A Financial Modeling Project for Single Payer Healthcare in the US

Back in January 2016, when the Democratic primary was in full gear, Kenneth Thorpe, health care policy professor from Emory University, published a devastating claim.

He suggested that US presidential candidate Bernie Sanders’s estimate for his proposed single payer health care plan was wildly off, and that it would cost almost a trillion more in spending per year than initially estimated. By implication, implementing single payer in the US would be a fiscal and possibly even economic catastrophe.

As a concerned citizen following the election closely, I was curious about such a claim, which went against the intuition of just about any other experiment with universal health care in the developed world. Unfortunately, Mr. Thorpe did not present any actual documentation of how reached those numbers, and when I emailed him as well as Dylan Matthews, the original writer of the article I read, I did not receive any response.

So I set out to do it myself, hoping to finish before the Iowa caucus. And the results were interesting! The project took about 40 hours total.

First, I gathered a wide variety of data from sources such as the Congressional Budget Office and insights from professionals who had studied the health care industry for years, even decades. I provide citations for all of my initial estimates, and mark assumptions (such as growth rates) in blue.

Next, I used very conservative projections to try and replicate Mr. Thorpe’s results (the business as usual case).

Then, I decided to make a more optimistic approach. I aggressively attacked big pharma’s margins. Same with hospitals. And loosened assumptions on growth rates.

I ended up coming with a valuation at least in the ballpark of the estimate from the Sanders campaign.

Finally, I added sensitivity analysis through What-If modeling, hoping to find out how the deficit would change as two critical assumptions changed.

There were even some scenarios where my projections were less expensive than the estimate of the Sanders campaign!

This was a useful intellectual exercise that I did not want to initially publish in the interests of being politically sensitive. Now that we have someone in power who shows all the red flags of fascism and is already restricting free movement with the 30-day suspension of visas of seven Muslim-majority countries (minus Saudi Arabia, which I would agree with restricting), the gloves are off.

So hope you found this as intellectually stimulating and informative as I had! And if you want to make comments, revisions, or critiques, I am open to it.

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