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Thursday, July 18, 2019

Democrats' All-Out Socialist Agenda, Part 2

Kamala Harris thinks she can create Medicaid for All without raising taxes. Here is what that means in the real world. Brace yourself for third-world health care. If that, even.

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Next year's election will be the most ideologically charged in decades. We said that under Obama, thinking that the left could not drift any farther out toward the edge of sanity than they had already done. 

We were wrong. They could. They can. And they do. Yesterday, in Part 1 of this series on the Democrats' all-out socialist agenda, we discussed slave reparations. My conclusion was not quite what libertarians and conservatives would have expected - I replaced reparations with restitutions - but I nevertheless doubt that the left will even consider this more reasonable approach. 

Reason? It does not create a permanent new entitlement program. Which is all they are about. 

Today we turn our attention to the biggest fish in the muddy Democrat waters: single-payer health care. Specifically, we will take a look at the proposal from Senator Kamala Harris. She is going full force with Medicaid for All, claiming that most people won't have to pay a dime for it:
Sen. Kamala D. Harris of California said Tuesday that her vision for a “Medicare for All” program wouldn’t require a tax hike on middle-class Americans, and that her push requires a transition period of more than four years. That puts the 2020 presidential contender in line with advocates who say this sort of massive overhaul of the nation’s health care system would actually lower costs. 
Of course they do. They are delusional. In a moment we will review some elementary health care data showing how it is impossible to run a single-payer system - which is what Medicaid for All is - without raising taxes.

Actually, it is not impossible. There is a way out. Back to that in just a bit. For now, here is more from Kamala Harris, again courtesy of the Washington Times:
“I am not prepared to engage in a middle-class tax hike,” Ms. Harris said in an interview with CNN Tuesday. Asked whether people would no longer be able to carry private insurance, Ms. Harris suggested that would be the case. “They would eventually be covered under Medicare for All, and they would still see their doctor,” she said, adding that she believes it would take longer than four-year transition period under the Sanders plan. 
When a Democrat says "if you like your doctor, you can keep your doctor" you should run for the exit.

At least Senator Bernie Sanders is honest. The Washington Times again:
Mr. Sanders has pegged the cost of his Medicare for All plan at $30 trillion to $40 trillion over 10 years. He has said he would have to raise taxes on the middle class to pay for his bill, and that it would take four years to transition into the program. “People who have health care under Medicare for All will have no premiums, no deductibles, no co-payments, no out-of-pocket expenses,” Mr. Sanders said in the first debate. 
But Senator Harris persists:
Pressed on whether she believes it can be done without that sort of tax hike, Ms. Harris said, “without a middle-class tax hike, yes, yes.” “There are ways to pay for it, also understanding the investment that we are going to be making in a way that is going to reap great benefits in terms of other costs,” she said.

Here we go again. The left never ceases to play that string: let us spend more of your money now and you will get great benefits... in the long run... Down in Venezuela they are still waiting for the long-term benefits from their massive government.

Before we get to the data, let us just stop by Axios.com where Drew Altman from the Kaiser Family Foundation laments the demise of Medicaid under Medicaid for All. The current Medicaid program is run jointly by the states and the federal government, allowing for some minor variations within the tight confinements of federal funding dictates. Those variations would be lost, he notes, as an all-federal Medicaid for All program
would all but eliminate states’ role in health care, where they have been leaders not just in providing coverage, but also driving efficiency and testing new models of care. Those reforms — and the idea of states as laboratories of reform — would pretty much disappear, and the balance of federalism in health would fundamentally change.

 It is outright comical to hear an advocate of socialized, single-payer health care cry over reduced federalism. Even if the states ran Medicaid entirely on their own, turning it into a single-payer system would centralize massive amounts of power and economic resources into the hands of government. The only difference is that it would happen at the state level.

Altman's tears over federalism are not tears over the loss of American constitutional principles. They are tears in defense of some government bureaucrats over others. 

With that in mind, let us take a look at some numbers that explain why Senator Harris is wrong and Senator Sanders is right: you cannot socialized health care in America without crippling tax hikes. 

In order to be able to pay for all health care that Americans consume without having to raise taxes, Kamala Harris and her Democrat cohorts will have to hope and pray that the consumption of health care does not grow faster than the tax base that is supposed to fund it. Unfortunately, history is not on their side. As Figure 1 explains, total national health expenditures have outgrown their tax base since at least 1960:

Figure 1
Source: Center for Medicare and Medicaid Services (health care costs); Bureau of Economic Analysis (GDP)

Since Medicaid-for-All proponents continuously say that nobody will have to give up any health care, they only have two ways to get to a single-payer system: break the promises of no tax hikes, or ration health care.

