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Under Warren’s Medicare for All Plan, Many Hospitals Would Be Forced to Close—Especially in Poor, Rural Areas

Sen. Elizabeth Warren (D–Mass.) said during the first Democratic Party debate last night that the reason we don’t already have a Medicare for All plan in place is that politicians “just won’t fight for it.”

More often than not, when a politician declares that the only thing preventing some particular plan from going into place is political will, it’s a sign that there are uncomfortable practical questions they would like to paper over. So it was when Warren explained her support for a single-payer health care in which the government takes over nearly all of the country’s health care financing. 

The discussion began when the entire stage was asked who, by a show of hands, would eliminate private insurance. Warren was one of just two candidates, along with New York Mayor Bill de Blasio, to raise her hand.

She then went on to defend her position, saying “I’m with Bernie on Medicare for All.” One of the top reasons for bankruptcy, she said, was medical bills. And insurers, she argued, have an incentive to keep as much money as possible rather than pay for better care. 

That leaves families with rising premiums, rising copays, and fighting with insurance companies to try to get the health care that their doctors say that they and their children need. Medicare for All solves that problem. And I understand. There are a lot of politicians who say, oh, it’s just not possible, we just can’t do it, have a lot of political reasons for this. What they’re really telling you is they just won’t fight for it.”

The core problem, in Warren’s view, is politicians who won’t fight for ordinary people. Everything else is just politics. That’s a convenient and politically easy response, but it’s not a particularly good one. Warren’s blithe dismissal of the challenges of uprooting the nation’s health care system and starting over with an entirely new system of government financing allows her to portray herself as a populist champion while ignoring the practical problems that single-payer poses. 

Like, for example, how hospitals will be paid in a one-size-fits-all system that pays Medicare rates for every service. 

As former Maryland Rep. John Delaney pointed out just a few moments later, Warren’s plan—which is to say Bernie Sanders’ plan—would probably result in a sharp contraction in the number of hospitals.

“If you go to every hospital in this country and you ask them one question,” Delaney said, “which is how would it have been for you last year if every one of your bills were paid at the Medicare rate? Every single hospital administrator said they would close. And the Medicare for All bill requires payments to stay at current Medicare rates. So to some extent, we’re supporting a bill that will have every hospital closing.” 

It’s probably an overstatement to say that every single hospital would close. But Delaney is right that under a single-payer plan paying current Medicare rates, some, and perhaps lots, almost certainly would. And many of the hospitals that stayed open would likely shed staff and services.

Medicare pays far, far less than private rates, and the higher rates from private payers is part of what keeps hospitals afloat financially. One estimate found that providers would take something like a 40 percent pay cut under the Sanders plan. And that cut would take place very quickly, as the Sanders plan calls for the elimination of most private insurance in just four years. 

You can believe that American health care costs too much (it does) and that the country spends far too much on health care overall (probably) and still recognize that, in addition to the sheer bureaucratic disruption of switching to a new, government-run system of financing, reducing provider payments so sharply in such a short period of time would place a huge financial strain on the system, resulting in hospitals shutting their doors and jettisoning staff. 

The nation’s hospitals would lose somewhere on the order of $150 billion a year, according to an article in The Journal of the American Medical Association. Which would mean that someone would have to be paid less, and it wouldn’t just be insurance companies: It would be nurses and doctors, therapists and billing specialists, the entire universe of middle-class jobs that America’s health care industry supports. Even some physicians who support single-payer have suggested they are worried about the possibility that hospitals would lose money. “The line here can’t be and shouldn’t be soak the hospitals,” the president of Physicians for a National Health Program recently told The New York Times

Cuts to hospital payments, meanwhile, would be hardest to bear for rural hospitals that serve poorer populations. Many of these hospitals are, for obvious reasons, already struggling financially, and under a system of all Medicare rates, they would likely be first to close, leaving local residents with fewer health care options. Warren styles herself a populist champion of the working class, but it is not much of a stretch to say she supports a plan that would make health care worse and less accessible for the nation’s rural poor. 

One response to this problem might be to have Medicare for All pay providers more than today’s Medicare does. That is roughly what the state of Maryland has done with its all-payer rate setting program, a system of price controls that equalizes the differential between Medicare rates and private rates. As a result, the state’s Medicare rates are far higher than is typical, and the state’s hospitals end up with about $2 billion extra in Medicare funds each year. But doing so would eliminate the “savings” in terms of total national health spending that single-payer supporters like to tout. 

You can avoid these issues on the campaign trail, insisting that they can be solved with political courage alone. But once in office, these are the challenges and trade-offs that any single-payer plan will have to account for. Elizabeth Warren has plans for a lot of things, but by insisting that these are all fake problems that can be solved by more political fight, what she is inadvertently revealing is that so far, at least, she doesn’t have a plan for this. 


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About The Author

Peter Suderman

Founded in 1968, Reason is the magazine of free minds and free markets. We produce hard-hitting independent journalism on civil liberties, politics, technology, culture, policy, and commerce. Reason exists outside of the left/right echo chamber. Our goal is to deliver fresh, unbiased information and insights to our readers, viewers, and listeners every day. Visit https://reason.com

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