Bernie finally explains how he plans to pay for Medicare for All. Let's take a look!

For years now, I (along with many others) have criticized Bernie Sanders for the big blank section of his "pure" Medicare for All single payer healthcare proposal. He's kind of, sort of given some ideas about how he proposes paying for it in the past, but yesterday he finally released an updated, revised list of additional taxes, loophole cuts and so forth which he claims would cover the total cost.

Since I've given him so much grief before, and since I did a detailed write-up about Elizabeth Warren's proposal last fall, I owe him some coverage of his new pay-for proposal as well. Let's take a look:

According to a February 15, 2020 study by epidemiologists at Yale University, the Medicare for All bill that Bernie wrote would save over $450 billion in health care costs and prevent 68,000 unnecessary deaths – each and every year.

What our current system costs over the next decade: Over the next ten years, national health expenditures are projected to total approximately $52 trillion if we keep our current dysfunctional system.

How much we will save: According to the Yale study and others, Medicare for All will save approximately $5 trillion over that same time period.

  • $52 trillion - $5 trillion = $47 trillion total

How we pay for it: Current federal, state and local government spending over the next ten years is projected to total about $30 trillion.

  • The revenue options Bernie has proposed total $17.5 Trillion
  • $30 trillion + $17.5 trillion = $47.5 Trillion total

Sources: CMS, The Lancet

Hmmm...the National Health Expenditure projection he links to from CMS only runs through 2027, while "the next ten years" would run from 2021 - 2030, so I'm not sure that the $30 trillion is quite accurate, but I'll give him the benefit of the doubt. My own extrapolation of the NHE projection in my analysis of the Mercatus Center analysis a couple of years back put it at $26.5 trillion from 2021 - 2030...but there may have been some updates by NHE since then.

This brand-new Lancet analysis is quite different from most of the other "pure" M4All cost projections I've seen from other sources, such as the Urban Institute, the RAND Corp, the Mercatus Center, Kenneth Thorpe and Gerald Friedman, which have ranged from spending 25% less (Friedman) to 15% more than we'd collectively spend otherwise (Urban). It's worth noting that the Urban Institute is generally thought of as left-leaning if anything, while the Mercatus Center is a right-wing think tank, so there's no obvious ideological bias here. The Lancet analysis puts the overall national savings at around 13%.

I haven't read the Lancet analysis myself yet, but other experts have found some pretty big red flags already:

But other independent experts were skeptical of the Lancet study’s estimate — arguing it exaggerates potential savings, cherry-picks evidence and downplays some of the potential trade-offs.

...For instance, the researchers calculate $78.2 billion in savings from providing primary care to uninsured people — $70.4 billion from avoided hospitalizations and $7.8 from avoided emergency room visits. But previous evidence suggests that the logic is suspect at best.

When states expanded Medicaid under the Affordable Care Act, providing new insurance to people who had previously lacked coverage, avoidable hospitalizations and emergency room visits didn’t disappear because people could suddenly use preventive care, noted Ellen Meara, a professor at the Harvard T.H. Chan School of Public Health. That evidence doesn’t appear anywhere in the Lancet paper.

“The notion that we’re going to get rid of all these avoidable visits — that’s not been borne out,” she said.

The researchers also assume that a Medicare for All system would pay hospitals at a maximum of Medicare rates.

...on average, a hospital has a -9.9% margin on a patient insured through Medicare. ...But others would struggle to stay afloat, said Adrianna McIntyre, a health policy researcher at Harvard University.

Given the political influence hospitals, in particular, carry in Congress — where most members are sensitive to their concerns — passing a plan offering such a low payment rate would be politically challenging.

...the researchers also suggest hospitals would spend less money on overhead, having to navigate only a single insurance plan.

...But again, that ignores some of the reality of how hospitals work. While a single-payer system would undoubtedly cost less to administer — requiring a smaller back-end staff, for instance — it would not eliminate the need for expensive items like electronic health records, which coordinate care between hospitals.

“The assumptions are unrealistic,”... “You are never going to save that much money from the various providers.”

...Previous evidence suggests that such a shift would encourage consumers to use health care more than they currently do.

The Lancet paper acknowledges that — but only partially.

...But its estimate does not account for people who already have decent or adequate insurance and who would still be moving to a richer benefit, and therefore be more likely to use their insurance.

“It drastically underestimates the utilization increases we would expect to see under Medicare for All,” McIntyre said.

...Experts agree that expanding access to health insurance would probably reduce early mortality. But the 68,000 figure is another example of cherry-picking, Meara said.

