Families Will Save Money Under Medicare For All

Families Will Save Money Under Medicare for All

Laura Davison, Bloomberg author of “Tax Hikes on the Wealthy Alone Can’t Pay for ‘Medicare for All,’” misleads readers by cherry-picking one conservative study, focusing on the increase in federal taxes, and barely mentioning the even bigger decrease in spending on private health insurance and other out-of-pocket spending for most households. Additionally, she misrepresents Senator Sanders by implying that he will only raise taxes on the wealthy and actually goes on to contradict herself in her own article.

The question about whether Sanders’s tax financing proposal is sufficient to fund Medicare-for-All assumes that every dollar of new federal spending must be offset (“paid for”) with a dollar either through new taxes or spending cuts somewhere else in the budget. It assumes that any deficit spending is inherently bad and must be rejected. Modern Monetary Theory (MMT) challenges this notion.

QUICK FACTS

While federal spending would increase under Medicare-for-All, studies show that most households and employers will enjoy a savings. Learn More
The additional federal revenue for Medicare-for-All would come from a variety of progressive taxes. Learn More
It is important to understand how federal spending and taxes work in order to understand why the U.S. can afford Medicare-for-All. Learn More
The author relies heavily on three sources biased against Medicare-for-All. Learn More

LEARN MORE

Most households and employers will enjoy a savings.

While federal spending would increase under Medicare-for-All, studies show that most households and employers will enjoy a savings. This is continually overlooked or ignored by the media.

In three recent studies (Mercatus, UMass PERI, and Friedman), the increase in federal spending/taxes is more than offset by a decrease in health spending by households and employers (as well as state/local governments according to the Mercatus study). So, total health spending in the country goes down.
- The added spending by the federal government is simply a shift of money already being spent on healthcare in our current system; not new or additional money.
- Tax increases for workers and employers under a Medicare-for-All system would be more than offset by eliminating private insurance premiums, deductibles, co-payments, and other out-of-pocket costs.

Net savings for the country ranges from 3.5% to 24.6% depending on the study and the decade:
- $2.1 trillion or 3.5% (Mercatus for 2022-2031)
- $5.1 trillion or 11.9% (UMass PERI for 2017-2026)
- $11.5 trillion of 24.6% (Friedman for 2019-2028)

Davison does not directly cite a source in her Bloomberg article for the $30 trillion number, but instead links to another Bloomberg article from April 10, 2019, which cites the Mercatus study:
- According to the Mercatus study, federal taxes would need to be raised $32.6 trillion to fully fund Medicare-for-All from 2022 through 2031 (after applying $21.9 trillion in existing federal health spending/subsidies and $3.1 trillion spending for long-term care, which remains under state administration under Senator Sanders’ 2017 plan). See Table 2 on page 7.
- For an earlier decade (2019-2028), Mercatus estimated $27.7 trillion in additional federal taxes would be needed. See Table 3 on page 22

In her Bloomberg article, Davison cherry-picks one study that has high estimates for the additional federal spending under Medicare-for-All (the Koch-funded, libertarian Mercatus study). She completely ignores two other studies that came up with much lower estimates for the increase in federal spending (UMass PERI and Friedman).
- The UMass PERI study estimated the increase in federal spending would be far less than $30 trillion over a decade. Based on its one year analysis of sample year 2017, the increase in federal spending would be about $1 trillion annually. See Table S2 (P. 7) and S3 (P. 8) for one year (2017). When adjusting for healthcare inflation over a decade, the increase in federal spending under M4A would be about $13.5 trillion for 2017-2026. 1
- Similarly, a recent analysis by Gerald Friedman of UMass estimated the increase in federal spending will be $8.9 trillion to $14.2 trillion over the decade 2019-2028, depending on the level of savings actually achieved. 1 l 2 l 3

Davison focuses only on the increase in federal spending, but that only tells half the story. Even if people pay more in taxes, several studies show that the increase in taxes would be more than offset by a bigger decrease in spending on private insurance premiums, cost-sharing, and other out-of-pocket costs for most households.
- According to the May 2018, Milliman Medical Index, the cost of healthcare for the typical family of four with employer-based insurance is on average $28,166, with $15,788 paid by the employer and $12,378 paid by the employee in the form of premiums ($7,674) and out-of-pocket costs ($4,704). See P. 9.
- According to the analysis by Friedman, replacing such private expenditures with a 10.87% predictable payroll tax means the average middle-class family will see an increase in after-tax income of between 14% and 18%.

