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The High Cost of “Free” Health Care

By Tom Coburn | August 1, 2018

No issue is fueling the rise of Democratic socialism more than health care and, specifically, the allure of “free” health care. Democratic socialists Bernie Sanders and Alexandria Ocasio-Cortez are making a direct appeal to millennials. If millennials, the nation’s largest voter-eligible generation, would accept single-payer “Medicare for All,” they argue, everything that ails America’s health care system will be fixed.

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Millennials shouldn’t buy it. The best argument is your own life and experience.

In almost every area of the economy – with the exception of health care and education – every generation of Americans, and especially millennials, expect the right to shop and exercise choice. App stores have thousands of choices for a reason – people have different needs and desires and expect options. Competition fuels innovation and provides more options people want to buy. That’s how markets work.

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The problem is not that health care markets have failed. The problem is that they have never been tried. Health care is so expensive because people can’t shop and make choices in an open, competitive and transparent market. Single-payer health care would make the status quo far worse, not better. As P.J. O’Rourke quipped, “If you think health care is expensive now, wait until you see what it costs when it’s free.”

Single-payer health care would make the status quo far worse, not better.

Bernie Sanders wants you to have only one option – his option. Instead of a market with many apps you would have one app – single payer health care that would make decisions for you. Single-payer would take away your power to choose and give it to the federal government. As eHealth CEO Scott Flanders explains, “Single-payer means single-shopper – and that shopper isn’t you.”

As a physician, I understand that people can’t shop in a medical emergency but 86 percent isn’t for emergencies but chronic and mental health care. As I argue here:

Why is it the case that when it comes to health care – nearly one fifth of the American economy – we deny consumers the right to know the price of care before they select and purchase services?

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When consumers are denied basic information on costs and quality, they have no incentive to select the most efficient and effective site of service. As a result, prices for the same health care services vary so considerably that a single procedure may be two to three times more expensive within the same state, or even the same city.

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In most segments of the American economy, sellers compete for buyers by offering competitive prices, service guarantees, and even attractive financing. But in health care, consumers don’t benefit from the market discipline of transparency and competition. Some argue that American consumers are not sophisticated enough to shop effectively for health care. And yet, these same people are sophisticated enough to buy in other sectors of the economy. More than 90% of Americans have figured out how to buy and operate a smartphone, and 51% of Americans use their smartphone for activities like buying a car, shopping on Amazon, or selecting a new outfit. 79% of Americans have made purchases online, while 64% of Americans have figured out the complex financing and paperwork necessary to buy a home. Americans are smart and adaptable in every other sector of the economy; under the right conditions, health care would be no exception.

Joe Lieberman, the Democratic nominee for Vice President in 2000, isn’t exaggerating when he says this movement could bankrupt the country.

To fund “Medicare for All” taxes would need too increase by roughly 9 to 12 percent to cover the additional costs, though a recent study finds that doubling taxes could be necessary. In other words, the typical millennial would have to spend at least two workdays per month just to cover the cost of “free” health care. That is, if they can find a job. Even Bernie Sanders admits there would be pain associated with his plan.

Additionally, the plan could cost $32 trillion over 10 years according to the Urban Institute. Every dollar borrowed to pay for the plan is a deferred tax increase on the next generation.

Lieberman joined with me in 2011 to try to save Medicare for future generations. “We can’t save Medicare as we know it. We can only save Medicare if we change it,” Lieberman said.

Ezra Klein, then with the Washington Post, offered cautionary analysis for today’s socialists. In 2011 he wrote, “The problem with health-care costs is that they rise faster than wages, GDP or most anything else … You wouldn’t just need to raise taxes. You’d need to raise them again and again and again, because every tax increase would soon be outpaced by Medicare’s growth.”

Klein was right then, and he’s right today. The costs of “free” health care would be debilitating to today’s millennials.

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My plea to millennials is don’t buy the Sanders option. Exercise choice, and demand choices in a truly free and transparent market that will give you a far better deal than today’s system.

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