Is ‘Medicare for All’ plan too costly?

The debate over how to provide health care in the United States has roiled the political waters for years, reaching a boiling point in 2010, when President Barack Obama signed the Affordable Care Act into law.

The continued effort by Republicans to repeal and replace what has been termed “Obamacare” re-ignited the push by some Democrats for a single-payer health care system.

U.S. Sen. Tammy Baldwin, who faces re-election in November, is a co-sponsor of U.S. Sen. Bernie Sanders’ “Medicare for All” bill. Her opponent, Republican Leah Vukmir has strongly criticized that single-payer approach, saying it will drive up costs for taxpayers.

U.S. Sen. Ron Johnson, R-Wis., has made similar comments. During a Sept. 4. interview with WISN-AM (1130) radio host Vicki McKenna, Johnson responded to a question about Baldwin’s support for a single-payer health system by saying:

“You could double every American’s tax bill and it still wouldn’t pay for it. It sure sounds good: ‘Free health care for everybody.’ But it’s not free.” Is Johnson right about a doubled tax bill?

It’s a provocative claim, to be sure. But we decided to withhold, for now, a rating of Johnson’s statement because there is no formal cost estimate for Sanders’ bill, estimates by experts vary widely, the competing projections rely on different assumptions and there are other unknowns.

We do know this much:

1. The only point of agreement appears to be that a single-payer health care system would involve an enormous government cost. This is because it would bring the operations of a massive health care system together. According to the Centers for Medicare and Medicaid Services, U.S. health care spending grew 4.3 percent in 2016, reaching $3.3 trillion or $10,348 per person. As a share of the nation’s Gross Domestic Product, health spending accounted for 17.9 percent.

2. The effect on individuals would vary widely. It’s unlikely that everyone’s taxes would simply double. Any tax increase would vary from person to person, depending on what taxes are used and factors such as income and deductions.

Since a single-payer system has become a key issue in the race, here is some background and context for voters.

What is single-payer health care?

According to the group Physicians for a National Health Program, a single-payer national health insurance system is one in which a single public or quasipublic agency sets prices and pays for health care, but the delivery of care remains largely in private hands.

Under a single-payer system, all U.S. residents would be covered for medical services, such as doctor and hospital visits; preventive, long-term and behavioral health care, dental, vision and other care.

Backers say the plan would cut administrative costs, help slow the increase in health care spending, improve access and simplify the health care system. Opponents say it would be too costly, result in lower quality care and would amount to the government takeover of health care.

One key difference for consumers: It would mean private insurance companies would mostly be eliminated, so paycheck deductions and co-pays would disappear. That’s important in evaluating the impact on taxpayers.

The ‘Medicare for All’ plan

The plan, according to information outlined on the Sander’s website, would be paid for by:

❚ A 6.2 percent income-based health care “premium” (tax) paid by employers

❚ A 2.2 percent income-based “premium” (tax) paid by households

❚ Progressive income tax rates

Under this plan, the marginal income tax rate would be:

❚ 37 percent on income between $250,000 and $500,000.

❚ 43 percent on income between $500,000 and $2 million.

❚ 48 percent on income between $2 million and $10 million.

❚ 52 percent on income above $10 million.

The plan also references funding from taxing capital gains and dividends the same as income from work, limiting tax deductions for the rich and a “responsible” estate tax.

Winners and losers

A New York Times article, “How Medicare for All would affect you,” offered an analysis of the plan’s pros and cons. It noted:

❚ People insured through work would have new taxes, but no more premiums.

❚ People with Medicaid would have more choices, but possibly higher taxes.

❚ People currently with Medicare would have more generous coverage.

❚ The uninsured would all get health care.

❚ People who buy their own insurance would have new taxes, but less out-of-pocket spending.

❚ Doctors and hospitals would likely face pay cuts, but would no longer face unpaid bills.

❚ Drug companies would likely have less profits.

❚ Health insurance companies would mostly be eliminated.

Estimates vary

Patrick McIlheran, a communication and policy adviser for Johnson, said the senator was referring to a July 2018 report by Charles Blahous, senior research strategist at the Mercatus Center at George Mason University.

The center is described as a nonprofit free-marketoriented research, education and outreach think tank. Blahous’ expertise includes domestic economic policy, federal fiscal policy and health care programs.

According to Blahous’ report, Sanders’ “Medicare for All” bill “would under conservative estimates increase federal budget commitments by approximately $32.6 trillion during its first 10 years of full implementation (2022–2031), assuming enactment in 2018.”

In the report, Blahous wrote that “doubling all currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan. In a Wall Street Journal commentary, Blahous wrote.

“My projection generously assumes the plan would succeed in lowering prescription-drug costs and that administrative costs would somehow be less than half what they are among private insurers. Most important, it assumes Medicare for All would successfully cut all health-care provider payments down to Medicare’s reimbursement rates, which are more than 40% lower than private insurance rates — and even below providers’ costs of delivering services.”

Nevertheless, his report has faced a whirlwind of controversy.

Critics — including Baldwin’s staff — note the cost estimates are not official and have not been vetted by the Congressional Budget Office. They also question their impartiality, noting the Mercatus Center has links to the conservative Koch brothers.

(Koch Industries CEO Charles Koch is listed on the Mercatus Center website as a board member and the center receives funding from the brothers.)

Meanwhile, according to Sanders’ website, his “Medicare for All” proposal has been estimated to cost $1.38 trillion per year.

Other health policy experts have put the single-payer health plan price tag much higher, ranging from $2.4 trillion a year to $2.8 trillion a year.

What other experts say

Kenneth Thorpe, a health policy professor at Emory University in Atlanta, in an interview with CBS News, said the cost of a single-payer system would be “enormous.”

“It’s showing that if you are going to go in this direction, it’s going to cost the federal government $2.5 trillion to $3 trillion a year in terms of spending,” said Thorpe, a senior health policy adviser in the Clinton administration.

Jodi Liu, associate policy researcher at the RAND Corp., a nonprofit think tank, said “even if aggregate federal health care spending were to double, this does not mean that every American’s tax bill would double.”

Lydia Austin of the Urban-Brookings Tax Policy Center noted Congressional Budget Office projections show receipts of $44 trillion from 2019-’28, a 10-year period. By that measure, she said, “the federal government would need to less than double revenues to generate $32.6 trillion over the 10-year budget window.”