Cost of "free" health care? $32 trillion

  • 30 July 2018
  • NormanL

A big idea Democratic congressional candidates are touting on the campaign trail is something they call "Medicare for all," or "M4A." In other words, it's a single-payer, government-run health program. The idea has taken hold in Democratic primaries, and Sen. Bernie Sanders is pushing it in Congress.

But how much would it cost? The Mercatus Center ran the numbers and discovered "Medicare for all" would be very expensive, indeed:

By conservative estimates, this legislation would have the following effects:

M4A would add approximately $32.6 trillion to federal budget commitments during the first 10 years of its implementation (2022–2031).

This projected increase in federal healthcare commitments would equal approximately 10.7 percent of GDP in 2022. This amount would rise to nearly 12.7 percent of GDP in 2031 and continue to rise thereafter.

These estimates are conservative because they assume the legislation achieves its sponsors’ goals of dramatically reducing payments to health providers, in addition to substantially reducing drug prices and administrative costs.

A doubling of all currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan.

So even if all federal tax rates are doubled, there still wouldn't be enough revenue to pay for this one program. Which means its proponents would either have to triple current rates to get closer to even, or simply finance the rest with debt. Not a good plan. But it gets much worse:

First and foremost, the federal government would become responsible for financing nearly all current national health spending, including individual private insurance and state spending.

M4A would increase federal health spending on the currently uninsured as well as those who now carry insurance by providing first-dollar coverage of their healthcare expenditures across the board, without deductibles or copayments.

M4A would expand the range of services covered by federal insurance (for example, dental, vision, and hearing benefits).

M4A would dramatically expand the demand for healthcare services, consistent with economics research findings that the more of an individual’s health costs are covered by insurance, the more services they tend to buy, irrespective of the services’ efficacy and value.

Said another way, it wouldn't just cost a lot up front, the costs would be much higher over time. 

So yes, it's a big idea. It's likely to get a lot of Democrats excited -- what's not to like about a free government program? Except there is no such thing as a "free" government program. And as the Mercatus Center's study demonstrates, those "free" programs are the surest way to bankrupt just about everyone.