My Sanders Column on his flawed health care plan Posted on Forbes

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morning Forbes posted a new article by David Beier, John Osborn and Merv Turner on the health care plan from Senator Bernie Sanders. A list of previous articles by David Beier can be found at the bottom of this email, or on the website of Bay City Capital. Www.baycitycapital.com Sanders Article URL http://www.forbes.com/sites/johnosborn/2016/01/28/bernie-sanders-healthcare-dreams/#4bd1d2cf1c7c Sanders article text: Bernie Sanders' Healthcare Dreams Are Revolutionary, Unaffordable And Unachievable Perhaps the greatest utopia would be if we could all realize that no utopia is possible; no place to run, no place to hide, just take care of business here and now. -Jack Carroll, Canadian politician. By David Beier, John Osborn and Merv Turner In T.R. Reid's entertaining and informative book on comparative healthcare systems, The Healing of America, the author highlights the myriad ways in which the delivery of, and payment for, healthcare has evolved on a country-by-country basis. In each case, the prevailing model can be traced to entrenched aspects of the antecedent healthcare system that constrain the extent to which the body politic can affect change. Why should we imagine that America would be immune from this reality, where an influential array of vested political and financial interests have combined with structural inertia to frustrate the most determined efforts to change our system and preserve a series of rather perverse incentives? Hillary Clinton learned that lesson the hard way during the early years of her husband's administration as she failed to gain Congressional support for an ambitious healthcare reform initiative. Barack Obama took heed as he came into office in 2009, and fashioned as his legacy a series of incremental changes designed not for perfection, but to improve our system over time by covering more lives, providing better-quality care and reducing costs. Now along comes Senator Bernie Sanders of Vermont, with an idealistic vision of healthcare as a fundamental human right and a lingering sense that Obamacare is not quite up to the task of accomplishing the treasured goal of universal care. It's fair to say that Obamacare is a kludge: it's the best we could hope for in the divisive political climate of our time. But whether or not one believes that a European-style single payer model would be a good thing for America (more access to healthcare would be good, and removing financial incentives for biomedical innovation would be bad), Bernie's plan falls short of this imagined utopia and would fail for reasons fiscal, political, social and medical. * * * * * Bernie's proposal is, in a word, revolutionary-at least for Americans. At bottom, Senator Sanders wants to expand our health insurance scheme to cover an additional 29 million Americans in a nationalized program of comprehensive, Medicare-style coverage. No American would have to come up with copays or satisfy deductibles, nor would they face the fear of losing coverage. Sanders envisions more coverage at lower cost by using the government's leverage to enhance delivery efficiency. As tempting as this sounds, and as noble as it may be, it can't be funded without massive tax increases at a time in which the American economy remains in slow-growth mode. To crunch the numbers, the Sanders campaign hired an economist who concluded that the Sanders plan would cost us $1.38 trillion per year, or about $14 trillion dollars over the next decade. However, many commentators (and not just Republican critics) claim the cost could be up to twice that figure. This level of increased public spending would require huge payroll and income tax increases for both middle-class and affluent taxpayers (with the highest marginal tax rate increasing to 52%), and also would require higher taxes on estates, capital gains and dividends. The Sanders proposal assumes that much of the cost saved by employers who no longer must provide their employees with health insurance would be used to increase their wages and bring in more tax revenue-but it's not at all clear that this would actually happen. Even if the campaign's math is more or less correct, and larger middle-class tax hikes are not required, the proposal as written would bring the overall tax burden to record levels and increase the level of government spending as a share of the Gross Domestic Product by 50%. Of course, the odds of this being enacted by a Republican Congress are absolute zero, but let's consider the health policy implications. The Sanders plan is billed as "Medicare for All," and this reflects mostly that the federal government would administer the plan for all Americans. Well, we all know how well the federal government manages programs, so who would have any concerns about that? In fact, even modest efforts to change the existing Medicare program have been met with great outcry. Just imagine the horror that would follow the introduction of a plan that would end all employer-paid health insurance (thereby undoing coverage for about two of every three Americans), and repeal the Medicaid program for the poor as well as an effective current program for children's health insurance. Even basic questions of whether Americans may continue to receive treatment from their current doctor are left unclear. This initiative makes the changes wrought by Obamacare, though it was challenged twice at the U.S. Supreme Court, resemble the status quo. As Ezra Klein has written, there are a number of pretty important unanswered questions that arise from the general vagueness of the proposal and a paucity of detailed information. For example, who would decide what care is medically necessary; if it is not deemed necessary, it would not be covered and you would not receive treatment. Obamacare requires that qualified healthcare plans cover medically necessary procedures, but at least you can still engage your doctor and fight with your insurer. In European-style single-payer systems, such as Britain's National Health Service, the government as paymaster effectively controls the practice of medicine. And this may be the single biggest concern of the Sanders proposal-it would transform the federal government from substantial payer into sole provider. Other aspects are worrying as well. Even with a bolstered NIH budget, how can we continue to foster biomedical innovation if the government sets prices on drugs and medical technology? How can we expect to control costs if patients have no responsibility to pay even a small fraction of the cost of care, and therefore no incentive to decline treatment? How can we improve quality when any semblance of competition is removed from the system and government regulation prevails over market forces? No country has yet mastered the challenge of containing the long-term trend of higher healthcare costs, while providing improved quality of care and broad access for its citizens. In a democracy, it's good to have outliers and it's good to provoke policy discussion with provocative proposals. Senator Sanders must be given credit for doing just that. However, the only political appeal of the Sanders proposal is that it is certain to anger every single healthcare constituency in America, from patients to physicians to biomedical researchers to cost control advocates to quality proponents. Further improvement in the American healthcare system will need to start with our current system, as we have neither the political will nor the policy know how to begin anew. Mr. Beier is a managing director of Bay City Capital in San Francisco, and previously served in the Clinton administration and was a senior executive with Amgen AMGN -0.88% and Genentech . Mr. Osborn is a senior advisor with the international law firm Hogan Lovells, and previously served in the George H.W. Bush administration and was general counsel of Cephalon and McKesson's MCK -5.06% US Oncology group. Mr. Turner runs his own consulting firm and previously was chief strategy officer at Merck & Co MRK -2.04%., Inc. Earlier pieces on similar topics include: With John Osborn and Merv Turner: 1. An assessment of the Trump Health Care plan, http://www.forbes.com/sites/johnosborn/2016/01/20/as-with-most-issues-trump-candidacy-offers-few-details-but-much-sound-fury-on-healthcare/#45d752e98598 2. A call to the biopharma industry to accept transparency and embrace value: http://www.forbes.com/sites/johnosborn/2015/08/13/desperately-seeking-price-reform-the-pharmaceutical-industry-needs-to-change-its-ways/#1058bfac4cbb With Bob Kocher: 1. Precision Health: Policy Needs to catch up with Science: http://www.forbes.com/sites/realspin/2014/10/22/precision-health-policy-needs-to-catch-up-to-science/#1e7f161f6888 David Beier only: 1. An assessment of how to price an Alzheimer's drug: http://baycitycapital.com/bay-city-capital-news/cure-alzheimers-disease-cost-value/ 2. Innovative Medicine: A Balance between Benefits and Costs: http://baycitycapital.com/wp-content/uploads/2014/06/Healthcare-Reform-06-17-2014.pdf