Sanders Adviser: Berniecare Would Increase Total Federal Spending by 55 Percent (at Least)

by Avik Roy

Yesterday, the Bernie Sanders campaign put out a fiscal score for Sanders’ plan to replace the entire U.S. health-care system with a government-run single-payer regime. The score was generated by Gerald Friedman, an economist at the University of Massachusetts at Amherst, and it illustrates why Berniecare is an utter fantasy.

Friedman believes that Sanders’ single-payer plan would reduce national health-care spending (both public and private) by $6.3 trillion over ten years, by some combination of price controls and rationing, though Sanders understandably never uses those words. That leaves $41 trillion in national health spending over that period, all of which would run through the federal government under Berniecare. (Disclosure: I’m advising Marco Rubio on policy.)

It’s far from clear that Sanders’ plan would achieve $6.3 trillion in spending reductions. The plan would make nearly all health-care services free to all U.S. residents, regardless of price or value. As anyone who has been to an open bar knows, when you make the apparent cost of a service “free,” the nearly certain outcome is more consumption, not less. The only way to keep costs down under single-payer is to control access and price, as Canada has attempted to do. It’s far from clear that American doctors, hospitals, nurses, et al. will accept the 15 percent pay cut needed to realize Friedman’s savings.

Nonetheless, if you take Friedman’s rosy scenario for granted, you’re still looking at an astounding 55 percent increase in total federal spending from 2017 to 2026. That’s because under current law, “only” 31 percent of U.S. health-care spending is run through the federal government, while 19 percent goes through state and local governments, 21 percent through businesses, and 29 percent through households. So if the federal government were to assume responsibility for all U.S. health-care spending, even with some rationing and price controls, federal spending would increase by $28 trillion from 2017 to 2026. Of that, $14 trillion would be paid for by taxes, and the rest would increase the deficit.

State and local governments would be relieved of their responsibility to fund health-care programs, but they would not be required to give that money back to their residents in the form of lower taxes. It’s far more likely that they’d spend the money on other priorities. Individuals and employers would, of course, pay far more in taxes to finance Sanders’ plan.

If you’re a glutton for punishment, I have more details on the plan at Forbes, including what would happen if Sanders’ purported savings did not materialize.

The Corner

The one and only.