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October 22nd, 2018

The Fact Checker: The Truth Behind the Rhetoric

Dems seize on cherry-picked claim that 'Medicare-for-all' would save $2 trillion

Glenn Kessler

By Glenn Kessler The Washington Post

Published August 8,2018

Dems seize on cherry-picked claim that 'Medicare-for-all' would save $2 trillion

"We know that Medicaid expansion and Medicare-for-all actually save this state and this nation $2 trillion if it were fully implemented."- Andrew Gillum, Democratic candidate for Florida governor, in a primary debate, Aug. 2, 2018

As The Washington Post's David Weigel reported, Democrats have latched onto the catchy idea of "Medicare-for-all" (also known as M4A) as a way of expressing their support for universal health care.

On July 30, the Mercatus Center at George Mason University released a working paper on the 10-year fiscal impact of the Medicare-for-all plan sponsored by Sen. Bernie Sanders, I-Vt. The report was written by Charles Blahous, a former economic adviser to George W. Bush and a public trustee for Social Security and Medicare from 2010 through 2015.

Gillum, the mayor of Tallahassee, was quoted in Weigel's article as having touted, during a debate, a $2 trillion cost-savings figure that is in the report. Sanders, too, has tweeted about this $2 trillion number, sarcastically thanking the conservative Koch brothers, whose foundation has contributed to Mercatus.

Bernie Sanders tweeted "Thank you, Koch brothers, for accidentally making the case for Medicare for All! "

But Blahous is crying foul, saying Democrats are misrepresenting his findings. Let's take a look.

The Facts

We often warn readers that you can't get something for nothing. In the health-care realm, even relatively small shifts can lead to major dislocation and changes; President Barack Obama discovered that, to his chagrin. As former Lyndon Johnson White House aide Joseph A. Califano Jr. once noted, congressional dealmaking during the passage of Medicaid unexpectedly led to one-third of the Medicaid budget going to nursing homes - an industry that was literally built on Medicaid funding.

In doing his research, Blahous decided to follow the text of the Sanders plan and assume that providers - doctors, hospitals, drug companies and the like - would face an immediate cut of 40 percent in their payments. That in theory would reduce the country's overall level of health expenditures by $2 trillion from 2022 to 2031. But he makes clear that it's a pretty unrealistic assumption.

In the fourth sentence of the report's abstract, Blahous wrote, "It is likely that the actual cost of M4A would be substantially greater than these estimates, which assume significant administrative and drug cost savings under the plan, and also assume that healthcare providers operating under M4A will be reimbursed at rates more than 40 percent lower than those currently paid by private health insurance."

Under an alternative scenario, which assumes these cuts cannot be achieved, national health spending rises even faster than under current law because health-care demand would increase.

"To lend credibility to the $2 trillion savings number, one would have to argue that we can cut payments to providers by about 40 percent at the same time as increasing demand by about 11 percent," Blahous said.

The main point of his study is being ignored by Democrats - that even by generously accepting Sanders's assumptions that he could squeeze providers so much, the plan would still raise government expenditures by $32.6 trillion. This is in line with a 2016 estimate by the left-leaning Urban Institute of an earlier version of the M4A plan - that it would cause federal expenditures to increase by $32 trillion. (Without the provider cuts, Blahaus estimated the additional federal budget cost at nearly $40 trillion over 10 years.)

Sanders has said his plan would cost $1.38 trillion a year, paid for in part with new taxes on employers and an income-based premium, but under Blahaus's analysis it would be closer to $3.3 trillion.

"For perspective on these figures, consider that doubling all currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan," Blahous wrote. (He's referring only to income tax collection, not existing Social Security and Medicare payroll taxes.)

Blahous told the Fact Checker: "Every table in the study (Tables 1-5) is very explicit that the additional costs arising from higher demand are substantially higher than the potential administrative efficiencies of going to a centralized national health insurance system. So whenever proponents argue that eliminating private sector insurance profits and overhead would enable us to cover more people for less money, that conflicts with the findings of the study."

Congress has a long history of passing cuts to health-care providers that do not come to fruition. The 1997 balanced-budget agreement between President Bill Clinton and the GOP-led Congress included cuts that Congress deferred for 17 years with an annual provision known as the "doc fix." It was finally eliminated under a deal Obama reached with Congress in 2015, or else providers would have faced a cut of 21 percent.

In 2012, Blahous wrote a study questioning the budget assumptions in the Affordable Care Act, such as the political prospects for a tax on "Cadillac" health plans. He turned out to be right: The tax keeps getting pushed off and weakened.

For the record, Blahous says the Kochs had nothing to do with his research. "It's academic research, it goes through a blind review process, and it represents my own work," he said. "I choose my own research subjects and follow the facts where they lead. You'd have to ask someone else about where funding comes from, I don't follow that and it doesn't affect me."

We shared Blahous's concerns with Gillum's campaign, which confirmed that he relied on the Mercatus study, and received this response: "The Mayor's a proud supporter of Medicare-for-All and this study shows the potential for significant savings," said communications director Geoff Burgan. "It would be a strong improvement over the Republicans' attempts to destroy our current system and rip health care away from people."

The Pinocchio Test

We don't intend to pick on Gillum, who appears to have picked up a talking point that is circulating among Democrats. But we do want to lay down a marker because this goes too far.

All too often, politicians mischaracterize conclusions that are contained in academic or think tank studies. At the Fact Checker, we rely heavily on how a study's author says the data should be presented. In this case, it's clear that Blahous bent over backward to accept Sanders's assumptions, only to find they did not add up. Democrats cannot seize on one cherry-picked fact without acknowledging the broader implications of Blahous's research. Three Pinocchios

Three Pinocchios


An award-winning journalism career spanning nearly three decades, Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street. He was The Washington Post's chief State Department reporter for nine years, traveling around the world with three different Secretaries of State. Before that, he covered tax and budget policy for The Washington Post and also served as the newspaper's national business editor. Kessler has long specialized in digging beyond the conventional wisdom, such as when he earned a "laurel" from the Columbia Journalism Review

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