Yes, We Can Cut the Pentagon to Pay for Medicare for All

Source: National Priorities Project

Last night’s debate, in which moderators asked whether spending on items like Medicare for All would lead to “bankrupting the country” while failing to ask any similar questions about the cost of two decades of war, has got me thinking again about the stories we hear (and don’t hear) about the costs of various policy choices.

One form this takes is folks comparing the cost of Medicare for All to what we pay for the Pentagon. In one perfect example, a blog from Committee for a Responsible Federal Budget took issue with my October 17 op-ed in the The New York Times, “We Don’t Need to Raise Taxes to Have ‘Medicare for All.’” They got a couple of important things wrong, and their argument keeps being repeated, so it’s worth a review.

The primary complaint from CRFB? That Medicare for All wouldn’t be fully covered by our suggested $350 billion in richly deserved Pentagon spending cuts, which we first wrote about in conjunction with the Poor People’s Campaign Moral Budget (and which I encourage folks to check out for their own sake, also to see that yes, the total really is $350 billion). CRFB is technically right (and so was I, in my Times op-ed), but CRFB’s point doesn’t have that much to do with real policy choices.

Here’s where the CRFB analysis is misleading:

1. $350 billion doesn’t need to cover Medicare for All. It just needs to cover the difference between Medicare for All and what we have now.

It’s entirely right that $350 billion is nowhere near the full cost of Medicare for All. But it doesn’t need to be.

We made this clear in the Times op-ed: that we found the “$300 billion per year over the current system that is estimated to cover Medicare for All (though estimates vary).” (Emphasis added.)

In 2017, we (collectively, public and private) spent $3.2 trillion on health care. The $350 billion we identified in Pentagon budget cuts only needs to cover the difference between what we pay now and what Medicare for All would cost. The $3.2 trillion we spend now could be redirected to Medicare for All, albeit with some changes to ensure the cost is borne fairly. Together, our current spending of $3.2 trillion, plus the $350 billion in Pentagon cuts, would be more than enough to pay for Medicare for All.

And, it turns out that CRFB knows this. They acknowledge that this may have been my meaning all along, but they bury it down in the sixth paragraph.

How to Pay for Medicare for All (in part) by Cutting the Pentagon

CRFB aren’t the only ones to use this misleading reasoning, but it just doesn’t check out. More than half of the $3.2 trillion in current health care spending is already flowing through the federal government, as part of Medicare and Medicaid and other public systems. Sure, most Medicare for All proposals involve shifting the cost burden for health care around to some degree, but the argument shouldn’t be about whether the money is there – it definitely is, because we’re already spending it. That’s why we can talk about the $300 billion in additional funding without belaboring the full cost of Medicare for All.

And for anyone concerned about the deficit, the fact that Medicare for All would in fact cost less overall than the current system should matter. A lot.

2. The total Medicare for All cost estimate we relied on is right in line with other estimates – even on the high side.

CRFB managed to compare apples to oranges to argue that the total Medicare for All cost we assumed was way out of line with other estimates. In fact, the estimate we relied on is right in line with the others – even a little on the higher side.

CRFB shows a graphic comparing the UMass PERI Medicare for All cost estimate to other cost estimates ranging from $24.7 trillion to $36 trillion over ten years. The CRFB blog claims that the PERI estimate for the ten-year cost of Medicare for All is the lowest among comparable studies, at $13.5 trillion. This is a misreading of the PERI findings.

The PERI figure CRFB cites – $13.5 trillion over ten years – isn’t the total Medicare for All cost at all. It’s what would be needed in new government revenues – that is to say, it could be covered by shifting health care spending from the private sector to the public sector (which, yes, the private sector would still pay taxes for, but making that switch doesn’t take any additional money out of the pockets of private payers). The problem is that the other figures in the chart are, in fact, the total cost of Medicare for All. No wonder they’re higher.

The appropriate figure from PERI for the full system costs of Medicare for All is somewhere between $35 trillion over ten years (a loose figure based on their more detailed, single-year cost estimate – see PERI page 36, Table 6C) and $37 trillion over ten years (see PERI p. 126, Table 39A.) Contrary to CRFB’s assertion, that puts the PERI estimate actually at the far high end of ten-year cost estimates. The bar chart below is a corrected version of the one that ran with the CRFB blog.

PERI has a couple of different estimates based on different methodologies, though they come pretty close at $3.54 trillion for one year, versus $37 trillion for ten years. We based our calculations on the more rigorous, one-year cost analysis, and to be on the safe side, we further assumed PERI’s one-year cost for Medicare for All before any savings were realized from controls on prescription drug prices, hospital profits, etc. That gave us a one-year cost of $3.54 trillion in total costs.

Actually, Medicare for All Would Cost Even Less

The truth is that the reality of Medicare for All could actually save money compared to the current system, if deeper cost savings could be achieved. PERI estimates that by implementing cost saving measures like prescription drug price controls, limits on hospital profits and reducing administrative overhead, the total cost of Medicare for All could be as low as $2.93 trillion in the first year, which would return $310 billion for other uses compared to the current system. But even without realizing those savings, it’s possible to pay for Medicare for All.

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