Medicare for All will be paid for by a variety of progressive taxes.

The additional federal revenue for Medicare-for-All would come from a variety of progressive taxes, not an equal flat amount from each person and not solely by taxing the wealthy.

No single-payer proposal has ever suggested that the distribution of taxes should be spread equally among all Americans.
- On the contrary, every proposal we could find has a “progressive tax” structure, which means the vast majority of the population would pay something into the system, albeit less than they pay now, with the wealthy paying more. For example, see the sample tax package below that accompanied Sanders’s Medicare for All Act of 2019.
- The claim that Medicare-for-All would require $10,000 more per person in taxes annually is based on an absurdly regressive tax scenario that nobody is proposing, as well as a rough average of the Mercatus ten-year estimate, rather than using Mercatus’s more precise numbers for 2019 (See Table 3 on P. 22):
  - $2,205 billion divided by 329 million people equals $6,702 per capita, not $10,000 per capita.
  - The author completely ignores other studies such as UMass PERI and Friedman, which calculate that a much lower additional federal revenue will be required to fund Medicare-for-All. For example, UMass PERI’s additional federal spending works out to $3,221 per capita for sample year 2017 ($1,050 billion divided by 326 million people).

This claim also conflates per capita spending with how much an individual household would actually pay in a progressive tax system.

The entire premise of the article, which is reflected in the headline (“Tax Hikes on the Wealthy Alone Can’t Pay for ‘Medicare for All’”) and the first ten paragraphs, inaccurately implies that Senator Sanders claimed he will only raise taxes on the wealthy. However, there is no evidence that he has ever claimed anything like that. It is not until paragraph 11 that the author actually quotes Senator Sanders as saying that everyone is going to pay more in taxes, not just the wealthy, and contradicts her own premise by doing so. In paragraph 11, she reluctantly admits that Senator Sanders was indeed honest when talking about the costs of Medicare-for-All and who would be paying for it:
- “‘You’re going to pay more in taxes,’ Sanders said at a CNN town hall last month. ‘But at the end of the day, the overwhelming majority of people are going to end up paying less for health care because they’re not paying premiums, co-payments, and deductibles.’”
- Sanders’s financing proposals from 2016, 2017, and 2019, have all included some income-based premiums (payroll taxes) on employees/employers or households.
- Sanders’s 2016 plan, 2017 bill and 2019 bill all offer a variety of different taxes that require some contribution from nearly all Americans, with the wealthy contributing a larger percent of their income in a progressive tax structure.
  - Not including tax expenditure savings from eliminating subsidies for private insurance (which most analyses include in existing government spending), Senator Sanders offered the following list of financing options with his S. 1129 Medicare for All Act of 2019. The first two items apply to most households and medium to large businesses, while the remaining taxes only apply to high incomes, the wealthy, or large corporations:
    1. Creating a 4% income-based premium paid by employees, and exempting the first $29,000 in income for a family of four.
    2. Imposing a 7.5% income-based premium paid by employers, and exempting the first $2 million in payroll to protect small businesses.
    3. Making the federal income tax more progressive, including a marginal tax rate of up to 70% on those making above $10 million, taxing earned and unearned income at the same rates, and limiting tax deductions for filers in the top tax bracket.
    4. Making the estate tax more progressive, including a 77% top rate on an inheritance above $1 billion.
    5. Establishing a tax on extreme wealth.
    6. Closing the Gingrich-Edwards loophole, which allows some wealthy business owners to avoid paying payroll taxes (for Social Security and Medicare) on a large part of their income.
    7. Imposing a fee on large financial institutions.
    8. Repealing corporate accounting gimmicks.

