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The cost of “Medicare for All’ isn’t just taxpayers’ dollars — it’s also jobs and income. Should we care? | American Enterprise Institute

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“Medicare for All” plans, such as those proposed by Bernie Sanders and Elizabeth Warren, qualify as “big structural change,” to use Warren’s phrase. The elimination of private health insurance in favor of “free” government health coverage is certainly change that’s big and structural. Same goes for the all the tax increases and the payment of much lower rates to physicians and hospitals.

But those are the known big structural changes, or BSCs — at least the ones mentioned in candidate plans. But what about other BSCs that may be less obvious? Would, say, overriding drug patents affect the type of early-stage development done by biotech firms and funded by venture capital? Undercutting that innovation mechanism would qualify as a BSC. 

Participants hold signs as Bernie Sanders speaks at a news conference to introduce the “Medicare for All Act of 2019” on Capitol Hill. REUTERS/Aaron P. Bernstein

Or how about this: The Washington Post points out that economists “have projected as many as 2 million jobs could be lost under a Medicare-for-all system that eliminated all private coverage.” That also qualifies as BSC. When a reporter recently asked Warren about the job loss issue, the senator responded, “So I agree. I think this is part of the cost issue and should be part of a cost plan.”

It’s unlikely that the nearly 400,000 folks employed by health insurance carriers last year think of their jobs as “part of the cost issue.”  Nor are they likely to think of the elimination of their jobs as a feature rather than a bug. Even from a macro perspective, they have a point. As my AEI colleague Ben Ippolito noted in a podcast Q&A with me earlier this year:

So you really have to understand that especially over the last 20 years or so, health care has been a huge jobs creator. … Even through the Great Recession, all of 2008, all of 2009, 2010, there was never a decrease in any quarter in the number of people employed in health care. And so what that says is that there are a lot of people for whom these costs that we’re talking about is their income. And it is a Herculean task to think about every hospital in every district and all the people that rely on it for their incomes and to start talking about cutting [reimbursement] rates by half.

As Ippolito explains, the employment issue isn’t just about the private insurance industry. It just as importantly concerns how Medicare pays significantly lower rates to physicians and hospitals than private insurers do. A universal shift to those lower payment rates could, even Vox points out, “lead to widespread hospital closures and physician bankruptcies.” More BSC.

Now that Washington Post story on the job loss issue also
quotes economists who make the comparison to farmers and automation. Most
American workers used to work in agriculture. Now only a tiny sliver of them
do. The efficient use of capital and labor often requires a dynamic
reallocation of those factors, and we’re better for it. Maybe the same would be
the case with “Medicare for All” over the long run. 

But the short-term pain might well be intense. Said one health policy expert in the Post piece, “It is a mistake to assume everyone who loses their job in the insurance industry is going to be unemployed. But it is also a mistake to assume everyone in the insurance industry who become [sic] unemployed is going to be employed in another industry in a reasonable amount of time.” Maybe we should hear more about this BSC from the candidates.

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