Medicare-for-all sounds great, but how do we pay for it?
In a normal country, the answer would be simple -- just raise taxes.
But in the United States, health care is so outlandishly expensive that the simple solution is anything but. Where Austria or Finland would be assured that a modest tax hike could (and did) cover everyone, America has to grapple with a bloated health-care sector eating up over 17 percent of GDP -- nearly 5 points (or about $1 trillion) greater than Switzerland, the second-most expensive country.
As Jon Walker argues, this reality forces Medicare-for-all advocates into one of two basic choices, neither of them easy:
1. Swallow the huge costs, shove through a really big tax hike, and hope that people will understand the taxes-for-premiums swap.
2. Try to cut costs, and keep the tax increase modest, but tempt the wrath of the medical lobby.
Some tax increases are certainly inevitable. But the second choice is by far the best, on grounds of both practical policy and politics.
Now for the final accounting.
If we start with that 5 point GDP gap (or $1 trillion) between the U.S. and Switzerland in annual health-care spending, drugs and administration cuts get us about 2 points (that $390 billion from above).
As I noted above, it's hard to say how much waste and fraud will cover with any certainty, but I would venture it would be about 2 points ($400 billion) at a minimum.
In my view, a national Medicare-for-all plan should make up the remaining difference in tax increases and actually aim for an overall spending goal of 1 point of GDP higher than Switzerland.
(This is an arbitrary choice, but it's trying to strike a balance between cutting a hard bargain and setting realistic goals. A bit more revenue will grease the policy skids.)
Government health-care spending through direct programs and tax expenditures already accounts for about $7,000 per person. Assuming that can all be captured and redirected, that leaves about $650 per person -- or $210 billion total -- in more revenue to bring us up to 13.3 percent of GDP.
The existing progressive 2.9-3.8 percent Medicare payroll tax brings in $260 billion, so another payroll tax of 2-3 percent ought to carry that easily.
Alternatively, we could add a new income tax surcharge, or some mechanism to force the rich to pay more. The point is that is a modest, easily achievable tax.
This new revenue might not be enough at first, requiring some initial borrowing, but any remaining budget gaps will be made up through the price cuts and audits outlined above.
Of course, we won't know for sure how much we can save until we start really trying, and all these estimates are very rough.
But it basically has to be the case that America can wring out enough waste and bloat to have merely "the world's most expensive health-care system by a small margin" instead of our current wild outlier status.
See next post ...