Warren Relies on Rationing in Medicare for All Plan

Cost-cutting measures would likely lead to long wait-times, limited care

Senator Elizabeth Warren (D., Mass.) / Getty Images
November 19, 2019

Sen. Elizabeth Warren's (D., Mass.) Medicare for All plan has been widely criticized for taking what many consider an unrealistic approach to raising revenue, but one expert told the Washington Free Beacon the bigger problem is that it pushes health care rationing to keep costs low.

Warren, a Democratic presidential frontrunner, relies on aggressive cost-cutting measures, including tightly restricted reimbursements and global budgeting. Health care policy expert Christopher Pope said her approach would effectively amount to a rationing scheme. This, in turn, would likely curtail Americans' access to care, replacing a "fee for service" system with long wait times and mandatory caps on spending.

"The more radical part of [Warren's plan] is the very, very bold rationing scheme for health care," Pope, a scholar at the right-leaning Manhattan Institute, told the Free Beacon. "A big part of how she tries to make the numbers work is really very tightly restricting access to care and funding of health care services."

Warren's campaign, which did not respond to request for comment, has avoided using the word "rationing," likely because it believes the idea would be unpopular. But, as the Massachusetts senator pushes towards the presidency, other Democratic contenders and the public at large may force her to answer hard questions about what single-payer health care requires.

As experts have noted, Warren's plan relies on optimistic assumptions about the cost of implementing Medicare for All. Her campaign predicts the proposal will add about $20.5 trillion in federal spending over 10 years, which is about $14 trillion short of the liberal-leaning Urban Institute's estimate.

To shave that $14 trillion off, the plan must drastically curtail spending. Warren's stated goal is to bring national health care spending growth in line with GDP growth, cutting it down from about 18 percent to about 4 percent over the next decade.

The two economists Warren asked to evaluate her plan—former Obama official Donald Berwick and MIT professor Simon Johnson—concluded that the "new payment models including global budgets for health care systems and full-risk population-based payment models," suggested in the Warren plan "can achieve better care for patients and much lower costs of care." They also said "Urban did not attribute savings to those effects of Medicare for All" to account for the disparity between their estimate and the Urban Institute's.

The first of these "new payment models" is what the Warren campaign calls "comprehensive payment reform": a government-run system that will "reimburse hospitals at an average of 110% of current Medicare rates." Current rates pay hospitals 87 to 89 cents for each dollar of medical spending, meaning that a 10 percent bump in spending would still fall short of full reimbursement. Hospitals are able to sustain those losses with an average reimbursement of $1.45 per dollar of spending from private insurers—the same entities that Warren seeks to eliminate.

The Warren campaign expects to offset low revenue by reducing administrative bloat and compensation of "overpaid specialties." But it is equally likely that some hospitals will close, while others will be forced to curtail the services they provide, forcing patients to pay for care with time rather than money.

"If hospitals are expected to make do with much less money than they would currently, but expected to care for more people, they're going to have to really tightly restrict the access to services that people are able to get," Pope said.

Comprehensive payment reform is just the start, however. Warren has promised that "if growth rates exceed [GDP growth], I will use available policy tools, which include global budgets, population-based budgets, and automatic rate reductions, to bring it back into line." Although it only receives a line or two from the campaign, global budgeting may be the most radical feature of the Warren proposal.

"Global budget" may be an unfamiliar term, but the idea behind it is not complicated. Currently, the U.S. health care system is "fee for service": Doctors provide a service and get paid a fee. A global budget switches from that model to a "budget" approach, giving hospitals a fixed amount of funding to spend over a fixed amount of time, usually a year.

There are benefits to a global budget approach, most obviously that it can radically constrain costs. But global budgets limit hospitals' ability to account for health care costs that exceed their allotment. In practice, this means that patients end up paying for services with time rather than money, as the Urban Institute notes.

"She's basically proposing to cap the amount of health care spending as a total of what she will commit to, but especially the amount of money that hospitals will get," Pope said. "In practice, it's going to mean waiting lists.… it's going to mean that people aren't going to be able to access care, especially high-quality care to the extent that they have been able to."

Global budgets are in use in countries such as Canada, where the median wait time for specialists is nearly five months. This is why France, the Netherlands, and Norway have all moved away from a global budgeting approach, according to a recent op-ed from Pope.

Of course, Americans may decide that they prefer a rationing approach to current, high health care costs. But history suggests rationing may be a hard pill for the general electorate to swallow. During the fight over passage of the Affordable Care Act, conservatives targeted the bill with charges that it would also implement a de facto rationing scheme, an angle of attack which galvanized many—in particular the elderly—against the bill.