HOW TO FUND MEDICARE FOR ALL
Funding Medicare For All (M4A) has always been a political challenge, rather than a mathematical/accounting challenge. Here's a blue print of how to pay for it. Some approximations have been made to evolve an descriptive picture of where the money is. Let me try to lead you through the process with sources. Its not as complicated as one might think.
- Our current healthcare system costs ~3.6 Trillion $ per year or 18% of GDP (100%)
2)
~50% of that spending is public money and comes from your tax dollars already (Fed govt spends close to $1.2 Trillion $ per year (Refer to CMS 2018 Fact Sheet 'Table 05 National Health Expenditures by Type of Sponsor/Federal, excluding VA Healthcare which costs ~70 Billion $ a year). This includes Medicare, Medicaid, CHIP
+ $250 Billion $ tax breaks for healthcare premiums . Your state governments and their taxes fund
~$600 Billion per year ( Refer to CMS 2018 Fact Sheet 'Table 05 National Health Expenditures by Type of Sponsor/State and Local Govt), mostly for Medicaid, Govt Employees healthcare and other programs.
How much does the federal government spend on health care?
So, this is the critical part. For any M4A plan, we need to start at 50%, not 0%.
3)
Employers/Private entities currently pay ~615 Billion $ per year (Refer to CMS 2018 Fact Sheet 'Table 05-1 Private Business Sponsor Expenditures' and subtract the 113 Billion $ in payroll taxes they already pay) towards employee premiums and other healthcare expenditures.
An employer side payroll tax (~8.5%) to divert most of that money to the Fed would contribute to ~17% of the money needed.
4) The US private healthcare system has lots of administrative waste. Moving to a single payer system is estimated to save
600 Billion $ a year(16% of cost) on administrative waste. So, we need to raise revenue for 84% of current cost.
A new study reveals the US could save $600 billion in administrative costs by switching to a single-payer, Medicare For All system
Health Care Administrative Costs in the United States and Canada, 2017 | Annals of Internal Medicine | American College of Physicians
5) The US health care system and the private market rips and then robs us in broad daylight on prices. A single payer system can negotiate prices for drugs and medical procedures, hospital and physician rates. This is expected to save
$250 Billion a year (lower estimate, we spend 17% of GDP, other OECD countries spend ~10% of GDP on healthcare) on procedural prices and drugs (The VA already negotiates drug prices). So, that adds up to savings of another ~ 7% savings of the current costs of the system.
Waste in the US Health Care System
https://annals.org/data/Journals/AI...on_Drug_Savings_Under_Single-Payer_Refor.jpeg
https://www.healthaffairs.org/do/10.1377/hpb20171008.000174/full/
***** So, 2 and 3 got us to 67% revenue of the money needed, and savings on 4 and 5 reduced the cost to 77% of the current system cost. So, we need to cover the
delta 10% in new taxes to fund M4A (~$360 Billion a year). **** (If you manage to cut military budget to 2% of GDP, as required by a NATO country, none of these extra taxes are needed)
6) Bernie has proposed the a portfolio of multiple taxes to cover that deficit, most which are carefully crafted to not impact the middle class and working poor, like Wealth Tax, increase in estate tax, a 4% tax on all employees while getting rid of all their premiums, co-pays and deductibles, taxing capital gains equal to wages etc.
https://www.sanders.senate.gov/download/options-to-finance-medicare-for-all?inline=file
7) Additionally, other academic groups have come up with slightly different portfolio of taxes to raise this revenue. One interesting tax proposed by PERI is a 3.75% fed sales tax on non-essential goods, which in itself is estimated to raise ~196 Billion $ a year (Page 14 of the PDF).
PERI - Economic Analysis of Medicare for All
- When you expand coverage to everyone, the utilization is estimated to go up by a 10 %, which can still be covered by a combination portfolio of taxes suggested in 6 or 7 and other non-single payer related structural reform to curb waste.
Annual Waste in U.S. Healthcare System Nears $1 Trillion
- Bernie is proposing a 200$ deductible per year on drugs. That will raise some money to pay for some aspects the system.
Remember, the cost savings of single payer were underestimated. If we squeeze the knife deeper into hospitals, drug companies and other private players, we could get even more savings. So, saying M4A could never be funded is purely delusional. As I said before, its more of a political challenge than a financial one
P.S: All our blood, sweat and tears which constitute out of pocket costs(deductibles, co-pays and other rubbish) that we pay to private insurance racketeers adds to
375 Billion $ a year (Refer to CMS 2018 Fact Sheet 'Table 05-2 Household Sponsor Expenditures/Out-of-Pocket Health Spending'). In a single payer system, savings from 4 should nearly wipe out these entirely.
BENEFITS OF MEDICARE FOR ALL
WHY DOES IT WORK
Below are the underlying structural mechanisms that make Single Payer work and save money:
The current system is fractured into multiple insurance pools(the old into Medicare, the poor into Medicaid and each insurance company has its own pools). Single-Payer M4A tries to create a single insurance pool across the whole country. This has the following advantages:
A)
Purchasing power: With fractured insurance pools, the purchasing power is also split. The providers(hospitals, doctors, labs etc) take advantage of this fractured purchasing power and jack up prices as they want. Large insurance pools(like Medicare, Medicaid) set prices, but not insurance companies. M4A by getting rid of private insurers, and combining all existing govt programs(except VA) into one govt national insurance plan, forms a single pool, thus forming a
monopsony. With all the purchasing power concentrated in the govt insurance pool, all the prices with the providers can be set and costs reigned in.
2)
Risk Management: This is self-explanatory. Insurance is all about risk management amongst a pool of users. The bigger the pool, the better risk is managed. M4A creates the biggest pool possible, that is the whole country.
3)
Administration: The insurance companies sell thousands of plans, each with their own parameters.The insurance companies are incentivized to deny claims to make profits, while the providers and patients fight for the claims to be paid. This war within the system creates armies of superfluous private bureaucracies on the insurance side and providers side. M4A with a single public plan removes the need for these bureaucracies, thus saving tons of money.
