A Koch-Funded Think Tank Tries Hard to Pretend That it Didn't Find Savings From Bernie Sanders' Medicare Plan

Charles Blahous explained his attack on Sanders' single payer Medicare for All plan to CNBC's Rick Santelli. (CNBC)

A Koch-Funded Think Tank Tries Hard to Pretend That it Didn't Find Savings From Bernie Sanders' Medicare Plan

What’s overlooked in all these cavils about Sanders’ crowing about Blahous’ finding is that the champion cherry-picker in the discussion is Charles Blahous

The Mercatus Center at George Mason University, a libertarian think tank partially funded by the Koch brothers, appears to be mighty embarrassed about its finding in a recent paper that the Medicare for All proposal from Sen. Bernie Sanders (I-Vt.) might actually reduce Americans' overall spending on healthcare.

We know this because Mercatus has sent out several emails pushing back against reports about the finding. And the paper's author, Mercatus fellow Charles Blahous, took to the opinion page of the Wall Street Journal to complain that "some have seized on a scenario in my estimates showing a slight decline in projected total public and private health expenditures under Medicare for All."

Among those who "seized" on the scenario is Sanders himself, who crowed about it on Twitter after the paper was published at the end of July, mischievously getting the Koch brothers into his tweet because, why not?

Total health expenditures decrease by only 4 percent, even after assuming substantial administrative cost savings. -Charles Blahous, admitting that the Sanders plan cuts expenditures by $2 trillion (4%)

Blahous grouses that Sanders and his followers overlook his main point, which is that the Sanders plan would sharply increase government spending on healthcare. He's got the support of several conservative commentators and not a few credulous journalists. We analyzed Blahous's paper here.

The problem with Blahous' complaint, as it happens, is that he actually did find that the Sanders plan could reduce overall healthcare costs. That conclusion is right there on page 18 of his 24-page paper. Under the assumptions in the Sanders plan, he writes, "aggregate health expenditures remain virtually unchanged: national personal healthcare costs decrease by less than 2%, while total health expenditures decrease by only 4%, even after assuming substantial administrative cost savings."

According to his own math, under Medicare for All, national health expenditures would total $57.6 trillion through 2031. They're currently projected to be $59.7 trillion. In other words, Medicare for All would reduce total U.S. spending on healthcare by 3.44% (a bit less than the 4% Blahous cited).

Mercatus in its emails cite several ostensibly objective journalism sources calling out Sanders for, in effect, "cherry-picking" Blahous' results to make Medicare for All seem thriftier than it is. They include Washington Post fact-checker Glenn Kessler, the Associated Press, and Jake Tapper of CNN. Some of Sanders' critics panned him for failing to give the context to Blahous' finding; but it's a little churlish to complain about someone leaving out details from a 185-character tweet, since Sanders has published all the details and assumptions underlying his proposal, and Blahous found them easily enough to use them.

Moreover, those sources engaged in a fair amount of cherry-picking of their own. And Blahous is dancing as fast as he can to minimize the implications of his own math.

Let's get to the bottom of the controversy.

To begin with, all these estimates and projections of the cost of Sanders' plan are dependent on the assumptions incorporated into the calculations -- Sanders relies on some assumptions, Blahous on others, Kessler, et al, on yet others.

Blahous took Sanders' assumptions as read and costed them out over time. Among those assumptions are that hospitals and doctors would be reimbursed for their services at Medicare rates, which are on average 40% below private insurance reimbursements (though higher than Medicaid reimbursements); that negotiating with drug companies and other price caps would reduce prescription costs by nearly $850 billion over 10 years; and that administrative efficiencies would save nearly $1.6 trillion over the decade.

Sanders made further assumptions about the cost of universal coverage, including dental and vision care for all, and the elimination of deductibles and copayments. The bottom line from all those assumptions, Blahous acknowledges, was the reduction of U.S. spending by $2 trillion over 10 years.

Much of the pushback in the press against Sanders' plan is based on the theory that his assumptions are too aggressive. That's Blahous' argument too. (Blahous also tries to put his thumb on the scale by describing a $2-trillion reduction as "only" 4%. In other words, he's making the assumption that people would consider $2 trillion to be a negligible number.)

The AP, for instance, says Sanders' "scenario in which hospitals and doctors accept significantly lower payments for many patients ... is a big asterisk, and one that Sanders fails to disclose." It's a little odd to claim that Sanders "fails to disclose" his reliance on lower payments for providers -- since it's explicitly part of his plan and was penciled out by Blahous. Did AP even read the plan, or just the tweet?

