This article was a winner of the Medicare for All scholarship opportunity. It contains one essay arguing for, and one essay arguing against the implementation of Medicare For All.
Pro
The implementation of Medicare for All in the United States would bring about two largely beneficial changes: Value Based Pricing and Recession Prevention.
Value Based Pricing
In the status quo, big pharma companies are harming and exploiting their consumers instead of benefiting them. Crucially, Light of Stanford finds that about 85-90% of all new drugs provide few or no clinical advantages for patients. However, Medicare for All solves for this by emphasizing innovation through a system of value based pricing. Rather than being based on production cost, the price of drugs under Medicare for All will be based on clinical value, stated in section 616 of the bill. Value-based pricing is crucial because Keckley of Deloitte writes that in a value-driven health care system, pharma companies will need to provide pharmaceuticals that demonstrate real, measurable value.
Patel 17 corroborates that this may pressure pharmaceutical companies to align their incentives with those of the payers.Productive innovation is critical, as the ITIF finds that Pharmaceutical Innovation Accounted for 73% of the Increase in Life Expectancy in 30 countries around the world. Levy ‘14 quantifies, a 20% decrease in the price of drugs would increase the amount of people who can afford the drug by 23% while only decreasing revenue of drug companies by 1%. With new clinically based pricing in the market, more people can seek the medication they need. Nooshka 15 affirms this, finding that with the newly spurred innovation we could avert
10 million deaths every year.
Preventing a Recession
Additionally, the current healthcare system cannot be sustainable for long. According to Futrelle 12, health care costs are going to exceed household income by 2030. This means that it becomes, quite literally, impossible for the average American to pay for their medical bills. And already, the impacts are crashing down on us.
According to Owens 19, a horrifying 530,000 families turn to bankruptcy each year due to their medical bills. Moreover, Fontinelle 19 finds that 43 million Americans have overdue medical bills on their credit reports. High credit card interest rates then cause medical debt to proliferate and make it harder to pay-off. Eventually, families get trapped in cycles of high-cost debt. This leads to less consumer spending overall in the US economy, and ends up harming it. However, the high cost crisis for Americans will only get exponentially worse over time.
CBO 18 predicts that current healthcare costs for the government will grow over 65% between now and 2047, becoming more expensive by the year. Horowitz 18 extends on this finding that the government debt will spiral out of control, sparking a global crisis. This is historically proven as Gallagher 14 finds that a US debt spiral in the 1990s put 21 countries into a recession.
Luckily, Medicare-for-All solves this by stabilizing costs. Accessible healthcare solves for recession recovery in three ways.
First is by increasing disposable income. Currently when a recession strikes, people who are unemployed no longer have insurance, which further plunges them into poverty as they have to pay for expensive medical fees. However, University of Massachusetts quantifies that 95% of Americans would save money under single payer healthcare because they no longer pay medical fees, so less people fall into extreme poverty ,which makes recessions shorter and less severe.
Second is by eliminating medical debt. Recessions are not caused by excessive government spending, but an accumulation of personal debt. Le Fort 19 finds that if consumer debt continues to grow like the status quo, it can easily cause a recession as consumption lowers because consumption accounts for 70% of US GDP. Public Citizen writes that affirming would remove all medical debt by having the government pay for healthcare, which would eliminate 60% of personal bankruptcies.
Third is through government spending. Archer 20 finds that a metastudy of 22 studies found that Medicare for All would yield net savings in the long term, with 19 predicting savings within the first year of implementation. This is because Medicare for All will eliminate over 600 billion dollars of administrative costs that are used to individually negotiate rules as well as other costs. This is empirically true as Schumaker 20 finds that Canada spends $2,000 less per person on healthcare and yields better health results. Government spending less on healthcare means they have more money to spend on auto stabilizers during recessions.
Unfortunately, if we continue on our current path without Medicare for All and carry the burden of a draining healthcare system, an economic collapse is imminent. Thus, because of a double dip recession, Bradford of the IMF quantifies that in the case of an economic shock to the US with would impact many other countries, 900 million people could go into poverty, because of the interconnectedness of economies worldwide.
