Medicare for All (M4A) retained its prominent place on the stage at the latest Democratic debate. In its purest Bernie Sanders form, concurrent with abolishing private health insurance, U.S. residents would be enrolled in “Medicare.” The program would pay for unlimited “medically necessary” health expenses, including pharmaceuticals, mental health and substance abuse treatment, vision, dental, and hearing services, and long-term care with no out-of-pocket costs. Some supporters were scared off by the $32 trillion over 10 years price tag. Not to be outdone, Elizabeth Warren’s “I’m with Bernie” plan comes with a $52 trillion over 10 years price tag including up to $34 trillion in new government spending. Our country’s entire yearly budget is a mere $3.5 trillion. For perspective, if your salary is $40,000 per year it would take 25 million years to earn 1 trillion dollars. As M4A’s dark side emerged, the candidates distanced themselves from Bernie-care.
Elimination of private insurance? Whoa, Nellie! Over 156 million Americans —half the country—are covered by employer-sponsored health insurance plans and another 23 million have private individual policies. And most of these folks like that arrangement. Then there was pushback from some unions who had excellent health insurance policies for which they had bargained and given up other perks.
In the June debate the candidates raised their hands indicating they would abolish private health insurance. Now Mayor Buttigieg wants to “unify the American people around, creating a version of Medicare, making it available to anybody who wants it, but without the divisive step of ordering people onto it whether they want to or not.” Vice president Biden, noting his desire to keep patient choice stated, “we should build on Obamacare … adding a Medicare option in that plan, and not make people choose.” Of course, Obamacare caused a rise in premiums, a decrease in choice of insurance coverage, and like any large government-run program was prone to mismanagement and waste.
Possible financing mechanisms were screaming for a deep dive. One analysis concluded that most Americans would suffer financially if M4A were implemented as proposed. An analysis by a bipartisan think tank estimated a 32 per cent increase in payroll taxes would be needed to fund M4A. Everyone—even the working poor—would have more payroll taxes extracted from their paycheck. The analysis concluded that most households would pay more in new taxes than they would save by eliminating their current spending on private health insurance and out-of-pocket medical expenses.
Senator Warren tries to hide the ugly truth by railing about the evil rich who would be taxed down to their underwear. Take the deceptively worded “2-cent” annual tax for households with more than $50 million in assets. If you have $51 million in assets, most probably tied up in your business, you’d have to cough up (.02)($1,000,000) or $20,000, not 2 cents. The devil’s spawn, aka our 535 billionaires, would be subject to a 6 percent annual tax on their assets. Who will be the next target when the government has driven the assets to a sunny island in the Caribbean? Finally, raising the corporate income tax back up to 35 percent likely would result in businesses paying lower wages to current employees or cutting back on hiring to compensate for the increased tax burden.
During the latest debate, Senator Warren retreated from her “all-in” approach, asserting she would first provide Medicare at no cost to “everybody under the age of 18, everybody who has a family of four income less than $50,000”—about 135 million people. Second, she would lower the Medicare age to 50 and expand Medicare coverage to include vision, dental, and long-term care. In the third year, “when people have had a chance to feel it and taste it and live with it, we’re going to vote and we’re going to want Medicare for all.”
Senator Sanders owns that payroll taxes would be doubled or tripled and proposes a 4 percent surtax on families earning more than $29,000. So if you earn $60,000, you’d have to pay (.04)($31,000) or $1,240, enough for a whole year’s membership in a private Direct Primary Care plan. Senator Sanders, staying true to his principles, is sticking with unadulterated Medicare for All with its financial warts.
Even those who are numb to government over-spending can see the broader problem of inviting Uncle Sam into their lives in exchange for a Medicare card in their wallet. Any remaining privacy is erased. Our medical records would be furnished to the Department of Health and Human Services and the National Coordinator for Health Information Technology. Physicians and patients would be robbed of their autonomy and choice by medical care policies set by the government monopoly. Lack of competition leads to lower quality and fewer services. Coverage becomes an illusion.
Medicare for All’s beauty is only skin deep and its ugly goes to the bone.
Dr. Singleton is a board-certified anesthesiologist. She is Immediate Past President of the Association of American Physicians and Surgeons (AAPS). Her opinions are her own. This is an edited column that originally appeared at www.pennypressnv.com, reprinted with permission.
Ever since Senator Bernie Sanders made “Medicare for All” (M4A) the centerpiece of his campaign, it has attracted support, and others have joined the bandwagon. In a Kaiser Family Foundation poll earlier this year, 56 percent of respondents and 81 percent of Democrats backed “a national health plan, sometimes called Medicare for all,” which has been used to assert a mandate for M4A.
Medicare’s Unfunded Liability
Since exactly what M4A details (where the devil lurks) are less than crystal clear, and even the best-articulated versions are more like political talking points than complete plans, backed by questionable, if not provably incorrect assumptions, the goal is clearly to pass a bill that would be very hard to undo before most citizens have any clear idea of what is involved.
Consequently, it is important to remember what most stories hyping the popularity of M4A leave out: When people were informed it would entail a massive increase in costs and taxes, support cratered. Given that Sanders’ proposal could add $3.2 trillion in annual government spending (when America now spends $3.5 trillion annually on health care), that is easy to understand. However, there is also another multi-trillion-dollar reason why many who now support M4A might switch sides: Medicare’s massive unfunded liability.
As with other Social Security expansions, when Medicare was created in 1966, those in or near retirement paid little or no more in taxes but got substantial benefits throughout retirement. That imposed a large unfunded off-budget liability on later generations. And every expansion since (most recently, Medicare Part D’s prescription drug benefit, whose officially estimated unfunded liability at the time was $17 trillion) has created another free lunch for those older, expanding the huge tab facing later generations.
The same sort of conclusions were reached in an Urban Institute study of Medicare, which found that in 2012, average-earning males were “buying” $180,000 in Medicare benefits for $61,000, while similarly situated females, with smaller lifetime contributions and longer life expectancies, did even better.
The result, as reported by Michael Tanner, was a 2015 forecast of almost $48 trillion of unfunded liabilities under implausibly optimistic assumptions. A return to higher medical cost inflation rates could make it $88 trillion. A continuance of lower birthrates than forecast would push it higher. So would including future commitments to recipients who have qualified for but not yet received all their benefits as of the end date of a study.
So why might recognizing that massive unfunded liability and its continued expansion move Americans into the “anti-M4A” camp?
Because of the wealth transfer to early enrollees, as well as from ensuing expansions, Medicare provided many with a great deal. But that deal was the result of dumping an enormous bill on future generations (bigger than the unfunded liabilities for Social Security plus the national debt).
With that bill starting to arrive, Medicare is not even close to sustainable in its present form, much less to be leveraged to cover the entire population (although one can understand the vote-buying potential in promising massive new M4A generational transfers).
Not only is a massive expansion of an already far-in-the-hole Medicare program a fool’s errand, but the massive unfunded liabilities it has built up also mean that the previous costs were far higher than what recipients paid and continue to be so (even underestimates of its unfunded liability growth add more than $1 trillion per year of hidden costs to Medicare).
As a result, Medicare was a far worse deal than M4A salesmen and women admit, and it is now decaying at an increasing rate, making its extension to all a 14-digit boondoggle, not a boon. And doubling (or more) down on the already unpayable burdens Medicare has laid on future generations also highlights the blatant hypocrisy of backers who, at the same time, preen about all the new plans they have to “invest in the future.”
Gary M. Galles is a professor of economics at Pepperdine University. His opinions are his own. This article originally appeared on fee.org, then pennypress.com Reprinted with permission.