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At the January Democratic debate, Vermont Sen. Bernie Sanders zeroed in on the question of profits in the health care industry.
Under "Medicare for All," he said, "We end the $100 billion a year that the health care industry makes."
It’s a huge number, and one that Sanders has cited before. So we decided to look closer.
The Sanders campaign shared its math, and it’s comprehensive.
The $100 billion total comes from adding the 2018 net revenues -- as disclosed by the companies -- for 10 pharmaceutical companies and 10 companies that work in health insurance.
We redid the numbers. Sanders is correct: The total net revenues, or profits, these companies posted in 2018 comes to just more than $100 billion - $100.96 billion, in fact. We also spoke to three independent health economists, who all told us that the math checks out.
There are a couple of wrinkles to consider. Some of the companies included -- Johnson & Johnson, for instance -- do more than just health care. Those other services likely affect their bottom lines.
But more importantly, $100 billion is likely an underestimate, experts told us.
For one thing, there are more than just 10 pharmaceutical companies, and more than 10 insurance companies, noted Robert Berenson, a health economist at the Urban Institute. Many more exist -- even if they are smaller and post smaller profits.
And this figure looks at pharmaceutical companies and insurance companies, but it doesn’t include the biggest source of health care profits: hospitals and physicians.
"You could ask the same questions of health systems and not-for-profit hospitals who are raising prices at a steady clip," said Ellen Meara, a professor of health economics at the Harvard T.H. Chan School of Public Health. "If you’re going to go after industry, you need to go after the whole system and say prices are a problem everywhere."
If anything, Berenson said, that makes Sanders’ point stronger. After all, $100 billion is a small proportion of the trillions spent annually via national health expenditures. When you factor in hospital margins, the number grows significantly.
So, Medicare for All?
Sanders suggested that Medicare for All would "end" the $100 billion per year profits reaped by the health care industry.
The proposal would certainly give Washington the power to do that.
"If you had Medicare for All, you have a single payer that would be paying lower prices," Meara said.
That means lower prices and profits for pharmaceuticals, lower margins for insurers and lower prices for hospitals and health systems.
That could bring tradeoffs: for instance, fewer people choosing to practice medicine. But, Meara noted, the number supports Sanders’ larger thesis. "There’s room to pay less."
Other health reform plans — including letting Medicare negotiate drug prices, or a government-sponsored public option, such as the plan backed by former Vice President Joe Biden and former South Bend, Indiana, Mayor Pete Buttigieg — could also have this effect.
But, Berenson noted, having only one insurer, and having it be publicly funded, would likely have a greater impact.
"I could whack pharmaceutical companies, and I don’t need Medicare for All to do it, but I do need Medicare prices for All to deal with what the real profits are — whether you call them profits or not — which is hospitals."
Sanders said Medicare for All would "end the $100 billion a year that the health care industry makes."
The math holds up. If anything, it’s an underestimate because it doesn’t include one of the largest sources of health care profits: hospitals, health systems and physicians. We rate it True.
CNN / Des Moines Register Debate, Jan. 14, 2020.
Email interview with Gerard Anderson, professor of health policy at Johns Hopkins University, Jan. 6, 2020.
Telephone interview with Bernie 2020, Dec. 20, 2019.
Telephone interview with Ellen Meara, professor of health economics at the Harvard T.H. Chan School of Public Health, Jan. 13, 2020.
Telephone interview with Robert Berenson, fellow at the Urban Institute, Jan. 8, 2020.
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