Medicare for All Would Save US Money, New Study Says

Medicare for All Would Save US Money, New Study Says

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Plus, Treasury's new bond to finance rising debt
Friday, January 17, 2020

Medicare for All Would Save US Money, New Study Says

A Medicare for All system would likely lower health care costs and save the United States money, both in its first year and over time, according to a review of single-payer analyses published this week in the online journal PLOS Medicine.

The authors reviewed 18 economic analyses of the cost of 22 national and state-level single-payer proposals over the last 30 years. They found that 19 of the 22 models predicted net savings in the first year and 20 of 22 forecast cost reductions over several years, with the largest of savings simplified billing and negotiated drug prices.

"There is near-consensus in these analyses that single-payer would reduce health expenditures while providing high-quality insurance to all US residents,” the study says. It notes that actual costs would depend on the specifics features and implementation of any plan.

The peer-reviewed study’s lead author, Christopher Cai, a third-year medical student at the University of California, San Francisco, is an executive board member of Students for a National Health Program, a group that supports a single-payer system.

Questions about methodology: “This might be the worst 'academic' study I've ever read,” tweeted Marc Goldwein, head of policy at the Committee for a Responsible Federal Budget. “It's a glorified lit review of 22 studies - excluding 6 of the most important on the topic and including 11 that are redundant, non-matches, or from the early 90s.” The results would look quite different if the authors had made different choices about what analyses to include in their review.

What other studies have found: Other recent analyses have been far less conclusive about how health care spending might change under a single-payer system. The nonpartisan Congressional Budget Office said last year that total national health care spending under Medicare for All “might be higher or lower than under the current system depending on the key features of the new system, such as the services covered, the provider payment rates, and patient cost-sharing requirements.”

An October analysis by the Urban Institute and the Commonwealth Fund, meanwhile, found that a robust, comprehensive single-payer system would increase national health spending by about $720 billion in its first year, while federal spending on health care would rise by $34 trillion over 10 years. But a less generous single-payer plan would reduce national health spending by about $210 billion in its first year.

US Will Issue 20-Year Bonds as It Seeks to Finance Rising Debt

The Treasury Department said late Thursday that it will begin issuing 20-year bonds in the first half of this year as it seeks to fund a deficit expected to top $1 trillion a year for the foreseeable future.

The Treasury explored a range of new offerings, including 20-year, 50-year, and 100-year bonds. “Institutional investors have been clamoring for more longer-dated, risk-free securities that offer some nominal yield, amid a global total of $11 trillion of debt with negative rates,” Bloomberg News reporter Saleha Mohsin writes. But many on Wall Street had lobbied against the ultra-long options.

The government now sells 10-year notes and 30-year bonds. In choosing to add the 20-year securities, Treasury said Thursday that it anticipated strong demand for them. Treasury last issued 20-year bonds in 1986, before it switched to 30-year securities instead. Mohsin notes that previously issued 30-year Treasury bonds with 20 years left to maturity yield about 2.15%, roughly two percentage points more than Japanese or German 20-year bonds.

Why not longer-term bonds?

“The 20-year bond fits more easily into the existing market structure,” Lou Crandall, chief economist at Wrightson ICAP in New York, told Bloomberg. “This is a way of taking advantage of long-term interest rates that are low by historical standards without introducing a wild-card such as an ultra-long bond, which would have had more growing pains.”

Other bond investors echoed those sentiments, noting that 20-year bonds would be more useful than the ultra-long 50- or 100-year offerings Treasury had considered.

The Treasury Department said its goal was to expand the federal government’s borrowing capacity while keeping costs down. “We seek to finance the government at the least possible cost to taxpayers over time, and we will continue to evaluate other potential new products to meet that goal,” Treasury Secretary Steven Mnuchin said in a statement.

Bloomberg columnist Brian Chappatta writes that, after twice reviewing the idea of ultra-long bonds as a way to take advantage of historically low interest rates, Mnuchin decided to play it safe. “And it was the right call,” Chappatta argues. “There was simply no way to know for sure that the government could successfully place 50- or 100-year bonds at monthly or quarterly auctions in any kind of reasonable size.”

Treasury’s latest decision, he adds, suggests that the U.S. may never turn to ultra-long bonds. If Mnuchin couldn’t justify extending maturities now, “when the federal government is running $1 trillion annual deficits and the 30-year U.S. yield is just a few months removed from an all-time low, it seems unlikely the department will ever give the green light,” Chappatta says.And that’s just fine with the Treasury market.”

Quote of the Day

“I’d still be able to take vacations and I’d still have two airplanes.”

– Stephen Prince, a member of the Patriotic Millionaires, a group of wealthy Americans pushing for higher taxes on the rich. Bloomberg’s Sophie Alexander interviewed five members of the group to find out why they joined, and why they think they should be paying more in taxes.

Chart of the Day: Medi-Cal's Major Growth

“Medi-Cal had a big decade,” writes Harriet Blair Rowan at Kaiser Health News. “The number of Californians enrolled in the state’s health insurance program for low-income residents swelled by 5.5 million from 2010 to 2019. It now covers 1 in 3 Californians and 40% of children. The program’s annual budget — a combination of state and federal money — tops $100 billion, more than the entire state budget of Florida.”

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