Contributor Post Created with Sketch. The Cost of ‘Medicare for All’ Isn’t Just Taxpayers’ Dollars — It’s Also Jobs and Income

 

“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 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.

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.

Published in Economics, Healthcare
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There are 21 comments.

  1. Vance Richards Member

    James Pethokoukis: The Cost of ‘Medicare for All’ Isn’t Just Taxpayers’ Dollars — It’s Also Jobs and Income

     . . . and most likely lives, but it’s “free!”

    • #1
    • November 5, 2019, at 2:24 PM PST
    • 2 likes
  2. Full Size Tabby Member

    The shift in farm employment occurred by the choices of suppliers, producers, distributors, and consumers, not by government edict. And the shift occurred over about a century, which century also included an industrial revolution spurred by inventors, producers, and financiers.

    • #2
    • November 5, 2019, at 2:42 PM PST
    • 3 likes
  3. Fake John/Jane Galt Coolidge

    There will be no jobs lost. They will just make a law that companies must pay people the government determined amount.

    • #3
    • November 5, 2019, at 3:04 PM PST
    • 1 like
  4. James Gawron Thatcher

    JamesP,

    I am surprised that all you focus on is the jobs lost. The government is notoriously less efficient than private industry. I am quite sure this will hold in the area of health insurance. There will be huge costs as new government jobs are created to substitute for private jobs. The total employment cost will be much higher using the government.

    The only way to hide these massive additional costs will be to reduce the actual coverage and then lie about it. Death panels you bet. However, every single health care decision will be distorted by a bureaucracy that considers you just a statistical liability.

    Do enjoy the brave new world. As long as you can survive.

    Regards,

    Jim

    • #4
    • November 5, 2019, at 6:42 PM PST
    • 2 likes
  5. Zafar Member

    From the linked PERI article:

    The implementation of Medicare for All will produce significant job losses for workers now employed in the private health insurance industry as well as administrative support staffers devoted to health insurance matters within the health care services industry. Providing fair levels of support and protections for these workers will need to be a major component of the overall transition process.

    It is strange that Ricochet would defend these positions as too economically disruptive to get rid of because they’re in the private sector. Would similar positions be too disruptive to can if they were in the public sector and provided the same basic admin function?

    The underlying takeaway is less money spent on admin under the new process, not more, which should be a good thing. Because the new process requires less admin. Huh

     

     

     

    • #5
    • November 5, 2019, at 7:09 PM PST
    • Like
  6. James Lileks Contributor

    My favorite part of M4A requires invalidating every worker-employer arrangement regarding health care, including hard-fought union contracts. The state will declare them null and void and require everyone to trade their private arrangements for mandatory participation in the State monopoly.

    But Trump’s the authoritarian.

    • #6
    • November 5, 2019, at 10:10 PM PST
    • 6 likes
  7. James Lileks Contributor

    The other thing about Warren’s proposal that seems remarkable: most presidential candidates campaign on the promise to create 400,00 jobs, not demand their abolition. I almost expect Warren to add her anti-fracking total to the sum, and note that she’s the only serious candidate in this race who is dedicated to eliminating the jobs that need eliminating.

    • #7
    • November 5, 2019, at 10:14 PM PST
    • 4 likes
  8. John Park Member

    A whole lotta people are going to have to “learn to code.”

    • #8
    • November 6, 2019, at 6:36 AM PST
    • 1 like
  9. James Gawron Thatcher

    Zafar (View Comment):
    The underlying takeaway is less money spent on admin under the new process, not more, which should be a good thing. Because the new process requires less admin. Huh

    Zaf,

    How was it that the Obamacare government drones couldn’t even produce a working website? If you believe that government admin will actually reduce costs then I’ve got an exclusive listing on this really great 19th-century bridge going to Brooklyn. What a deal I can get you, you’ll love it.

    Com’on Zaf, Elizabeth Warren actually believed she was an Indian. That’s why she went ahead and did the DNA test. She’s an idiot. Her plan is garbage on a grand scale.

    Regards,

    Jim

     

    • #9
    • November 6, 2019, at 8:34 AM PST
    • 3 likes
  10. Misthiocracy grudgingly Member

    Somehow I doubt that a complete federal takeover of health care in the United States will result in a net reduction of employment in medical administration. If I believed it would do so then I might actually be in favour of socialized medicine.

    • #10
    • November 6, 2019, at 12:33 PM PST
    • 1 like
  11. Zafar Member

    Misthiocracy grudgingly (View Comment):

    Somehow I doubt that a complete federal takeover of health care in the United States will result in a net reduction of employment in medical administration. If I believed it would do so then I might actually be in favour of socialized medicine.

    https://www.politifact.com/truth-o-meter/statements/2017/sep/20/bernie-s/comparing-administrative-costs-private-insurance-a/ 

    James Gawron (View Comment):

    If you believe that government admin will actually reduce costs then I’ve got an exclusive listing on this really great 19th-century bridge going to Brooklyn. What a deal I can get you, you’ll love it.

    But Jim, that’s exactly what Govt involvement has done in every other industrialized economy. 

    Should I believe you or my lying eyes?

    Regards

    Zafar

    • #11
    • November 6, 2019, at 1:50 PM PST
    • Like
  12. Mark Camp Member

    Jobs are a cost of Medicare?

