At the January Democratic debate, Vermont Sen. Bernie Sanders zeroed in on the question of profits in the health care industry.
Under 鈥淢edicare for All,鈥 he said, 鈥渨e end the $100 billion a year that the health care industry makes.鈥
It鈥檚 a huge number, and one that Sanders has cited before. So we decided to look closer.
The Math
The Sanders campaign shared its math, and it鈥檚 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 鈥 $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 important, $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鈥檛 include the biggest source of health care profits: hospitals and physicians.
鈥淵ou could ask the same questions of health systems and not-for-profit hospitals who are raising prices at a steady clip,鈥 said Ellen Meara, a professor of health economics at the Harvard T.H. Chan School of Public Health. 鈥淚f you鈥檙e going to go after industry, you need to go after the whole system and say prices are a problem everywhere.鈥
If anything, Berenson said, that makes Sanders鈥 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 鈥渆nd鈥 the $100 billion-per-year profits reaped by the health care industry.
The proposal would certainly give Washington the power to do that.
鈥淚f you had Medicare for All, you have a single payer that would be paying lower prices,鈥 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 trade-offs: for instance, fewer people choosing to practice medicine. But, Meara noted, the number supports Sanders鈥 larger thesis. 鈥淭here鈥檚 room to pay less.鈥
Other health reform plans 鈥 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 鈥 could also have this effect.
But, Berenson noted, having only one insurer, and having it be publicly funded, would likely have a greater impact.
鈥淚 could whack pharmaceutical companies, and I don鈥檛 need Medicare for All to do it, but I do need Medicare prices for all to deal with what the real profits are 鈥 whether you call them profits or not 鈥 which is hospitals.鈥
Our Ruling
Sanders said Medicare for All would 鈥渆nd the $100 billion a year that the health care industry makes.鈥
The math holds up. If anything, it鈥檚 an underestimate because it doesn鈥檛 include the largest sources of health care profits: hospitals, health systems and physicians. We rate it True.
