September 21, 2015
By Tim Worstall
There’s a number of reasons to think that replacing the US health care system with Medicaid for all isn’t going to work out quite like those who push the plan say it will. One of them being that no one’s as yet had notable success in making government supply things cheaper than private markets do. That doesn’t mean that it’s not possible, but we should be looking askance at those who tell us, airily, that it will be so. But putting aside our justified cynicism about how bureaucracies actually work there’s a much deeper economic reason why it won’t work out as advertised. The numbers that we’re being given miss the largest cost of the proposed scheme: deadweight costs.
Robert Reich (of course he does!) simply assumes that government spending the money will be more efficient:
1. [Bernie Sanders'] proposals would cost less than what we’d spend without them. Most of the “cost” the Journal comes up with—$15 trillion—would pay for opening Medicare to everyone.
This would be cheaper than relying on our current system of for-profit private health insurers that charge you and me huge administrative costs, advertising, marketing, bloated executive salaries, and high pharmaceutical prices.
Now it is possible that that could be true. For example, the insurance companies do have to market their plans and they do have to persuade us to part with our money. If we simply had a medical system with no choice and thus no marketing, that might be cheaper. And if we raised the money through the tax system then that’s notably more efficient in collection costs than private sector companies sending out invoices and all the rest.
Read the full article at Forbes.com: Bernie Sanders' Medicaid For All Plan Misses The Largest Cost Of The Plan: Deadweight Costs