Neil Herman

Former Institutional Investor top ranked technology analyst who worked at Lehman, Salomon, Citigroup, etc. still acutely focused on equities

[Neil Herman @breakopinions]

The Math Doesn't Work: Why Medicare for All Is a Disaster Waiting to Happen -- by Neil Herman

The ideological appeal of a single-payer healthcare system is undeniable: a sweeping promise of universal coverage, free at the point of service, and guaranteed by the federal government. However, as noted in the file named "medicare for all", the utopian rhetoric of a single-payer system masks a grim economic and practical reality. When subjected to basic arithmetic, international evidence, and an honest assessment of healthcare economics, it becomes clear that nationalizing the U.S. healthcare system is not a silver bullet. From exploding budget deficits and the collapse of provider networks to the stifling of medical innovation, the stripping of patient recourse, and the documented failures of every nation that has attempted full nationalization, Medicare for All is a fiscal and structural disaster waiting to happen. Most alarmingly, the resulting system bottleneck will inevitably trigger devastatingly long waiting times, leading to a profound loss of life—particularly due to delayed cancer diagnoses and treatments. Compounding this tragedy is the stark unfairness of the system it creates: while everyday citizens languish on fatal waiting lists, government officials, their families, and their political connections will undoubtedly use their influence to jump to the front of the line and secure immediate, top-tier care.

The Insolvency of the Status QuoBefore proposing a sweeping, nationalized expansion of the American healthcare system, it is vital to confront the stark mathematical reality of the program as it exists today. The average American works their entire adult life, paying a 2.9% Medicare payroll tax for 40-plus years, simply to fund a relatively short window of healthcare utilization during retirement. Yet even with decades of continuous tax contributions designed to cover only a fraction of a citizen's lifespan, the math fundamentally fails.
Crucially, that payroll tax only funds Medicare Part A (hospital insurance), a trust fund that the program's own Board of Trustees consistently projects will exhaust its reserves and hit insolvency by the mid-2030s. The 2024 Medicare Trustees Report confirms that the Hospital Insurance Trust Fund will be unable to pay full scheduled benefits within roughly a decade absent legislative intervention. Furthermore, Medicare Part B (outpatient medical insurance) and Part D (prescription drugs) are not funded by this payroll tax at all; they are instead heavily subsidized by massive, compounding transfers from general federal revenues. In fiscal year 2023 alone, general revenue subsidies accounted for approximately 74% of Part B funding and 73% of Part D funding—meaning these components were already operating as welfare programs disguised as insurance.

If a system cannot sustain itself when workers pay in for four decades to cover roughly 15 years of care—and must continuously drain the general fund to stay afloat—expanding that same system to cover every citizen from cradle to grave is not merely ambitious; it is a mathematical impossibility. The arithmetic of insolvency does not improve with scale. It compounds.

The Budgetary Black HoleThe cost of nationalizing the U.S. healthcare system would trigger unprecedented fiscal shockwaves. Currently, Medicare accounts for roughly 15 percent of all federal spending when excluding net interest payments. Under a Medicare for All framework, healthcare spending would explode to consume roughly half of the entire non-interest federal budget.

Estimates from nonpartisan and center-left economic models consistently project staggering price tags. The Mercatus Center estimates approximately $32.6 trillion in new federal spending over ten years, while the Urban Institute projects $34 trillion. Even the most optimistic projections from the Political Economy Research Institute (PERI) at UMass Amherst—often cited by single-payer advocates—still project roughly $30 trillion over a decade, while relying on assumptions about administrative savings and utilization reductions that independent economists have widely criticized as implausible.
To put this into perspective, total federal budgetary spending (excluding the costs of servicing the national debt) currently runs between $6 trillion and $7 trillion annually. Medicare for All would essentially force a 50 percent increase in the entire federal budget overnight. The entire current federal tax revenue base—individual income taxes, corporate taxes, payroll taxes, excise taxes, tariffs, and every other source combined—generates approximately $4.4 to $4.9 trillion per year. A single new program consuming $3 to $3.5 trillion annually would require a near-doubling of the federal government's fiscal footprint.

