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“We therefore estimate that Medicare for All could reduce U.S. Health Consumption Expenditures by about 9.6 percent while also providing decent health care coverage for all U.S. residents”
The Medicare for All movement gained some new support from a study released last week. The research report, “Economic Analysis of Medicare for All”,1 provides an analysis of the lower costs and improved healthcare outcomes to be expected from the implementation of Medicare for All.
Here is an excerpt from the Highlights of the Study:
Cost Saving Potential under Medicare for All
Medicare for All has the potential to achieve major cost savings in its operations relative to the existing U.S. health care system. We estimate that, through implementation of Medicare for All, overall U.S. health care costs could fall by about 19 percent relative to the existing system. The most significant sources of cost saving will be in the areas of: 1) administration (9.0 percent savings in total system costs); 2) pharmaceutical pricing (5.9 percent savings in system costs); and 3) establishing uniform Medicare rates for hospitals, physicians, and clinics (2.8 percent savings in system costs). An additional, more modest source of cost savings, at least in the initial years under Medicare for All, would be to reduce the high levels of waste and fraud that currently prevail in service provision. As a low-end figure, we assume that achiev- able cost savings in these areas would be about 1.5 percent of total system costs in the first year of full operations. We also assume that further gains in waste reduction and fraud control are achievable in later years, at a rate of about 1 percent per year for roughly a decade.
Overall System Costs
As of 2017, the U.S. is spending $3.24 trillion on Health Consumption Expenditures (other than public health programs). With Medicare for All generating both increased overall demand in the range of 12.0 percent and cost savings of about 19.2 percent, total Health Consumption Expenditures would fall to $2.93 trillion. We therefore estimate that Medicare for All could reduce U.S. Health Consumption Expenditures by about 9.6 percent while also providing decent health care coverage for all U.S. residents.
To bolster faith in the findings of this study the authors assembled a large cast of all-star academics to provide a peer review:
- Donald Berwick, President Emeritus and Senior Fellow, Institute for Healthcare Improvement and former administrator of the Centers for Medicare & Medicaid Services;
- Richard Freeman, Herbert Ascherman Professor of Economics at Harvard University;
- Sandro Galea, Robert A. Knox Professor and Dean of the Boston University School of Public Health;
- Adam Gaffney, Instructor in Medicine at the Harvard Medical School and a pulmonary and critical care doctor at the Cambridge Health Alliance;
- Alison Galvani, Director, Center for Infectious Disease Modeling and Analysis and Burnett and Stender Families’ Professor of Epidemiology, Yale School of Public Health;
- David Himmelstein, Distinguished Professor, School of Urban Public Health at Hunter College and M.D., Columbia University College of Physicians and Surgeons;
- William Hsiao, K.T. Li Professor of Economics at the Harvard University T.H. Chan School of Public Health;
- James G. Kahn, Professor Emeritus at the University of California-San Francisco Institute for Health Policy Studies;
- Theodore Marmor, Professor Emeritus of Political Science, Management and Public Policy, Yale University;
- Thomas Rice, Distinguished Professor, Department of Health Policy and Management, Fielding School of Public Health, University of California-Los Angeles;
- Jeffrey Sachs, University Professor at Columbia University, Quetelet Professor of Sustainable Development at Columbia’s School of International and Public Affairs and Professor of Health Policy and Management at the Columbia School of Public Health; and
- Stephanie Woolhandler, Distinguished Professor of Public Health and Health Policy at the CUNY School of Public Health at Hunter College and Adjunct Clinical Professor at the Albert Einstein College of Medicine.
You can read their findings here: https://www.peri.umass.edu/reviewer-assessments-of-economic-analysis-of-medicare-for-all.
Are These Cost Savings Surprising?
As has been pointed out repeatedly here at American Delusions our healthcare system is twice as expensive per capita as our developed country cohort and delivers far worse services and health outcomes. In our view given a more democratic government reflecting the needs of people instead of the rich and corporations we should be able to reduce our expenditures fare more. We spend roughly 19% of our economic output on healthcare compare to roughly 10% for our developed country friends.
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