The latter option is easy to illustrate. Suppose we had created Medicaid for All in 1960 and therefore capped the growth in health care consumption to the growth in private-sector GDP (the broadest possible tax base). Figure 2 explains:

Figure 2



















SourceCenter for Medicare and Medicaid Services (health care costs); Bureau of Economic Analysis (GDP)

After ten years, in 1970, Americans would have had 28 percent less health care to utilize. After 20 years, in 1980, more than 43 percent of their actual health care consumption would have been gone. By 1982 half the American health care system would have been missing.

It is only downhill from there. In 2017 Americans would have had access to 28.4 percent of the health care they actually enjoyed that year. 

Health-care socialists will contend that they can make up the difference with savings in administration and bulk purchases of medical equipment and prescription drugs. Again, though, they are out of touch with reality. Starting with administration costs, here is how they break down together with other parts of our national health care expenditures:

Figure 3
Source: Center for Medicare and Medicaid Services

If we add up Out-of-Pocket costs (OUP), private insurance and all government programs, we account for approximately 90 percent of total health are expenditures. In other words, these are the expenses that actually pay for medical services. Administration - the red band in Figure 3 - was 8.3 percent of total expenditures in 2017.

Figure 3 omits research and costs for facilities, which together make up the final few percent on top of the items accounted for. 

Bluntly: even if we eliminate all health-care administration (an impossibility) it will only close about one eighth of the gap between actual health care costs and the single-payer level we saw in Figure 2. Kamala Harris and her Medicaid-for-All buddies are going to have to look somewhere else for a lot of money. 

But what about bulk purchases of prescription drugs? Let's take a look.

Prescription drugs are part of medical-technology expenditures, together with durable medical equipment and facilities, i.e., structures and non-medical equipment:

Figure 4



















Source: Center for Medicare and Medicaid Services

Since 1960, there has been a significant change to the nature of the technology used in U.S. health care. Starting in the mid-1980s prescription medicine began dominating this expenditure category, rising for 40 cents of every med-tech dollar in 1984 to two thirds of all med-tech spending today. During the same time, the share that goes to medical equipment has declined.

This does not mean that we spend less on durable medical equipment. All it means is that prescription drugs have risen to a prominent position within our health care system, and that this has affected health care costs. We can debate the usefulness of pharmaceutical products all day long - and some people will do so - but the fact of the matter is that modern pharmaceutical products generally provide us with much better treatment options than were available only half a century ago. Therefore, it is not insignificant to propose measures to curb the rise in pharmaceutical-drug costs within our health care system. 

In fact, as Figure 5 explains the cost of all medical technology together has outpaced private-sector GDP for almost all the period we are reviewing here:

Figure 5
Sources: Center for Medicare and Medicaid Services (med-tech); Bureau of Economic Analysis (GDP)

We have a similar situation here as with national health expenditures in general: if we tied growth in prescription-drug spending to the broadest possible tax base, under the 1960 socialized-medicine scenario, by 2017 we would have had to forfeit 69 percent of all prescription-drug spending. 

Is it possible to negotiate away that much of the current costs without in any way affecting the treatment quality of pharmaceutical products? The usual "buy generics" does not work: generic products ride on the research and development efforts of the original patent holders. How many of those patents would we get if we cut away more than two thirds of the money we spend on prescribed medications? Most of them? Some? A few?

For the sake of the argument, though, let us assume for a moment that we can indeed preserve treatment quality in prescription drugs and still slash costs by more than two thirds. If we look at 2013 alone, we would have had to cut total health care expenditures by $2.38 trillion in order to keep our health care system within Kamala Harris's no-tax-hike pledge. A two-thirds reduction in the spending on prescription drugs would only have saved us $231 billion. Adding the equally pie-in-the-sky'ish idea that we could completely eliminate administration, we have still only reduced national health care costs by $274.5 billion.

We are now down $505.5 billion. How is Kamala Harris going to come up with the remaining $1.87 trillion?

Simple. Rationing. She is going to give every American the right to all health care they need, but that does not mean every American will actually get all the health care they need. As an experiment, let us spread out the $1.87 trillion across the items that constitute health care consumption. This 56-percent reduction in health care spending would have to deny access to health care for 182 million Americans - or;
  • Reduce funding for our hospitals by $640 billion;
  • Remove $2.2 billion from Indian Health Services;
  • Take $2.9 billion away from school health programs;
  • Cut Americans' dental care by $72.3 billion;
  • Slash public-health programs by $49.8 billion;
  • Take away $28.4 billion from health care research;
  • Cut $54.3 billion from home health care;
  • Eliminate more than $93 billion in funding for nursing care facilities;
  • Reduce spending on medical technology by another $100 billion.

These figures are all obtained from raw data provided by the Center for Medicare and Medicaid Services under the Department of Health and Human Services. They are, again, calculated from the gap that remains in Kamala Harris's no-tax-hike single-payer Medicaid-for-All plan - after we have eliminated all administration and 69 percent of all spending on prescription drugs.

Do you still want single-payer health care?

Click here for Part 3.

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