Cost of Medicare for All: Review of the Estimates

Abstract

This paper critically evaluates the estimates of the cost of Medicare for All (M4A) in the USA. Six studies that estimate the 1-year total cost of M4A in the USA are reviewed. These studies find that M4A would increase national health spending by as much as 16.9% or decrease it by 20.0%, representing a range of estimates that generates uncertainty and confusion regarding what to expect if M4A were implemented. To develop more comparable estimates, the national health spending in each study’s comparison year is used as the baseline. Estimates of the change in national health spending under M4A for each report are broken down into five important components of costs and the percentage change from baseline is calculated. The assumptions regarding these cost components are evaluated for each study, and errors and inconsistencies identified. Using data from the literature and findings that are consistent across the reports where they exist, errors and inconsistencies are corrected, and new estimates of the cost components and the overall change in national health spending are calculated. After eliminating one of the reports as having methods that are too opaque to adjust and being an implausible outlier, and adjusting the findings of the remaining five reports, this paper finds that M4A would generate savings from 2.0 to 5.1% of baseline national health spending, averaging 3.9%. M4A would cost about 4% less than current national health spending, and eliminate the uninsured, expand coverage, and likely improve the health of Americans.

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Notes

  1. 1.

    The term “national health spending” is used in this paper as a general term to represent all the definitions of spending used by these studies. National health expenditures are defined by the Centers for Medicare and Medicaid Services to include personal health expenditures (hospital services, physician and dental care, home health care, nursing home care, prescription drugs, durable medical equipment, and other non-durable medical products) plus administrative costs of insurance and government public health activities, plus spending on health sector investment, non-commercial health research, and new structures and equipment. Health consumption expenditures are defined as personal health expenditures plus administrative costs of insurance and government public health activities. Even though the definitions of spending in the baseline year might vary from study to study, the studies become comparable by focusing on the percentage changes in this spending. The error caused by comparing non-uniform baselines is minimized in that way.

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Acknowledgements

The author thanks Gordon Mosser, Kip Sullivan, James F. Hart, Mark H. Brakke, Ronald J. Jankowski, and four anonymous reviewers for helpful comments on an earlier version of this review. Any errors or oversights remain the sole responsibility of the author.

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Correspondence to John A. Nyman.

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This research was not supported by any external funding.

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John A. Nyman has no conflicts of interest that are directly relevant to the content of this article

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Nyman, J.A. Cost of Medicare for All: Review of the Estimates. Appl Health Econ Health Policy (2021). https://doi.org/10.1007/s40258-021-00636-6

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