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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
. . . and most likely lives, but it’s “free!”
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.
There will be no jobs lost. They will just make a law that companies must pay people the government determined amount.
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
From the linked PERI article:
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
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.
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.
A whole lotta people are going to have to “learn to code.”
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
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/
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
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.
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.
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:
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
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
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
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?
Am I the only person who sees ‘warren plan’ and thinks of rabbits? This has been bothering me all day. Anybody?
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