Funding a multi-trillion-dollar annual shortfall of this magnitude would require devastating tax hikes not merely on the wealthy, but squarely on the middle class. Proposals from single-payer advocates routinely include new payroll taxes of 4 to 8 percent on all workers, broad-based income tax surcharges, and the elimination of the employer-sponsored insurance tax exclusion—which would effectively function as a massive middle-class tax increase by pulling employer health benefits into taxable income.

If financed through debt instead, the impact on the broader economy would be catastrophic. Pumping tens of trillions of additional dollars into the deficit would trigger severe inflationary pressures, forcing the Federal Reserve to dramatically hike interest rates to attract buyers for U.S. Treasury bonds. These soaring interest rates would choke off access to capital for businesses, stall economic growth, depress housing markets, and lead to widespread, devastating job losses across the private sector. The Congressional Budget Office has repeatedly warned that sustained deficit spending at these magnitudes would crowd out private investment and reduce long-term GDP growth, meaning the economy would shrink precisely as the government's obligations grew.

The Collapse of the Care NetworkA central mechanism by which a single-payer system attempts to control costs is through drastic reductions in reimbursement rates to healthcare providers. Currently, Medicare reimburses hospitals at approximately 84% of the cost of providing care for inpatient services and roughly 88% for outpatient services. For physicians, Medicare rates average roughly 70 to 80 cents on the dollar compared to private insurance reimbursement, and for many procedures, the gap is far wider.

Hospitals and clinics survive by relying on the higher margins provided by private insurance reimbursements—often 140 to 250 percent of Medicare rates—to subsidize these Medicare and Medicaid losses. This cross-subsidization is not a flaw; it is the structural load-bearing wall of the entire American hospital finance system. Remove it, and the building collapses.

If private insurance is outlawed and all patients are shifted to Medicare rates, the financial lifeblood of the medical system vanishes. The American Hospital Association has estimated that if all payers reimbursed at current Medicare rates, more than 60 percent of hospitals would operate at a loss. Rural hospitals, which already operate on razor-thin or negative margins, would face immediate closure. Safety-net hospitals in urban centers, which disproportionately serve vulnerable populations, would be next. The result would not be a modest contraction; it would be an epidemic of bankruptcies, facility closures, and the permanent destruction of healthcare infrastructure that took generations to build.
The medical professionals who remain will operate in an impossible environment. Doctors and nurses will find themselves working longer hours for drastically reduced pay while trying to service hundreds of thousands of dollars in medical school debt. Slash clinical earnings by 30 to 50 percent through Medicare-rate-only reimbursement, and the pipeline of new physicians collapses. The inevitable result is an exodus of talent: experienced doctors will retire early, mid-career physicians will leave clinical practice for consulting or industry, and fewer students will enter medicine at all.

The Death of Medical InnovationBeyond the immediate collapse of the care network, a single-payer system would severely stifle the development of new, life-saving treatments. The United States produces roughly twice as many new pharmaceutical compounds as all of Europe combined and accounts for the majority of global biomedical research output. This is not an accident. It is the direct result of a market structure that permits the recoupment of immense research and development costs.

Bringing a single new drug to market typically takes 10 to 15 years and requires $2 to $3 billion in high-risk investment. Under a government monopoly, federal price controls would be aggressively enforced on pharmaceuticals and medical devices to help curb the system's exploding deficits. Economic modeling by researchers at the University of Chicago suggests that eliminating the U.S. premium-pricing environment could reduce global pharmaceutical R&D spending by 40 to 60 percent over two decades, resulting in hundreds of fewer new life-saving drugs being approved.

The victims would not be abstract. They would be patients suffering from rare diseases, advanced cancers, Alzheimer's, ALS, and treatment-resistant infections. The pipeline for breakthrough cures would dry up, leaving them reliant on stagnant therapies.

