The Corner

Health Care

Study: Medicare for All Would Make Two-Thirds of Households Financially Worse Off

Senator Elizabeth Warren (D., Mass.) during an event to introduce the “Medicare for All Act of 2017” on Capitol Hill in Washington, D.C., September 13, 2017. (Yuri Gripas/Reuters)

It’s here, from the Heritage Foundation. The upshot is that while Medicare for All could be a financial boon to non-working Americans, including seniors who’d see their current Medicare premiums disappear, most of those who currently have jobs would lose more in tax hikes than they’d gain by not having to pay for health care. Nearly two-thirds of households, containing nearly three-quarters of the population, would end up with less disposable income.

The study is an interesting exercise, but it’s not hard to anticipate the response from the Left. Liberals’ preferred Medicare for All estimates tend to assume that a single-payer system could pay doctors and hospitals a lot less than private insurers do, and that you could get a long way toward funding Medicare for All by socking it to the rich. Heritage made some key assumptions cutting in the opposite direction, though Heritage’s assumptions are a good bit more plausible than the lefties’ are.

The study assumes no payment cuts for medical providers at all. As the authors spell out in Appendix B:

The House and Senate bills offer only broad guidelines for how federal officials are to set payments. Consequently, our analysis did not include any assumptions about changes to provider payment rates under the program. We instead assume that the program will reimburse providers at rates equivalent to the payer-weighted average rates that they currently receive.

In a footnote, they point out that an aggressive assumption about payment cuts could reduce the total cost about 14 percent, and cut the needed payroll tax from 21.2 percent to 18.2 percent. Obviously, that assumption (or a more realistic one in between) would move some number of people from the “worse off” to the “better off” column.

In addition, they assume the program is funded with a flat tax, specifically a payroll tax of 21.2 percent. A more progressive funding scheme would move people from the “worse off” to the “better off” column as well, because rich people are already in the “worse off” column and would shoulder even more of the burden.

Indeed, in another appendix, the authors run the numbers on a still-not-particularly-progressive alternative, where everyone’s income-tax rates are increased 24.3 percentage points. Someone in the 10 percent bracket would see his rate more than triple, to 34.3 percent, while someone in the 37 percent bracket would have his rate less than double, to 61.3 percent. Nonetheless, this moves the needle quite a bit, with only about half of households becoming worse off instead of two-thirds.

To be fair, there are assumptions that go the other way too. For instance, the authors don’t try to anticipate the behavioral responses to these new taxes, such as people working less, which could require the rates to be even higher to raise the same revenue.

In general, though, the study mainly drives home that the expected results of Medicare for All depend mainly on one’s subjective assumptions about how payments would work out and which taxes could plausibly raise that much money. It’s an enormous change from the status quo, and its effects are difficult to predict in an empirical, non-ideological manner.

No matter how it worked out, it would require someone to pay a boatload in new taxes, though, for sure.

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