Rob: Thorpe says you've underestimated, that Bernie Sanders' health care plan is underfunded by $1.1 trillion a year. Let's talk about Kenneth Thorpe and his claims.
Gerald: I have a memo that I sent to the Sanders' campaign, outlining "Thorpe's claims and how he got them. If you read his paper, which is linked to Vox by Dylan Matthews, it's very hard to figure out where he got the $1.1 trillion. He doesn't lay things out in a clear way. The reason for this becomes clear if you actually work through his numbers, such as he gives. Because he's making outlandish assumptions. And we'll come to why he might be making them in a minute.
But he's assuming a very small reduction in administrative expense -- actually, he assumes that the savings on administration will be less, from a single payer plan that does away with health insurance, private insurance, the savings will be less than we would save just from getting rid of those companies. If we replace private health insurance with Medicare, at the Medicare administrative rates -- that is, the cost for processing bills through Medicare compared to the costs of processing the same bill through a private health insurance company -- we save $200 billion. He assumes that the total savings from administration will be less than that. So he assumes no savings from hospitals, I mean hospitals have as many people processing bills, doing billing and insurance related activities, as they have beds.
Secondly, it's not clear because he doesn't say anything in his memo about savings from drug prices. In a correspondence, he claims he's assuming a 20% saving in drug prices. Even that 20% is half of what we can actually get. Based on his memo alone, there's $200 billion per year over ten years in savings on drugs that he leaves out. So that's $600 billion.
He says that he assumes a single payer plan would slow the rate of growth in health care costs. It's not clear where that is in his analysis because we don't see that in the numbers. But it's interesting that he makes that an issue, allows for that. Once you assume that savings on health care prices will slow down, that's a huge benefit from a single payer plan.
Take it all together, and he's got a couple of things in there we don't need to go into. But take it all together -- he's leaving out hundreds of billions of dollars in savings. But we still don't account for $1.1 trillion -- that's because he's assuming a huge increase in utilization when we do away with co-payments and deductibles. He's assuming an increase in utilization of almost 40% -- that people will start going to doctors all the time and that will cost huge amounts of money.
Now, to be sure, if people did start going to doctors a lot more, maybe that's a good thing. Maybe that's saying the system is seriously reducing people's ability to go the doctor and causing, killing, thousands of people which is what's happening. [inaudible] wants to admit that, then that's fine. But still that, even given that, his assumption is way more than any one else has ever found when countries have shifted from private health insurance to single payer. In Canada, for example, there's an increase of utilization of about 3%. In my work, to be conservative, I have estimated an increase of utilization of about 6%. Thorpe estimates an increase several times as great -- that's how he gets his big number. He makes it up, basically.
Now why does he go to this much trouble? Here's an intelligent man who has a lot of experience. He has a lot of experience in writing proposals for single payer plans. He did that for Vermont, he did that for Massachusetts over a decade ago. And when he did his work recommending single payer in the past, his numbers were very similar to the numbers I use, that I come up with. Why has he suddenly changed directions?
Well maybe it's because he works for a lot of different people: he's taken money from Blue Cross/Blue shield, he's a lobbyist for a group that advocated private Medicare Care Advantage Plans. In the past and today he worked with the Clintons, part of the Global Initiative. And I am sure he's hoping for a good position in the Hillary Clinton administration. So is that why he reaches these strange conclusions? Conclusions that he hides in the memo that's very hard to understand? I don't know.
Rob: I wanted to get Chuck's take on it, just to get another take. Chuck Pennacchio, welcome to the show again. You were on recently. You've been very active as an activist advocating single payer. What's your take on this story with Thorpe and his difference of opinion?
Chuck Pennacchio: Well, first off, thanks so much for having me on again, Rob. And Gerry, always great to hear from you; you've been a real boost for single payer efforts across the country. You've validated working assumptions that we've been running with for quite some time and so again, great gratitude.
Gerald: You've welcome.
Chuck: I concur with what Gerry said here, that conflict of interest leads people to change their tune, change numbers, change methodology -- change how they see the world because now they are representing the very interests that are paying them to do the work. What's truly wonderful about Gerry Friedman is that he's an independent economist. He works for a university and he gets very, very little in the way of compensation for the studies that he does for us. He must work close to McDonald's-level wages, I think, for the kind of stuff that he's done for us.
There's no conflict of interest where Gerry Friedman is concerned, whereas with other economists you can just follow the money. This is really what's become of economics as a whole.
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