Zero Cost, Endless Lines, and Two-Tiered AccessBasic economics dictates that when the out-of-pocket cost of a highly desired service drops to zero, demand skyrockets. The elimination of premiums, copays, and deductibles would trigger a massive, immediate surge in system usage. However, because the supply of healthcare—facilities, equipment, and medical professionals—would be rapidly contracting due to slashed reimbursement rates and provider burnout, the system would immediately bottleneck.
This severe supply-and-demand mismatch leads to the universal hallmark of government-monopolized healthcare: rationing by waiting. This is the documented reality of every major single-payer system in the developed world. In Canada, median wait times from referral to specialist treatment routinely exceed six months. In the United Kingdom, the National Health Service (NHS) consistently reports millions of patients on elective waiting lists, with target timelines for cancer treatments repeatedly missed.

In an overwhelmed system, these immense waiting times are not mere inconveniences; they are fatal. The loss of life will be profoundly devastating, particularly due to delayed cancer diagnoses and treatments. Treatable, early-stage tumors will become terminal during months-long delays for MRI approvals, biopsies, and specialist consultations. Everyday people will die while languishing on waiting lists for critical, life-saving treatments.

Of course, this rationing would not apply to everyone. While the general public suffers through fatal wait times, the democratic socialist senators and congressmen championing this system—along with government officials, their families, and their political connections—would undoubtedly use their positions of power to bypass the bureaucracy. Thanks to their status, wealth, and influence, they would be able to jump to the front of the line and receive the absolute best medical care without delay, cementing a hypocritical, two-tiered system of healthcare haves and have-nots. The politicians who vote to dismantle private insurance will never stand in the queue they have created for everyone else.

The Bureaucratic Wall and Loss of Patient RecourseAdvocates for a nationalized system frequently criticize private health insurance bureaucracies, yet moving to a single-payer model simply trades a private bureaucracy for an impenetrable, unaccountable federal one—and removes every mechanism by which a citizen can push back.
In a system desperate to control exploding costs, patients will inevitably face a faceless government bureaucrat denying approvals for cutting-edge drugs or advanced imaging. Crucially, under the current system, patients have leverage. If a private insurer wrongly denies a claim or breaches a contract, a patient can hire an attorney, file a complaint with a state insurance commissioner, sue the company, and hold them legally and financially accountable.

Suing the federal government is an entirely different matter. Thanks to sovereign immunity doctrines, patients have virtually no legal recourse if a government agency decides their necessary treatment does not meet the bureaucratic threshold for cost-effectiveness. Taking away private insurance strips citizens of their ability to fight back, leaving their lives and healthcare decisions entirely in the hands of the state. The patient becomes a supplicant, not a consumer.

The International Evidence: A Pattern, Not an ExceptionEvery nation with a government-dominated healthcare system struggles with the same triad of problems: chronic underfunding relative to demand, growing wait times, and the quiet re-emergence of private alternatives for those who can afford them. The UK's NHS has seen private health insurance enrollment rise steadily as patients seek to escape waiting lists. Canada's system is experiencing a quiet crisis of physician shortages and emergency room closures.

Moreover, the favorable per-capita spending figures in these countries are achieved in large part by paying healthcare workers significantly less, building fewer hospitals, purchasing less advanced equipment, and rationing access. The United States leads the world in survival rates for many major cancers, heart attacks, and strokes because of its well-funded, competitive, innovation-rich system. Dismantling that system in the name of equity would sacrifice the very outcomes that make American medicine the envy of the world.

The Demographic Time BombEven if one could set aside the staggering cost estimates, the demographic trajectory of the United States makes a single-payer system progressively more unaffordable. By 2034, adults aged 65 and older will outnumber children under 18 for the first time in American history. The ratio of workers paying payroll taxes to retirees drawing benefits is collapsing.
Medicare for All would extend this inverted dependency ratio to the entire population. Every working taxpayer would be supporting the healthcare consumption of every non-working citizen through a single tax-and-spend pipeline. As the population ages and chronic disease prevalence rises, the fiscal burden on the shrinking working-age population would become crushing. No tax base can sustain an entitlement system whose beneficiary-to-contributor ratio deteriorates year after year.