The figure is based on a 2009 paper. It doesn’t acknowledge...multiple studies that examined how expanding Medicaid affected mortality.

“When they so clearly are cherry-picking, when they clearly have all the information on studies in front of them, it’s concerning,” Meara said. “It’s a situation where you’re going to overpromise and underdeliver.

In other words, while other studies have placed the 10-year additional federal spending cost of Bernie's plan at as high as $40 trillion, Bernie has decided to go with a brand-new analysis released just 11 days ago to conclude that he only has to come up with $17 trillion.

HAVING SAID THAT, here's how he proposes to come up with the $17 trillion in question:

  • Creating a 4 percent income-based premium paid by employees, exempting the first $29,000 in income for a family of four.
    In 2018, the typical working family paid an average of $6,015 in premiums to private health insurance companies. Under this option, a typical family of four earning $60,000, would pay a 4 percent income-based premium to fund Medicare for All on income above $29,000 – just $1,240 a year – saving that family $4,775 a year. Families of four making less than $29,000 a year would not pay this premium.
    (Revenue raised: About $4 trillion over 10 years.)

For comparison, under the ACA, a family of four living in Detroit, Michigan earning $100,000/year pays around 9.8% of their income in premiums for an individual market plan with an $8,300 average deductible, or between 10 - 18% of their total income. This would be replaced with a 2.84% effective "premium" (i.e., tax) for Bernie's plan, so obviously that'd be pretty good for them.

Of course, the employer-sponsored insurance market is a lot bigger than the individual market:

  • Imposing a 7.5 percent income-based premium paid by employers, exempting the first $1 million in payroll to protect small businesses.
    In 2018, employers paid an average of $14,561 in private health insurance premiums for a worker with a family of four. Under this option, employers would pay a 7.5 percent payroll tax to help finance Medicare for All – just $4,500 – a savings of more than $10,000 a year.
    (Revenue raised: Over $5.2 trillion over 10 years.)

Again, a lot of this would be replacing the ~70% average portion of premiums paid for by employers today with having them pay a 7.5% tax towards M4All instead. Assuming Bernie's math is correct here, the assumption is presumably that the $10,000/year saved by employers would instead go to the employees in the form of increased salaries, since their healthcare plans are supposed to be part of their compensation already...but of course there's no way to be sure of that.

This is a big part of why some unions are opposed to Medicare for All...if you have an extremely generous plan already, then many union workers would see their taxes increase to pay for something they feel they already have without necessarily seeing additional compensation to make up for it. Of course, not all union plans are that generous, and even the most generous ones don't cover 100% of everything the way Bernie's plan supposedly would, so opinions vary on that even within union households.

  • Eliminating health tax expenditures, which would no longer be needed under Medicare for All.
    (Revenue raised: About $3 trillion over 10 years.)
  • Raising the top marginal income tax rate to 52% on income over $10 million.
    (Revenue raised: About $700 billion over 10 years.)

In case you're wondering why wealthy people aren't fans of M4All...

  • Replacing the cap on the state and local tax deduction with an overall dollar cap of $50,000 for a married couple on all itemized deductions.
    (Revenue raised: About $400 billion over 10 years.)
  • Taxing capital gains at the same rates as income from wages and cracking down on gaming through derivatives, like-kind exchanges, and the zero tax rate on capital gains passed on through bequests.
    (Revenue raised: About $2.5 trillion over 10 years.)
  • Enacting the For the 99.8% Act, which returns the estate tax exemption to the 2009 level of $3.5 million, closes egregious loopholes, and increases rates progressively including by adding a top tax rate of 77% on estate values in excess of $1 billion.
    (Revenue raised: $336 billion over 10 years.)
  • Enacting corporate tax reform including restoring the top federal corporate income tax rate to 35 percent.
    (Revenue raised: $3 trillion ,of which $1 trillion would be used to help finance Medicare for All and $2 trillion would be used for the Green New Deal.)

In case you're wondering why corporations aren't exactly fans of M4All even though they'd supposedly be saving $10,000/year per employee...

  • Using $350 billion of the amount raised from the tax on extreme wealth to help finance Medicare for All care costs and prevent 68,000 unnecessary deaths – each and every year.

I'm not gonna go into too much detail on these proposals because I'm not an economist and I don't know how valid the assumptions are on most of these.

Anyway, Bernie's at least set his marker.

Of course, if it turns out that the low-end $17 trillion figure is way off and it ends up being closer to the high-end $40 trillion some other projections put it at, he'd be around $23 trillion short, but there you go: A trillion here, a trillion there, pretty soon you're talking about real money!