Elizabeth Warren’s ‘Medicare for All’ Math

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Source: The New York Times

She thinks a single-payer health care system can save more than other analysts think. Here’s where she says she’ll get the money to pay for it.

Elizabeth Warren’s “Medicare for all” proposal would make substantial shifts to how the United States pays for its health care system. She would eliminate most other forms of coverage, including private insurance, and provide all Americans with a generous government-run plan.

To calculate its cost, she has modified estimates from the Urban Institute, a Washington research group that has assessed the legislative proposal she is endorsing.

To pay for it, she has proposed large new taxes, transfer payments and some cuts to government spending. Altogether, her campaign believes health spending under Medicare for all will cost $52 trillion over the next decade, with about half shifting from other sources onto the federal budget.

The Warren plan includes several key assumptions, including starkly lower prescription drug prices, minimal administrative spending and health care costs that grow at a significantly slower pace.

Warren backers describe these cuts as ambitious and assertive, contending that the American health system — which has the highest prices in the developed world — could weather the change. Other health care experts call the ideas unrealistic, given the revenue that American doctors, hospitals and drug companies have become accustomed to earning.

The key question in this debate is, how quickly can the United States tamp down its sky-high health care prices?

“The whole point of this analysis, which took weeks and was done with real discipline, was to come up with, what is realistic?” said Don Berwick, a co-author of an economic analysis of the Warren plan, and former administrator of the Centers for Medicare and Medicaid under President Barack Obama. “I think they’re achievable and, for those who are critical, please show me yours.”

Here’s a summary of what Ms. Warren has proposed on either side of the ledger.

To reduce the plan’s costs:

• Change the way Medicare pays for certain types of hospital stays, such as paying a package rate rather than different fees for surgical services, and paying doctors in hospital-owned practices the lower prices paid to those in private practices. ($2.3 trillion)

• Assume that the Medicare for all program itself can operate very leanly. The Urban Institute estimated that Medicare would devote about 6 percent of its health budget on administrators to decide what and how Medicare would pay for things, and to prevent fraud. In Ms. Warren’s plan, that rate is 2.3 percent. ($1.8 trillion)

• Assume very aggressive drug discounts. Ms. Warren believes a government system will be able to reduce spending on drugs substantially, including lowering the prices of branded prescription drugs by 70 percent. ($1.7 trillion)

• Assume slower growth in health spending over time. The federal government now thinks health spending will increase by 5.5 percent a year; the Warren campaign assumes 3.9 percent growth under Medicare for all, closer to the rate of growth in gross domestic product. ($1.1 trillion)

• Assume lower payments to hospitals. The campaign believes hospitals can be paid around 110 percent of what they are currently paid by Medicare, a number that would cause some hospitals to operate at a loss. Currently, private health insurers often pay a lot more to hospitals than Medicare for similar procedures. ($600 billion)

To pay for the plan:

• Employers would be required to pay fees to the federal government, equivalent to 98 percent of what they now spend on their employees’ health care. Some companies would be exempt, and companies with unionized work forces would be able to lower this payment if they increased workers’ wages. Currently, companies vary greatly in the cost and generosity of their health benefits, so this fee would vary substantially by firm. ($8.8 trillion)

• States and local governments would be required to make payments to the federal government, similar to what they currently spend on government employee benefits and their share of Medicaid expenses. ($6.1 trillion)

• Corporate taxation would be increased. ($2.9 trillion)

• Tax collections would increase through improvements to I.R.S. enforcement, which Ms. Warren believes could raise a lot of money. ($2.3 trillion)

• The top 1 percent of individual earners would pay new taxes on their capital gains; they would pay taxes on increases in investment value annually, instead of waiting until assets are sold. ($2 trillion)

• Income tax collections would increase, since workers would no longer pay part of their salaries for insurance premiums, which are not taxed now. ($1.4 trillion)

• Billionaires would pay a higher wealth tax than the rate Ms. Warren has previously proposed: 6 percent, up from 3 percent. ($1 trillion)

• A new financial transactions tax would be imposed on stock trades. ($800 billion)

• Pentagon spending from an overseas contingency fund, often criticized as a slush fund, would be eliminated. ($800 billion)

• Income earned by immigrants, following the passage of her immigration overhaul plan, would provide new tax revenues. ($400 billion)

• A risk fee on the liabilities of banks with more than $50 billion in assets would be introduced. ($100 billion)

Last Updated 11/13/2019

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