How we can “afford it” is complicated. But we CAN afford it!

It is important to understand how federal spending and taxes work in order to understand why the U.S. can afford Medicare-for-All. Modern Monetary Theory (MMT) challenges the entrenched notion that every dollar of new federal spending must be “paid for” through equal taxes or spending cuts, and that deficit spending is inherently bad.

The requirement that every new dollar of federal spending be offset by an equal increase in taxes or spending cuts elsewhere is itself biased and selectively applied. In fact, other funding priorities, including increases for the military and endless wars, rarely receive this same “How are you going to pay for it?” scrutiny.
- For example, when Republicans passed the Medicare Part D privatized drug benefit in 2003, they raised no additional revenue to pay for the additional federal spending — it was just added to the deficit. According to the 2019 Medicare Trustees Report (P. 10), federal revenue devoted to Part D was $67.8 billion in 2018. Since benefits started in 2006, Part D spending has added $717 billion to the U.S. federal debt. It appears that for these spending priorities, Modern Monetary Theory is applied.

Modern Monetary Theory maintains that some deficit spending is good policy if it balances conditions in the broader economy and funds worthwhile priorities like Improved-Medicare-for-All. Additionally, according to MMT economists like Stephanie Kelton, L. Randall Wray, Fadhel Kaboub and Warren Mosler:
- When the federal government deficit spends, that simply means that it is spending more into the economy than it is taxing out (a surplus is the opposite). When the economy is not operating at full capacity and too many are unemployed or underemployed, the federal government needs to prime the pump. When the federal government deficit spends, that means a surplus for the private sector.
- Funding federal priorities is created by fiat when Congress — the sole issuer of the U.S. dollar — authorizes the spending. Basically, Congress passes a spending bill, which then gets signed by the President, and the designated recipients’ bank accounts get marked up (like points on a scoreboard).
- Federal taxes do not pay for spending: Taxation just removes money from the economy to control inflation and inequality, while also creating demand for the dollar. Those goals do not require a one-to-one relationship between taxing and spending.
  - Warren Mosler explains how we decide whether to tax and how much to tax: “The important point is that the inflation forecast is what tells us how much to tax, not the size of the deficit.”

Economists Stephanie Kelton, L. Randall Wray, and Fadhel Kaboub recently joined more than 200 other economists in a letter endorsing Medicare-for-All, which was submitted to the U.S. House Budget Committee on May 21, 2019. Quoting from that letter,
- “As economists, we understand that a single-payer ‘Medicare for All’ health insurance system for the U.S. can finance good-quality care for all U.S. residents as a basic right while still significantly reducing overall health care spending relative to the current exorbitant and wasteful system. Healthcare is not a service that follows standard market rules. It should therefore be provided as a public good.”

The sources used in Davison’s article are deeply biased against single-payer healthcare.

The author relies heavily on three sources biased against Medicare-for-All: Committee for a Responsible Federal Budget (CRFB), Charles Blahous (author of the Mercatus study), and the Mercatus Center. Given their histories and financial ties, they cannot be trusted to deliver unbiased information about single-payer healthcare.