Kessler says the claim of lower spending requires "generously accepting Sanders' assumptions that he could squeeze providers." Also at the Washington Post, libertarian columnist Megan McArdle warns that implementing Medicare for All would require "hard choices." (No kidding?)

Tapper fact-checked Sanders' purported claim that Medicare for All would save the U.S. government $2 trillion and declared it "false." But Tapper was the sloppy one: The Blahous calculation, repeated by Sanders, is that the program would save Americans, not the government, $2 trillion. Big difference. Tapper later corrected his video to get it right.

In any case, "never gonna happen" is the weakest and laziest argument anyone can make in a public policy debate. The assertion that provider reimbursements will never, ever be reduced is based on nothing but hot air. Not very many years ago, after all, legalization of gay marriage was unimaginable in the U.S. political system. In 1859, slavery looked like it was with us to stay; that assumption ended Jan. 1, 1863. On the morning of Nov. 8, 2016, it was widely assumed that no one as crass and unfit as Donald Trump could become president; by 9 p.m. that night it was reality.

In the first few years after 2010, running against Obamacare seemed to be a slam-dunk campaign winner for Republicans; today, more than 50% of the public regards the program positively and Democrats are preparing to hang Obamacare repeal around the necks of their GOP opponents in November.

A wholesale reduction in doctor and hospital fees may be difficult to achieve, but it isn't "impossible" in the same sense that time travel, say, is impossible. One can mock those reimbursement cuts as unlikely, but given the evolution of Americans' approach to healthcare, they're not even implausible.

And, sure, creating a universal healthcare system, whether based on Medicare or otherwise, requires hard choices. If it were easy, Sanders would undoubtedly acknowledge, we would have it by now. Blahous picked at various assumptions underlying the Sanders plan, but he failed to invalidate the plan entirely, which was his goal.

Any national healthcare policy will have lots of moving parts, all subject to tweaking and negotiating. You can't achieve all those savings in doctor and hospital fees? Then maybe you impose nominal deductibles and co-pays. You can't squeeze drug companies as much as you'd like? Then maybe you create a tiered formulary or don't cover every single drug combination Big Pharma cooks up.

Blahous counted all the increases in costs and attributed them all to the government, without placing his government spending figures in the context of the reduced spending by individuals and businesses or the gains in health services. That's some world-class cherry-picking right there.

See how this works? As Scott Lemieux of the Lawyers, Guns & Money blog observes, "'If you couldn't solve every problem, you shouldn't have tried to solve any problem' is an idiotic way of evaluating legislation."

What's overlooked in all these cavils about Sanders' crowing about Blahous' finding is that the champion cherry-picker in the discussion is Charles Blahous. The cherry he picks is the cost of Medicare for All to the federal government, and he fills a bushel basket with his harvest. "Paying for every American's healthcare expenses would increase federal spending by $32.6 trillion over the first decade," he writes. "Even if Congress were to double what it collects in individual and corporate income taxes, there still wouldn't be enough money added to the federal coffers to finance the costs of this plan."

Notice what he did there? He pretended that the only economic effect of the plan would be to drive up government spending, without netting out the savings reaped by businesses and individuals by eliminating premiums, deductibles and co-pays. Nor does he factor in the value to individuals and society of the expanded services advocated by Sanders. Sure, giving everyone dental and vision coverage will cost money. But in return, everyone gets dental and vision care. Isn't that a positive?

In other words, Blahous counted all the increases in costs and attributed them all to the government, without placing his government spending figures in the context of the reduced spending by individuals and businesses or the gains in health services. That's some world-class cherry-picking right there.

Blahous' analysis, both in his paper and his Wall Street Journal essay, depend on his own arsenal of unproven assumptions. In the Journal, he wrings his hands over the Sanders plan's increase in "already unaffordable federal healthcare subsidies."

"Unaffordable?" Sez who? If he's talking about the Affordable Care Act tax subsidies, they've been in place since 2014, haven't brought down the republic yet, and evidently have left plenty of room to enact a tax cut for the wealthy valued at more than $1.5 trillion over the next decade.

In his paper, Blahous estimates the cost of expanding coverage and services under Medicare for All to be as high as $5.6 trillion over 10 years. His basis for this estimate is buried in his footnotes, but it turns out that it's an estimate built on assumptions, the same technique everyone flays Sanders for using.

So, sure, let's acknowledge that Sanders built his Medicare for All plan on a foundation of assumptions about costs and savings. But Blahous built his attack on a foundation of assumptions about costs and savings, just a different foundation. To declare his assumptions credible and Sanders' not is to give up the fight for universal healthcare before the bugle is even blown. That's what Blahous was hoping for, and no one should let him get away with it.

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