vision 2020

Medicare for All Should Hurt (Some) Hospitals and Doctors

Medicare for All, salary reductions for some. Photo: Mark Wilson/Getty Images

The American health-care system is dystopian. A conservative’s nightmare vision of a socialist dictatorship could scarcely feature a more cruelly complex and arbitrary bureaucracy than those underinsured Americans must navigate during the most harrowing moments of their lives. A Marxist polemicist would struggle to conjure a more inhuman or irrational “market” than that which currently governs the price of insulin in the United States. If you admire the inefficiency of the late Soviet economy — but wish that the Gorbachev-era communists had misallocated resources in a crueler and less equitable fashion — then you will love the American approach to medical care.

In 2018, Canada spent roughly 11 percent of its GDP on health care. Under its single-payer system, that was enough to provide all of its citizens comprehensive, affordable medical coverage. That same year, the United States spent roughly 18 percent of its GDP on health care — which, in our system, was not sufficient to provide any form of insurance to nearly 30 million Americans, nor to prevent more than 50 percent of our people from delaying or forgoing medical care due to affordability concerns.

If America spent only 11 percent of its GDP on health care in 2018, we would have collectively saved about $1.43 trillion, enough to finance an entire decade of universal public day care and a national high-speed rail system. Instead, we decided to spend a higher share of our collective income on insurance administration, pharmaceuticals, hospital reimbursements, and doctors’ salaries than any other nation on Earth — even as tens of thousands of uninsured Americans died preventable deaths (according to some estimates, anyway).

Source:: Source: Harvard T.H. Chan School of Public Health, Harvard Global Health Institute, London School of Economics. Credit: Rebecca Coleman/Harvard

Few politicians have done more to raise awareness of these obscenities than Bernie Sanders. And few activists are doing more to foment righteous outrage over the status quo than those who’ve rallied beneath the banner of Medicare for All. And yet Sanders and other prominent single-payer advocates have developed a curious orthodoxy on health-care reform — one that combines an uncompromising insistence on the abolition of private insurance with a pragmatic complacency about (or at least, noncommittal posture toward) taking on America’s overpaid hospitals and doctors.

This tension has come to the fore in recent days, as Wall Street’s anxieties about Medicare for All have weighed on health-care industry stocks, and hospital lobbies have escalated their preemptive war on single-payer. As the New York Times reported Sunday:

If Medicare for all abolished private insurance and reduced rates to Medicare levels — at least 40 percent lower, by one estimate — there would most likely be significant changes throughout the health care industry, which makes up 18 percent of the nation’s economy and is one of the nation’s largest employers.


… The prospect of such violent upheaval for existing institutions has begun to stiffen opposition to Medicare for all proposals and to rattle health care stocks. Some officials caution that hospitals providing care should not be penalized in an overhaul.


Dr. Adam Gaffney, the president of Physicians for a National Health Program, warned advocates of a single-payer system like Medicare for all not to seize this opportunity to extract huge savings from hospitals. “The line here can’t be and shouldn’t be soak the hospitals,” he said.


“You don’t need insurance companies for Medicare for all,” Dr. Gaffney added. “You need hospitals.”

Bernie Sanders hasn’t actually specified what the provider rates under his plan would be. And in his public advocacy, the senator almost always suggests that Medicare for All would generate savings exclusively by reducing the costs of administration and pharmaceuticals; the exorbitant salaries of American doctors, or price-gouging by monopolistic hospitals, typically goes unmentioned. By all indications, Sanders shares the view that Gaffney ostensibly endorses here: reducing nonadministrative hospital costs is not a priority for health-care justice.

Gaffney is among the most eloquent advocates for Medicare for All in the United States. His activism and scholarship (and “owning” of Fox Business hosts) have all been immensely valuable to the fight for progressive reform. But it is not clear why “soak the hospitals” shouldn’t be one of the single-payer movement’s core demands. After all, hospitals account for roughly one-third of all health-care spending in the United States — and they are one of the primary sites of price-gouging in our system. As HuffPost’s Jonathan Cohn explains:

[R]educing health care spending is very much the point of health care reform and it’s not difficult to make the case that hospitals are a logical place to find big savings. Prices here in the U.S. are much higher than in other countries, even for everyday services like knee replacements and routine baby deliveries, with scant evidence that the care here is better.


The story is the same within the U.S., where hospital prices vary enormously from region to region. It’s not the hospitals with the best outcomes charging the highest prices, research has shown pretty consistently. It’s the ones with the most market power — in some cases, because they have monopolies and are basically able to demand what they want from private insurers.

All of that suggests that the hospitals could handle major reductions without harm to access to quality. “The evidence is pretty clear that there’s room to cut without major damage,” says Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy.

