A rallying call for many in the progressive left, Medicare For All was effectively introduced and championed by Senators Bernie Sanders in the 2016 and 2020 Democratic Party Presidential Primaries. Advocates, of which there are many, claim that Medicare For All would bring the United States in line with the rest of the world, promising cheaper, better quality care which extends to all of the nation’s citizens, not just those who can afford insurance.
As a proponent of universal access to health coverage, Medicare For All has at times been on my mind, considered and contrasted with competing plans for achieving universal coverage. I’ve down a great amount of research over the last two years on both Senator Sanders and Vice President Biden’s health plans, as well the existing hybrid public-private insurance system.
I think to get started on whether or not a singleplayer system in the U.S. is worthwhile, we have to have an idea of the system that’s been put in place, as well as the issues prompting calls for reform. The United States has a hybrid healthcare system where the majority of hospitals and other providers are privately owned and operated, but where nearly half the population is enrolled in some sort of public insurance plan. These plans include Medicaid, Medicare, the Indian Health Service, Children’s Health Insurance Program, and the Veterans Health Administration.
Medicare and Medicaid were introduced by the Social Security Amendments of 1965, with Medicare, a Federal insurer providing subsidized insurance to the elderly, and Medicaid, a collection of Federally-funded state insurers providing zero cost insurance to the indigent. The Veterans Health Administration and Indian Health Service both slowly evolved into being through the 19th and 20th centuries to provide insurance to veterans and American Indians respectively. The Children’s Health Insurance Program began in the late 90’s, and similar to Medicaid, provides cost free coverage to children of low income families.
In 2010 the Patient Protection and Affordable Care Act was signed in law, the most comprehensive and consequential healthcare regulatory overhaul in the history of the United States. Among some of the most striking changes were the implementation of the following regulations:
- Mandatory out-of-pocket maximum, capping out-of-pocket expenses each year, not to exceed a level determined annually by the Dept. of HHS based on average per enrollee premiums (e.g. $6,350 in 2014, $8,150 in 2020)
- Prohibition against denying coverage on the basis of pre-existing conditions
- Permitting premiums to vary only by enrollee age and location
- Minimum coverage of ‘essential health benefits’
- Prohibition against annual and lifetime benefit limits
In addition to these new regulations, the ACA created a pair of new subsidies, a temporary reinsurance program for insurers, and allowed states to expand coverage of Medicaid. The subsidies include the Premium Tax Credit, which directly subsidies premiums for lower and middle income households not eligible for other coverage, and the cost-sharing reduction, which reimburses insurers for mandatory cost-sharing reductions (reductions in deductibles and copays) for low-income ACA enrollees.
Altogether, in the present system, few Americans lack coverage, however, progressives like myself believe that not a single person should be without comprehensive coverage. There are still nearly 30 million Americans without coverage, and tens of millions for whom adequate insurance is hardly affordable. It has been projected that the share of the population which is uninsured could rise over the decades as the costs of healthcare continue to outstrip income growth for ordinary Americans.
According to a poll conducted by the Kaiser Family Foundation in February 2019, one in four taking prescription drugs find it difficult to afford their medicines, meanwhile Gallup found that tens of millions of Americans knew someone who lost their life unable to afford necessary treatment, including nearly a fifth of Americans with annual household incomes below $40,000.
In addition, American healthcare is especially costly, which is particularly bad considering American patients have worse outcomes and shorter life spans. In 2019 the U.S. spent roughly $11,600 per person on health care, or 17.7 percent of national output. This compares to the 7 percent of GDP spent by the British NHS in 2019, or the less than 5 percent spent by Australia’s Medicare. The U.S. Federal and State governments collectively spend a similar amount, in many cases more than foreign countries with similar levels of development, but which have comprehensive national insurance.
In addition to this fact, the U.S. has seen hemorrhaging healthcare inflation unlike any other nation. While this might be reasonable or even desired in some sense, it doesn’t make any sense when the quality and effectiveness of American healthcare delivers either marginally better, or in some cases worse than peer nation health systems.
It has been (and in fact I have) previously argued that a single-payer health system in the United States would cost too much or require extraordinary tax hikes, but this is really not the case. Let’s begin with the cost of the program. In 2019, state and federal government spent $1.3 trillion on Medicare and Medicaid, or about 5.9 percent of GDP, a third of all national healthcare spending. With aggressively sought administrative and price savings (sources: here, here, and here), the cost of healthcare could fall gradually by a quarter, perhaps below 13 percent of national output after a few years of cost control, enough to counteract modestly increased utilization rates.
For the sake of cost control, this Medicare could retain some very limited cost-sharing features such as a $200 deductible and $1,000 out-of-pocket maximum, phased-out or eliminated for lower and lower-middle income families. Using CMS actuarial value tool, I estimated the value of such a policy with the ACA’s essential health benefits at about 90 percent of total benefits, reducing the cost of Medicare closer to 12 percent of GDP, or about 10 percent for the Federal Government.
If we shift to the revenue side, were there to be such a system implemented, it would immediately save employers around $1 trillion in employee benefits expenses, taxed either as corporate profits, income to shareholders, or increased wages to employees. Likely this would lead to a ~20% revenue feedback, so $0.2 trillion give or take. Taken together we have a revenue shortfall of 4 percent of GDP, eventually falling to 2 percent.
However large relative to existing federal receipts, there are sound options for meeting the shortfall. One option would be to simply raise income taxes, perhaps with an income surtax of 5 percent levied on income in excess of $30,000, or $15,000 for single-filers. Such a tax would raise approximately half of the first-year shortfall, but nearly the entire 2030 shortfall assuming a reduction in federal health outlays from 10 to 9 percent of GDP.
Alternatively the revenue could come from a new value-added tax, a type of broad-base consumption tax. Using the Tax Policy Center’s estimated VAT tax base of 62 percent of GDP from their analysis of Ted Cruz’s 2016 tax plan, the first-year shortfall could be bridged with what is essentially a national sales tax of 8 percent.
If we’re really bold, we may consider covering some or all of the shortfall with taxes on the wealthy, perhaps through a combination of a new wealth tax, assorted high income tax increases, and the implementation of some of the measures I’ve proposed or written about on this site such as dividend integration and retrospective capital gains taxation.
If through a progressive funding scheme utilizing capital income taxes there is an inflation issue, we can always throw in a VAT or broad income tax hikes to tame household consumption. It is likely that the reduction in health spending alone would offset the net transfer of savings to consumption brought on by the progressive financing of singleplayer insurance, and further it is likely that the government would want to offset decreases in aggregate wages and thus spending resulting from the laying off of administrative and insurance workers, not to mention provide those workers a fair transition to new employment.
At the end of the day there are really no good arguments for retaining a private multiplayer insurance system. Medicare For All does not advocate socialized medicine, state run hospitals, or healthcare rationing. What it advocates is an administratively simple scheme of health insurance which covers the entire population for all of its essential health needs, including vision, dental, and long-term care.
The majority of Americans today support some form of universal health care, and progressives have long thought of healthcare as a basic economic right in a country as wealthy and productive as ours. Hopefully sooner than later, progressives will make good on the century-old promise of universal healthcare.