The Economics of "Medicare for All"

Abstract

This memo provides a framework for evaluating the economic trade-offs of expanding the government’s role in financing and regulating health care through a single-payer system such as Medicare for All. First, I draw upon international comparisons to highlight important differences in the features of single-payer systems among high income countries. I then discuss the economic trade-offs that would accompany the adoption of a single-payer system in the United States, including potential changes to the quality and quantity of medical services, and to the quantity of health-care products (such as pharmaceuticals). If such a system were to adopt the existing Medicare price schedule, the average quality of medical services would be expected to be lower, while the impact on the quantity of medical services would depend on the willingness of a single-payer monopsonist to exert downward pressure on the wages of health-care workers. A U.S. single payer could also exert its buying power to lower drug prices but doing so would likely reduce the future quantity of health-care products, since reducing the global profits of drug innovators would deter them from making the large investments in research and development (R&D) that are necessary to develop new products. Finally, I discuss market-based policy reforms that could promote affordability and access in the current U.S. health-care system.

Keywords: Medicare, government, policy, health care, drug price, market, monopoly, affordability, investment