The Committee for a Responsible Federal Budget (CRFB) is an unreliable source given its long history of trying to slash and privatize existing safety net programs and being opposed to more federal spending on healthcare.
- CRFB is a public policy organization (think tank) whose stated focus is to reduce the federal deficit and debt; in reality, they work towards slashing benefit programs. Their focus is made clear by their initiatives and reports, including “Campaign to Fix the Debt” and “entitlement reform” (Medicare, Medicaid, and Social Security). CRFB’s singular focus is on balancing the budget above all else, even if that means cuts to the safety net and other social programs for struggling American families.
- Maya MacGuineas, the president of CRFB, wrote a letter to Speaker Pelosi and copied it to every member of Congress to adopt “pay-as-you-go” (PAYGO) rules. Here is an excerpt:
  - “While it may not be possible to stem this rising debt overnight, we request that you abide by the pay-as-you-go (PAYGO) principle. This principle is simple: if something is worth doing, it is worth paying for. The PAYGO principle is a pillar of responsible governance. It was vital to bipartisan efforts to control deficits — and ultimately to balancing the budget — in the 1990s. PAYGO ensures that the highest priorities supplant lower priorities, rather than testing the limits of the national credit card.”
- According to SourceWatch:
  - The Campaign to Fix the Debt is the latest incarnation of a decades-long effort by former Nixon man turned Wall Street billionaire Pete Peterson to slash earned benefit programs such as Social Security and Medicare under the guise of fixing the nation’s ‘debt problem.’” (Note: Pete Peterson died 3/20/18.)
- In its healthcare blog post of February 27, 2019 entitled “How Much Will Medicare for All Cost?”, CRFB does not even mention recent analyses by UMass PERI (November 2018) and Friedman (December 2018), and instead only includes less favorable analyses by Thorpe, Mercatus, Urban Institute, Center for Health and Economy, and CRFB itself.

Charles Blahous, who authored the Mercatus study, has a long documented history of providing research to institutions with both questionable — and likely unethical — means of funding.
- The Mercatus Center receives much of its funds from the libertarian, pro free-market Koch brothers and the American Enterprise Institute. Blahous is a senior strategist at the Koch brothers funded Mercatus Center and a former lobbyist for the National Association of Manufacturers (NAM) with 182 board members representing corporations that include Koch Companies Public Sector, Allergan Pharmaceutical, and UnitedHealth Group Incorporated.
- Blahous has conducted research for the Wilson Center, where Betsy DeVos and U.S. Secretary of State Mike Pompeo are two of their notable members. While the Wilson Center contributions are primarily from gifts and grants, a portion of their funding is provided by Congress.
- Blahous also served on the The Bipartisan Policy Center (BPC) Commission on Retirement Security and Personal Savings, and was nominated to temporarily fill a vacant position as a trustee in 2017. The Bipartisan Policy Center is a Washington D.C. think tank primarily funded by corporations and foundations that have conflicts of interest in regards to Medicare-for-All Single-Payer, including BlueCross BlueShield Association, United HealthCare Services, Inc., and Peter G. Peterson Foundation (P. 42).

The Mercatus Center received a great deal of funding from the Koch family and has ties to the American Legislative Exchange Council (ALEC), of which the Koch brothers are key funders.
- The American Legislative Exchange Council (ALEC) is what is known as a corporate bill mill. Through ALEC, corporations hand state legislators their wish lists to benefit their bottom line. Corporations fund almost all of ALEC’s operations and pay for seats on ALEC task forces where corporate lobbyists and special interest reps vote with elected officials to approve “model” bills.
- Between 2011 and 2014, the Koch’s gave $48 million in donations to George Mason University (GMU), and it is this money which largely supports the free-market Mercatus Center.
- In July 2009, an agreement was drafted between Charles Koch, the Mercatus Center, and George Mason University. The agreement was that the Charles G. Koch Foundation would give George Mason University Foundation $1 million dollars in exchange for GMU creating a tenured Mercatus Professorship at the Mercatus Center at George Mason University. The objective of the professorship was to advance the understanding, acceptance, and practice of free market principles.
- According to an article published in the Atlantic in 2015, a Koch staffer, Kevin Gentry, described the Kochs’ strategy to spread their views.
  - “It begins with reaching young minds in college lecture halls, thereby preparing bright, libertarian-leaning students to one day occupy the halls of political power.”
  - “The [Koch] network is fully integrated, so it’s not just work at the universities with the students, but it’s also building state-based capabilities and election capabilities and integrating this talent pipeline… So you can see how this is useful to each other over time… No one else has this infrastructure. We’re very excited about doing it.”

Editor: Alison Hartson

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