharmaceutical companies with still-exclusive patents have become adroit at suppressing competition by buying out developers of potentially competing drugs. And simply fixing prices among themselves — 47 state attorneys general are currently investigating 16 generic manufacturers.
Combatting those abuses is a bipartisan issue, but the drug companies are so skillful that drafting legislation short of just requiring manufacturers to charge Americans no more than they charge in wealthy European nations has eluded lawmakers.
The American health care system will soon absorb one-fifth of every dollar earned in America and needs reinvention, but until Mr. Sanders explains how he would convince Congress to put the health insurance industry out of business, what compensation he would pay shareholders and how he could outsmart, with some certainty, Big Pharma, his vision of socialized medicine is a fool’s journey.
• Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.