Authors: Robert Pollin, James Heintz, Peter Arno, Jeannette Wicks-Lim, Michael Ash
Published: November 30, 2018
Financed by: National Nurses United
Legislation analyzed: Medicare for All Act of 2017 (S. 1804, 115th Congress)
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As of 2017, U.S. Health Consumption Expenditures are equal to 17.2 percent of GDP. The comparable ratio for eight other large industrial economies ranges between 8.9 percent of GDP for Italy and 11.3 percent of GDP for Germany. In addition, health care spending as a share of the U.S. economy has risen dramatically over time. In 1970, U.S. Health Consumption Expenditures equaled 6.2 percent of GDP. The Centers for Medicare and Medicaid Services (CMS) projects that the ratio will reach 18.8 percent by 2026.
Following from our estimates, Health Consumption Expenditures would fall to 15.8 percent of GDP under Medicare for All, as of the 2017 economy. This would represent a dramatic decline in health care spending as a share of GDP for the U.S., but would still be substantially higher than the figures for all other large advanced economies. We conclude that further incremental improvements in service delivery under Medicare for All should enable U.S. health care costs to stabilize at around 15.8 percent of GDP, even after taking account of the rising cost pressures resulting from an aging population.
Based on these results, we can then develop a 10-year forecast of Health Consumption Expenditures under Medicare for All, and compare this forecast with the projection by CMS of Health Consumption Expenditures assuming that the U.S. continues operating under its existing health care system. We find that, over the decade 2017 – 2026, the cumulative savings through operating under Medicare for All would be $5.1 trillion, equal to 2.1 percent of cumulative GDP.
There would also be broader macroeconomic benefits through operating the U.S. health care system under Medicare for All. Among these are that improved health outcomes will raise productivity; Medicare for All will support greater income equality; and that Medicare for All should support net job creation, especially through lowering operating costs for small- and medium-sized businesses.