The Transition Chaos: Disrupting 150 Million LivesApproximately 150 to 160 million Americans currently receive health insurance through their employers. Under most Medicare for All proposals, employer-sponsored insurance would be eliminated entirely. Tens of millions of Americans would be shifted from familiar plans with known provider networks to a brand-new federal bureaucracy in a compressed timeframe. During the transition, patients would face coverage gaps, provider network disruptions, and mass confusion. The political and human cost of a botched transition could be devastating, and unlike a private market correction, there would be no alternative system to fall back on.

The Political Ratchet: No Way BackPerhaps the most insidious risk of Medicare for All is its irreversibility. Once a government monopoly over healthcare is established, dismantling it becomes politically impossible. The private insurance industry, the provider billing infrastructure, and the employer-based coverage systems that took a century to develop would be destroyed.

If the single-payer system underperforms, there is no market mechanism to correct course. Moreover, healthcare would become permanently subject to the political cycle. Funding levels, reimbursement rates, and drug approvals would be determined not by medical evidence, but by whichever party controls Congress. The politicization of medicine would be total and permanent.
The VA System: A Cautionary Tale Already in Our MidstThe United States already operates a government-run, single-payer healthcare system: the Department of Veterans Affairs. The VA has been plagued by chronic scandals involving hidden waiting lists, preventable deaths due to delayed care, and bureaucratic indifference. Medicare for All would essentially scale the VA model to cover 330 million people instead of 9 million. If the federal government cannot reliably deliver timely, high-quality care to a relatively small population of veterans with dedicated funding streams, the notion that it can efficiently manage the healthcare of the entire nation strains credulity.

The Elimination of Consumer Choice and Market DisciplineA functioning healthcare market provides a mechanism for quality improvement that no government bureaucracy can replicate: consumer choice and competition. Medicare for All eliminates these mechanisms. There is no competing insurer to switch to if the government plan denies a treatment. The physician's primary accountability shifts from the patient to the payer—and when the payer is the state, medicine becomes an instrument of policy rather than a service to the individual.

The Opportunity Cost: What Else Could That Money Do?The opportunity cost of spending $32 to $34 trillion on a single government program over a decade is staggering. Those trillions could fund universal catastrophic coverage, massive investments in primary care, medical school scholarships to eliminate physician debt, direct price transparency mandates, and tort reform. Instead, Medicare for All proposes to funnel all of those resources into a single, monolithic bureaucracy.
Conclusion: A False Promise Built on Impossible MathMedicare for All attempts to solve the genuine challenges of the American healthcare system by imposing a monolithic government monopoly that the country simply cannot afford, cannot staff, cannot manage, and cannot reverse. Expanding a fundamentally insolvent framework to cover over 330 million people will not guarantee healthcare; it will guarantee crushing taxation, the bankruptcy of essential hospitals, fatal wait times for the working class, the end of world-leading medical innovation, and the permanent politicization of every medical decision.

By trading legal recourse for unaccountable bureaucracy, consumer choice for central planning, and market discipline for political rationing, patients would be left entirely powerless over their own well-being. True healthcare reform requires sustainable math, patient empowerment, provider solvency, and the preservation of the innovation ecosystem that makes American medicine the most advanced in the world. None of these can be found in a system structurally designed to fail.

by Neil Herman

[Neil Herman @breakopinions]

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[Neil Herman @breakopinions]

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[Neil Herman @breakopinions]

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[Neil Herman @breakopinions]

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[Neil Herman @breakopinions]

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[Jeremy Slevin @jeremyslevin]

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[Neil Herman @breakopinions]

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[Neil Herman @breakopinions]

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[Neil Herman @breakopinions]

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