Skip to main content

Bernie Sanders' Medicare-for-all plan has a money problem. So does the entire United States healthcare system.

The Vermont Senator on Wednesday unveiled his long-awaited single-payer healthcare bill. Backed by 16 Senate Democrats, the legislation would transition the U.S. healthcare system to a single government-run plan that covers all Americans. Sanders' plan is murky on the details of costs and financing, reflecting broader problems plaguing the U.S. healthcare system.

The United States has one of the most expensive healthcare systems in the world. The country spends upwards of $3.2 trillion on healthcare annually, averaging $9,237 per person, far more than other countries with similar life expectancy.

Single-payer plans like the one Sanders is proposing would certainly increase coverage; however, it is unclear how it would affect costs. Moving all Americans to one health plan could reduce administrative costs in the long term, as could putting a single entity -- the government -- in charge of negotiating prices. But patients would also likely seek more treatments and services under single-payer, and, as Vox notes, the prices currently paid by Medicaid under Sanders' plan would go up.

"The devil is in the details," said University of Southern California health economist Darius Lakdawalla in an interview with TheStreet. "We've got to figure out what the strategy is going to be for the government to actually contain costs in a single-payer system."

The primary driver of how much patients spend on healthcare, whether through insurance premiums or government-funded programs, is how much healthcare they use. Managing utilization and, in turn, expenditures involves striking a balance in incentives among patients and providers and a mix of fee-for-service and managed care elements.

"The way we would want to gauge the effect and the effectiveness of laws would be not just how much we're spending on different stakeholders in the system, not just how much we're spending on hospitals, but then how much health we're getting out of the system," said Katherine Baicker, dean of the University of Chicago's Harris School of Public Policy. "Spending is not a sufficient statistic."

A single-payer system like the one Sanders is proposing could be a step in the right direction in getting costs under control in that it creates a unified financing scheme, said Stanford University healthcare economist Victor Fuchs, but it's no panacea.

"What we're really talking about, or what we should be talking about, is whether we have a fragmented financing system or we have some consolidated, unified system every other country that's worth talking about has," Fuchs, who has been called the dean of American healthcare economists, said. "The problem with single-payer is that it makes it sound too simple. Under some versions, money just miraculously appears but is only paid out by a single source. I don't think you can ever reasonably think about it that way."

Sanders does not deny that what he is proposing is expensive. He holds that his bill will seek to get costs under control by keeping insurers, drug companies and providers from charging exorbitant amounts and simplifying the system.

"This is where the country has got to go," Sanders said in an interview with The Washington Post. "Right now, if we want to move away from a dysfunctional, wasteful, bureaucratic system into a rational health-care system that guarantees coverage to everyone in a cost-effective way, the only way to do it is Medicare for All."

TheStreet Recommends

But it's not just the cost factor that weighs on Sanders' plan and the broader American healthcare system, it's financing. And there, the Vermont Senator's plan falls short.

While Sanders' bill extensively details coverage, it does not lay out exactly how it would be financed. Sanders acknowledged the issue in an interview with Vox. "This is complicated stuff," he said. "And you know what? There's nobody who has all of the answers. Nobody has all the answers. What I can say is we are going to be listing a number of revenue-raising proposals, which will generate more than enough money for what we want to do."

His office on Wednesday released a list of possible options for raising revenue.

An Urban Institute analysis of the single-payer plan Sanders laid out as a presidential candidate found that his proposal at the time would decrease the number of uninsured Americans by 28.3 million people in 2017 and increase national health expenditures by $6.6 trillion and federal expenditures by $32 trillion over the course of a decade. The Sanders campaign did include revenue features, but it "just wasn't near enough" the total cost, said John Holahan, health policy fellow at Urban and one of the analysis' authors.

The Congressional Budget Office has yet to score the Sanders bill to provide a sense of how much it might cost.

"I don't know why the Sanders people aren't including financing in their bill, and without financing, it's not a plausible proposal," said Gerald Friedman, a University of Massachusetts economist who came under fire during the 2016 campaign for his analysis that Sanders' policies would produce significant economic growth in the United States. "There's a lot of money that's involved, and unless you propose something, then your critics will say first that it's too scary, that's why you didn't put something in, and second, that you don't know how you're going to do it, so you're not serious."

To be sure, the problem of financing healthcare is not proprietary to Sanders. It's at the center of the entire healthcare debate in America.

"If you want to cover more people, especially low-income people or people with bad health conditions, you have to subsidize their care," Fuchs said. "You have to find some way of compelling the rest of the population to provide that money. That's the basic problem lawmakers face every time they get into this question of who should we cover and how much should we cover."

More of What's Trending on TheStreet:

Editors' pick: Originally published Sept. 13.