Figuring out precisely how to shave the fat off the hospital sector will take some work. There are small rural hospitals operating at a loss, and giants with regional monopolies that are making a killing. If payment reforms aren’t carefully designed, hospitals could cut back on costly (but socially urgent) forms of care like mental health, while others in low-density, low-income regions could be forced to close.

But if single-payer advocates sidestep the issue entirely, then they would ostensibly be acquiescing to some of the most regressive and unpopular aspects of our existing system. After all, the less savings Medicare for All generates through the imposition of price controls, the higher it will need to raise taxes on ordinary Americans. And given that Sanders had made clear he does not subscribe to Modern Monetary Theory — and believes that his program must be fully funded through increases in payroll taxes — complacency about provider payments amounts to complacency about the fact that America regressively redistributes more income from working-class families to affluent medical professionals than any other advanced nation.

The health-care policy analyst Jon Walker puts this point into sharp relief:

While there is a lot of administrative waste due to our private insurance system, even relatively optimistic estimates put savings that could be wrung from administrative simplicity at around 13 to 15 percent …American health care spending cannot be lowered anywhere close to Canada or Sweden or France levels unless salaries for American doctors, lab cost, MRI scans, and hospital prices are lowered as well. Prices would need to be cut across the board because the United States overpays in basically every part of the industry.


American specialists make effectively three times what similar doctors make in Sweden and twice what they do in France or the UK. This is a problem that is only getting worse. Hospital prices for the same procedures have grown dramatically faster than inflation. Many hospitals are so comically bloated and inefficient they don’t even know how much it actually cost them to perform common procedures. Average physician income has grown by nearly $100,000 since 2011.


If doctor salaries had remained flat over the last decade — like most other workers’ salaries, since increased health care costs ate up all of their potential income gains — we would be spending $100 billion less a year on health care. To put that in perspective, that is roughly how much it would cost for federal tuition free college and paid family leave legislation. These inflated salaries, lab fees, and hospital prices cost the average family thousands a year in higher premiums (or will cost them thousands a year in higher taxes if a single-payer plan is adopted without addressing the issue).

Sanders and his allies may have sound, practical reasons for taking a soft (or at least, opaque) line on providers. Doctors and hospitals have powerful lobbies and enjoy much more public trust than private insurance companies or big pharma. Nurses unions and progressive physicians groups are important pillars of the single-payer movement, and some within their ranks might be alienated by calls for “soaking hospitals.” Further, as mentioned above, there’s the difficulty inherent to reducing costs in the hospitals and specialities that are overpaid, without reducing the supply of well-run rural hospitals and much-needed primary-care doctors.

Finally, as Gaffney noted when responding to criticism from Walker on Sunday, there is simply no precedent for sharply reducing national health expenditure on a dime. Their ensuing back-and-forth is worth perusing.

Gaffney’s concern about the difficulty of making a rapid transition away from overpaying providers is quite reasonable. Although, given that hospitals are already signaling that they intend to oppose any expansion of government-run health care, it might make more tactical sense to get aggressive on provider payments, so as to minimize tax increases, and thus maximize support for single-payer among the general public.

Regardless, it is hard to reconcile an attitude of pragmatic patience on provider payments with the Medicare for All movement’s ideological maximalism on other fronts. There a lot of nations that have achieved universal coverage without outlawing all forms of private insurance; there are none that have done so while paying their providers anything close to what America does now.

One of the most prevalent left-wing arguments against a strong public option, and for abolishing private insurance, is that trying to gradually euthanize the insurance industry will only enable it to roll back incremental gains through future lobbying. And yet, this logic would seem to militate against a gradual approach to reducing provider payments. As Jonathan Cohn notes, “If hospital administrators had more time to adjust to cuts, then hospital lobbyists would have more time to persuade lawmakers to delay or cancel implementation.”

Gaffney has written (persuasively, in my view) that in the U.S. context, a multi-payer approach to universal health care would likely enshrine inequitable disparities in the quality of coverage. But a single-payer policy that allows well-heeled hospitals to continue providing upscale amenities to their patients — by imposing higher taxes on working families who frequent less-well-funded facilities – would seem to enshrine its own inequities.

All of which is to say: If Medicare for All proponents wish to insist on the creation of an egalitarian, universal health-care system that builds on the best practices of other countries — no matter the political obstacles to implementing such a sweeping reform — then they should embrace a tough line on hospital reimbursements and doctors’ salaries. If they believe that it is legitimate to compromise in advance — and make preemptive concessions to some powerful interest groups (like doctors and hospitals) but not to others (private insurers) — then they should be more up-front about that position and the reasoning behind it.

Medicare for All Should Hurt (Some) Hospitals and Doctors