Con
The implementation of Medicare for All has the potential to lead to absolutely disastrous consequences: destroying the system and provoking an economic crisis.
Destroying the System
Critically, Feinstein 20 explains that under Medicare for All, the government would negotiate drug costs with companies, which threatens to drop pharmaceutical prices by 70%. Because of lower profit made by these companies, two things happen.
First is a plunge in innovation.
Innovative medicines have been responsible for 73% of the increase in life expectancy. Currently, innovation is doing well, as the SBE council finds that 90.5% biotech small businesses lead manufacturing and development.
However, price controls will cause the sector to crumble, and because it’s extremely sensitive to the perceived and actual availability of capital, price controls dramatically decrease early-stage investments in small biotech businesses. Therefore, NBR shows that cutting prices by 40 to 50 percent in the United States will lead to 60 percent fewer R&D projects in the early stage of developing new drugs.
Conover ‘17 explains that price controls could cut Research and Development spending by up to $152 billion, because less profit means less reward for a high risk activity such as drug development.
Golec 06 estimates that because of this, there will be around 1,000 fewer medicines on the market, and Lichtenberg 98 indicates that each new drug brought to market saves 11,200 life-years.
Second is overpricing drugs in the developing world.
Comanor 11 finds that high drug prices in the US help encourage low drug prices in the developing world. Since drugs sold from the US market generate enough profit, companies can charge affordable prices for those who live in poorer countries. This helps increase global access by 4 to 7 times more through maximized profit.
However, as price controls smash prices, companies lose massive amounts of revenue as their short - term profits are undercut. Therefore, they have no choice but to raise prices in the developing world, as Chalkidou 20 continues that companies would rationally price for the rich segment of society, and have less incentive to offer cheaper prices to poorer countries.
The World Health Organization finds that 90% of the population in low-and middle-income countries are forced to purchase medicines out of pocket. However, cases may become life-threatening if many are unable to pay for life-saving medicine. Comparatively, Zarocostas 07 finds that access to drugs saves 10 million lives a year.
Economic Crisis
Implementing Medicare for all has the potential to decimate our economy. Problematically, the CHE finds that Medicare for All with taxes would still produce a deficit of 2.1 trillion.
Massive debt would push the US into two courses of action.
First is Raising Interest Rates.
In order to generate more money, the US has an incentive to raise interest rates, as this means more people will want to invest in the government.
However, Mitchell 10 finds that when the government raises interest rates, it competes with private investors who are borrowing as well.
Moreover, when the government borrows, competition in the market for loans increases, raising the price of borrowing for private investors. For firms, this means an increase in the cost of doing business. Projects that would have been profitable are no longer so.
However, Colombu finds that because of our record debt burden, interest rates do not have to rise nearly as high as in prior cycles to cause a recession.
Second is Treasury Bonds.
In order to finance this debt, Carpetta finds that the government will have to increase the number of treasury bonds on the market.
Luckily, US treasury bonds are reliable and are known as a safe haven for investors. However, as the federal government releases more bonds, investors are more likely to invest in the US government’s treasury bonds than in developing countries.
Ostroff 20 finds that critically, 18 developing countries have dollar denominated bonds that are trading at distressed levels, and therefore extremely risky and unsafe to invest in.
And because Hibah ‘12 found when there is a lot of turmoil and unease in financial markets, investors will look for a safe haven. Therefore, instead of investing in these developing nations, investors will flock towards US Treasury bonds.
They find that “there will be a reluctance to invest in countries from investors” making the chance of a sovereign wave of defaults the highest it’s ever been.
Critically, Wharton 20 finds that under deficit financing, the plan would reduce GDP by 24 percent by 2060, and the IMF finds that a 1% decrease in the US economy will decrease emerging market GDP by 1%.
Therefore, this has the potential to push 18 countries to default on their debt. Bradford 13 warns that as many as “900 million people could fall back into poverty in the event of an economic shock.”
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