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An analysis

Medicare for all reduces overall costs


 The 2018 elections are now complete.   Nine percent of Americans still do not have health insurance and 30% more are under-insured, meaning that they cannot afford the health care that they need. There are precious few of us that do not know a friend or loved one who has suffered the consequences.

“A team of economists from the University of Massachusetts Political Economy Research Institute (PERI) has found that the Medicare for All Act of 2017, introduced to the United States Senate by Senator Bernie Sanders, is not only economically viable, but could actually reduce health consumption expenditures by about 9.6 percent while also providing decent health care coverage for all Americans.”  

Economist and public policy expert Jeffrey Sachs, University Professor at Columbia University, in reviewing the researchers’ analysis, states “This study is the most comprehensive, detailed, authoritative study ever undertaken of Medicare for All, and it points powerfully and unassailably in support of MFA. ‘Medicare for All’ promises a system that is fairer, more efficient, and vastly less expensive than America’s bloated, monopolized, over-priced and under-performing private health insurance system. America spends far more on health care and gets far less for its money than any other high-income country. This study explains why, and shows how Medicare for All offers a proven and wholly workable way forward.”

Lead author Robert Pollin, Distinguished Professor in economics at UMass Amherst and co-director of PERI, states in their press release of 11/30/18, “The most fundamental goals of Medicare for All are to significantly improve health care outcomes for everyone living in the United States while also establishing effective cost controls throughout the health care system. These two purposes are both achievable.”  

The PERI research team concludes that not only is Medicare for All economically viable, it could reduce health care costs by about 9.6% while it provides health care for all those uninsured and underinsured Americans.  In 2017, health care expenditures were $3.24 trillion. This was 17% of the gross domestic product (GDP). The average amount spent by other wealthy nations in our world is 40% less while many of these nations produce better health care outcomes for their people.  These economists predict a drop from $3.24 to $2.93 trillion annually while providing stable access to health care for all US residents.

We as taxpayers already pay for 60% of total US health care expenses through Medicare and Medicaid taxes.  This $1.8 trillion would be used instead to pay for Improved Medicare for All.

The cost remaining would be $1.05 trillion.  How is this gap closed?

The PERI research team proposed closing this cost gap for Senator Sanders’ SB 1804 with four further revenue streams.  Please remember that our current insurance premiums, co-pays, deductibles, and other out-of-pocket costs are eliminated as a result of this bill.  Also note that the average cost of health care for a family of four in 2018 was $28,000.

First, businesses would pay an 8% premium of payroll.  For businesses already providing health insurance, this would cut their costs from the usual 16-20% of payroll.  This would provide $623 billion towards the gap.

Second, there would be a 3.75% sales tax added to non-essentials.  Excluded from this tax would be payments for foods and beverages consumed in the home, housing and utility costs, education expenses, and non-profit expenses.  This 3.75% sales tax would be credited back to Americans who have Medicaid. This would provide $196 billion.

Third, we would add a net worth tax of 0.38%.  The first million of net worth would be exempt. This tax involves the wealthiest 12% of American households.  It would provide $193 billion to close the gap.

Fourth, long term capital gains would be taxed as ordinary income.  This would contribute $69 billion.

PERI researchers project that middle income America would pay 2.6-14% less of their income towards health care costs as a result of this funding method.  The top 20% of income earners may see a 3.7% increase in costs while the top 5% may see a 4.5% increase in costs.

In the first 10 years, they predict that we would see a cumulative savings of $5.1 trillion, 2.1% of cumulative GDP.  

These experts also conclude that we would see broader macroeconomic benefits with increased productivity of our workforce, greater income equality, and net job creation due to reduced operating costs for small and medium-sized businesses.  

In short, most businesses and families would see lower costs.

Because the cost of health care is already expensive and unaffordable for many, this problem is not going to go away.  The opposition is very strong. There is tremendous power in the money of the private health insurance industry, the pharmaceutical industry, and other health care parties that believe they will be injured by our country’s transition to” Improved Medicare for All”.  These moneyed interests have again formed an alliance, now called “the Partnership for America’s Health Care Future”. Their mission is to maintain the status quo that serves them so well. They have tested which phrases scare and convince key legislators and voters of their legislative districts.  This alliance wants these key legislators to defeat any advance towards “Improved Medicare for All”.

Those of us who believe health care should be a human right need to speak out to our friends, families, and legislators. Remind them that nearly all (if not all) other industrialized nations in the world provide universal health care for their people.  We must pressure our state and national legislators with phone calls, letters, and emails. We need to inform them that we know that not only is “Improved Medicare for All” the most just solution, it is the best solution to provide affordable, accessible, high quality health care for all Americans.  Join the movement!

Dr. Michael is a HealthCare for All PA Board Member.