Massachusetts Sen. Elizabeth Warren on Friday unveiled a “Medicare for All” plan that, at least on paper, fulfills the 2020 Democratic presidential candidate’s ambition of financing the program with no new taxes on the middle class.
The plan, modeled on the bill from rival 2020 Democratic candidate Sen. Bernie Sanders, envisions wiping away most existing insurance arrangements, private and public, in order to enroll nearly all Americans into a new government-run program that would cover all necessary medical expenses. It is designed both to cover those who don’t have insurance and to make health care more affordable for those who already do.
The 9,000-word, 21-page plan is sprawling ― including everything from an expansion of Warren’s signature wealth tax to incentives for unionization to a pathway to citizenship for undocumented immigrants ― and contains aggressive measures to contain the spiraling cost of health care almost certain to generate opposition from doctors, drugmakers and hospitals. It would be funded using heavy tax increases on the wealthy and a new per-employee tax meant to replace what business previously spent on health insurance.
“Health care is a human right, and we need a system that reflects our values,” Warren writes in the introduction to her proposal. “That system is Medicare for All. Let’s be clear: America’s medical professionals are among the best in the world. Health care in America is world-class. Medicare for All isn’t about changing any of that. It’s about fixing what is broken – how we pay for that care.”
A big question hanging over Medicare for All ― and, increasingly, Warren’s candidacy ― has been how to finance this massive new program, as the burden of paying for medical care shifts from businesses and individuals to the federal government.
Warren, like Sanders and other Medicare for All advocates, has always said that all but the richest Americans would come out ahead financially, taking into account both the costs of the new system and the savings, compared to the old one. The proposal she released Friday explains exactly how she envisions that happening.
Warren’s plan fills out the details Sanders’ signature Medicare For All plan has left blank so far. The decision to do so comes with no small amount of political risk: The more detailed a health care proposal, the bigger the target for the health care industry and her political rivals to poke holes in the plan and question its math.
But Warren’s aides determined it was necessary, both to fulfill her campaign’s implicit promise to have detailed plan for seemingly every important policy, and to fend off increasingly feisty attacks from her more moderate rivals for the 2020 Democratic nomination.
The complicated plan, like any version of Medicare For All, is unlikely to become law, even if Democrats manage to win the presidency and both chambers of Congress in 2020, due to the unified opposition of Republicans and significant dissension within the Democratic ranks. But it could serve as an aggressive opening bid from a theoretical Warren administration on a proposal to expand health coverage and bring down the cost of care.
Under Medicare for All, individuals wouldn’t have to pay premiums or out-of-pocket costs, and employers wouldn’t have to pay for their workers’ insurance, because the federal government would be paying for basically all medical bills.
A key question about such a transition has been exactly how much new money the federal government would need to pull off this dramatic shift and, then, where the federal government could find those dollars.
On the cost of a new plan, estimates have varied. One of the more widely cited estimates has come from the Urban Institute, a well-respected think tank whose researchers have estimated that moving to Medicare for All would require about $34 trillion in new spending over the next decade.
Warren’s plan uses the Urban Institute estimate as a benchmark, but anticipates creating a program that would require a lot less new money: Medicare for All would need only $20 trillion in new money over the next decade, according to the Warren campaign.
What accounts for the difference? A big chunk, about $6 trillion, would come from asking states to contribute the money they already spend on Medicaid and other health programs they run. The rest, roughly $8 trillion, would be through additional savings in health care relative to what the Urban Institute’s projection assumed.
Some of these savings would be in the form of more aggressive price controls, like paying hospitals at 110% of Medicare rates rather than 115%, as Urban Institute used in its estimates. The Warren campaign is also assuming greater savings on prescription drugs, on the theory that her proposal (which would effectively break patents when drugmakers won’t accept lower reimbursements) would be more effective at reducing prices than the scheme the Urban Institute considered.
Some of the additional savings reflect more optimistic assumptions about the benefits of simplicity; Warren’s campaign is assuming more than twice as many savings from reduced billing and overhead than Urban Institute researchers did. Some of the additional savings come from a belief that changing the way hospitals get paid (for example, by moving to “bundled payments” that give hospitals more incentive to be efficient) would generate big savings.
Over the coming days and weeks, experts will get a closer look at these details and, inevitably, challenge assumptions that the Warren campaign has made ― or point out tradeoffs that aren’t so obvious at first blush. The Warren campaign said it has documented evidence backing all its claims, but that doesn’t mean the evidence is persuasive.
And how would Warren pay for that $20 trillion? The bulk of the money ― about $8.8 trillion ― would come from a per-employee health insurance tax levied on businesses. The Warren campaign is aiming to make this tax less expensive than what businesses currently pay for health care. Another $1.4 trillion would come from taxing the additional income Americans would earn instead of the deductions that come out of their paychecks. A collection of taxes on financial firms, wealthy Americans and corporations ― including both the repeal of the Trump tax cuts and increasing Warren’s proposed wealth tax on fortunes over $1 billion to 5% ― would bring in another $7.8 trillion. Another $2.3 trillion would come from “improvements in tax enforcement,” with a final $1.2 trillion coming from additional revenue from immigration reform and from ending the overseas contingency operations fund.
The Warren campaign has enlisted a number of bold-faced names in health care and economics to affirm the plan’s technical feasibility. Simon Johnson, a former chief economist at the International Monetary Fund, and former Medicare and Medicare chief Donald Berwick vouched for the campaign’s cost estimates. Johnson, Moody’s Analytics chief economist Mark Zandi and University of Michigan professor Betsey Stevenson vouched for the revenue proposals.
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