The Corner

Politics & Policy

Medicare for All Is Ridiculously Expensive, and the Status Quo Is Terrible Too

Senator Elizabeth Warren speaks during an event to introduce the “Medicare for All Act of 2017” on Capitol Hill in Washington, D.C., September 13, 2017. (Yuri Gripas/Reuters)

This is a depressing morning for those of us — left and right — who hope a major health-care reform could lower prices and improve care.

First up, from the libertarian-leaning Mercatus Center: “Medicare for All” would cost $32.6 trillion over the first ten years (2022–2031). It would consume more than 10 percent of GDP during its first year and a rising share after that. Doubling all individual and corporate income-tax collections wouldn’t be enough to pay for it.

This is just a smidge higher than a previous estimate (for the 2017–2026 period) by the left-leaning Urban Institute, which similarly pointed out that Bernie Sanders’s full suite of tax hikes would cover only half the tab. And Mercatus’s methods are actually cautious in a key way, taking at face value the idea that providers will accept Medicare reimbursement rates that are often below the cost of care. If Medicare for All would actually pay the current system’s average rates, “the resulting cost estimates would be substantially larger: $38.0 trillion from 2022 through 2031.”

So obviously free-market competition looks great in comparison, right? Well . . .

Another new study today, based on data from a large insurer, looks at patients who needed non-urgent lower-limb MRIs. If competition works anywhere in the health-care system, it should work here: This is an expensive procedure, most people have plenty of options, prices differ heavily, and patients in the study could compare prices online with a transparency tool.

But what actually happens is that, on average, “individuals bypass[] 6 lower-priced providers between their home and the location where they receive[] their scan.” Not even 1 percent of patients use the online price tool, but “referring physicians heavily influence where their patients receive care” — and the typical doctor doesn’t send his patients to the cheapest provider.

If people went to the lowest-priced option that was at least as close as the option they picked, total costs would fall more than one-third. And while patients facing more out-of-pocket cost exposure do seem to shop around slightly more, the effect is tiny.

This doesn’t prove competition can’t work, but it sure shows that it isn’t working. Ideally, patients should know that they are not bound to their doctors’ suggestions — and that they may save a lot of money by going elsewhere — but most seem reticent to ignore their doctor’s advice in these situations. As Pradheep Shanker notes on Twitter, this habit of meekly purchasing the care a doctor recommends, while asking no questions about price, is rather ingrained in American health-care consumers and will be hard to change.

Barring that, doctors themselves might have to be part of a solution. The paper suggests that “health care funders could . . . equip[] physicians with information on the prices of potential locations for care and incentiviz[e] them to make more cost-efficient referrals.” It also draws attention to an antitrust issue: Hospital-based MRIs are more expensive, and hospital-owned practices are unsurprisingly more likely to refer patients to a hospital.

Socialism is no easy fix to our health-care woes — but competition doesn’t always work the way it should, either, in an area as complicated and opaque as health care.

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