    Yes, at least for Mr. Pethohoukis.

    In the upside-down, inside-out, effects-precede-causes world of cult economics that James proselytizes for, labor is an output of production, rather than an input.

    • #12
    • November 6, 2019, at 5:19 PM PST
    • 1 like
  13. MISTER BITCOIN Coolidge

    efficient use of capital and labor is not happening under medicare for all or any plan advocated by liz warren.

    and the jets will win the super bowl.

     

    • #13
    • November 6, 2019, at 11:51 PM PST
    • Like
  14. MISTER BITCOIN Coolidge

    Misthiocracy grudgingly (View Comment):

    Somehow I doubt that a complete federal takeover of health care in the United States will result in a net reduction of employment in medical administration. If I believed it would do so then I might actually be in favour of socialized medicine.

    i was wondering the same thing.

    in health care, what is the breakdown between medical and non medical jobs.

    In Great Britain under NHS or national health service, administrative costs and staff have increased while doctors nurses and hospital beds have decreased.

    2 takeaways from NHS:

    1. the quantity of medicine will decrease
    2. admin overhead will increase

     

    • #14
    • November 6, 2019, at 11:53 PM PST
    • Like
  15. MISTER BITCOIN Coolidge

    James Gawron (View Comment):

    JamesP,

    I am surprised that all you focus on is the jobs lost. The government is notoriously less efficient than private industry. I am quite sure this will hold in the area of health insurance. There will be huge costs as new government jobs are created to substitute for private jobs. The total employment cost will be much higher using the government.

    The only way to hide these massive additional costs will be to reduce the actual coverage and then lie about it. Death panels you bet. However, every single health care decision will be distorted by a bureaucracy that considers you just a statistical liability.

    Do enjoy the brave new world. As long as you can survive.

    Regards,

    Jim

     

    i think JamesP’s main point is that liz warren’s plan will dislocate not only health insurance plans but also jobs both in and out of health care industry

    And he is right

     

    • #15
    • November 6, 2019, at 11:56 PM PST
    • Like
  16. MISTER BITCOIN Coolidge

    Fake John/Jane Galt (View Comment):

    There will be no jobs lost. They will just make a law that companies must pay people the government determined amount.

    the right to a ‘living’ wage

    the irony is if you are alive then presumably you are collecting a ‘living’ wage

    maybe not a ‘party’ or ‘jet setter’ wage 

    • #16
    • November 6, 2019, at 11:57 PM PST
    • 1 like
  17. MISTER BITCOIN Coolidge

    Full Size Tabby (View Comment):

    The shift in farm employment occurred by the choices of suppliers, producers, distributors, and consumers, not by government edict. And the shift occurred over about a century, which century also included an industrial revolution spurred by inventors, producers, and financiers.

    in 1776 90-95 percent of the population was devoted to agriculture

    in 1976 the number dropped to 5 percent

    today it is under 1 percent

     

    • #17
    • November 6, 2019, at 11:58 PM PST
    • 1 like
  18. Fake John/Jane Galt Coolidge

    One of the kicks I got out of the warren plan was the part where the medical insurance workers displaced by M4A will just be moved to other insurance jobs like property or auto. How is this to happen? These are different industries, different companies. She gonna write a law requiring hiring?

    • #18
    • November 7, 2019, at 3:40 AM PST
    • 1 like
  19. Zafar Member

    Am I the only person who sees ‘warren plan’ and thinks of rabbits? This has been bothering me all day. Anybody?

    • #19
    • November 7, 2019, at 5:01 AM PST
    • 1 like
  20. Zafar Member

    MISTER BITCOIN (View Comment):

    Misthiocracy grudgingly (View Comment):

    Somehow I doubt that a complete federal takeover of health care in the United States will result in a net reduction of employment in medical administration. If I believed it would do so then I might actually be in favour of socialized medicine.

    i was wondering the same thing.

    in health care, what is the breakdown between medical and non medical jobs.

    In Great Britain under NHS or national health service, administrative costs and staff have increased while doctors nurses and hospital beds have decreased.

    2 takeaways from NHS:

    1. the quantity of medicine will decrease
    2. admin overhead will increase

     

    Compared to when? Link?

    • #20
    • November 7, 2019, at 5:44 AM PST
    • Like
  21. MISTER BITCOIN Coolidge

    Zafar (View Comment):

    MISTER BITCOIN (View Comment):

    Misthiocracy grudgingly (View Comment):

    Somehow I doubt that a complete federal takeover of health care in the United States will result in a net reduction of employment in medical administration. If I believed it would do so then I might actually be in favour of socialized medicine.

    i was wondering the same thing.

    in health care, what is the breakdown between medical and non medical jobs.

    In Great Britain under NHS or national health service, administrative costs and staff have increased while doctors nurses and hospital beds have decreased.

    2 takeaways from NHS:

    1. the quantity of medicine will decrease
    2. admin overhead will increase

     

    Compared to when? Link?

    https://www.youtube.com/watch?v=VPADFNKDhGM

    milton friedman cites the work of max gammon, a british physician who studied the effects of NHS

     

    • #21
    • November 7, 2019, at 3:58 PM PST
    • Like