Committee for a Responsible Federal Budget
Sen. Bernie Sanders

How Much Would Sen. Bernie Sanders's Single-Payer Plan Cost?

Feb 2, 2016 | Health Care

Democratic presidential candidate Sen. Bernie Sanders (I-VT) recently released arguably his most ambitious policy proposal yet, to move to a single-payer health care system in the U.S., but debate quickly arose over just how much such a far-reaching proposal would actually cost.

The Sanders campaign relies on an estimate from UMass-Amherst economist Gerald Friedman suggesting the plan would cost $13.8 trillion over ten years. But Emory University health economist Kenneth Thorpe contends that it could actually cost closer to $24.7 trillion, particularly without simultaneously enacting very large provider payment cuts – which are not mentioned anywhere in Sen. Sanders's plan.

The Plan

Sen. Sanders's single-payer proposal would cover every American under a single government-administered health insurance plan that would provide a comprehensive set of benefits, including things like mental health services and long-term care, with no cost-sharing. He also proposed several tax increases that his campaign claims would fully offset the cost of the plan.

Differing Cost Estimates

However, with many of the details left unspecified, including the exact services that would be covered and provider payment rates, different estimates have been produced that project widely different costs.

Friedman's estimate used by the campaign assumes that moving to single-payer would reduce national health spending by $10 trillion – or a full fifth – due to reduced administrative costs, reduced prices for pharmaceuticals and medical devices, and controls on administrative costs and drug prices (the estimate also assumes $3.7 trillion of added costs due to higher health utilization). It is unclear exactly how such dramatic savings would be achieved, and it would likely require tough choices that go far beyond simply adopting a single-payer plan, including significantly cutting provider payment rates closer to the much lower levels seen in some other nations with single-payer systems.

The higher cost estimate from Thorpe projects that the single-payer plan would:

  • Reimburse providers at a rate higher than Medicare but lower than private insurance, appearing to give less credit for provider payment cuts (since none are mentioned);
  • As a result of eliminating cost-sharing, boost utilization in the under-65 population by 10 percent and for the small minority of Medicare patients currently without supplemental coverage by 25 percent – based on a wide body of research;
  • Save 4.7 percent from reduced administrative costs, significantly lower than the Sanders campaign assumes;
  • Require states to continue to contribute most of what they already spend on health care, similar to state contribution requirements after the enactment of Medicare Part D, instead of all as Friedman assumes; and
  • Include unspecified price and payment controls to slow the growth of per-capita spending and reduce drug spending.

What Accounts for the Difference?

Vox's Dylan Matthews further breaks down the differences between the two estimates, which mainly have to do with assumptions about administrative costs, savings on prescription drugs, and how much provider payments are reduced.

The Sanders campaign assumed administrative savings of 16 percent compared to Thorpe's estimate of 4.7 percent, which is purportedly based on Vermont's estimated savings from its attempt to move to single-payer. This difference amounts to $4.4 trillion of spending over ten years.

On prescription drugs, the campaign assumes $3.2 trillion more savings over ten years than Thorpe does, which seems implausible given that total prescription drug spending is only projected to be about $4.9 trillion over the 2017-2026 period. 

Other assumptions also make a noticeable difference in costs:

  • The effect of no cost-sharing on health care utilization – estimated at 10 percent by Thorpe but 6 percent by the campaign – adds another $2.2 trillion in spending.
  • The Sanders campaign assumes $1.6 trillion less in spending than Thorpe does because they argue he included certain elective procedures like cosmetic surgery in his estimate. Thorpe, however, disputes that elective procedures would not account for that much spending.
  • Finally, the campaign estimates $1 trillion less in new spending because they assume that states would be required to continue to contribute the exact amount they otherwise would to health insurance programs (mostly Medicaid); Thorpe assumes they would only contribute 75 percent.

Each of these last two points would of course depend on details that the campaign has not yet specified.

Verdict

While reasonable arguments can be made that the administrative savings from Sen. Sanders's plan would be larger than Thorpe suggests, particularly when implemented at the federal rather than state level, and provider payments certainly could be reduced under a single-payer system (if desired), it appears that the actual cost would almost certainly be higher than the $13.8 trillion originally claimed by the campaign. In fact, the campaign has already revised down its prescription drug and administrative cost savings after being questioned.

Critically, in order to more accurately judge the costs of Sen. Sanders's single-payer plan, more details are needed about provider payments, services covered, and how prescription drug savings are being achieved.

Hopefully the campaign will continue to release further details as the campaign progresses.