Senator Bernie Sanders introduced a bill last week that would provide universal health care coverage for all Americans by expanding Medicare to cover everyone, making employer – sponsored health plans a thing of the past.
When I read of this latest attempt by Senator Sanders to provide universal, single payer coverage, the first thing that came to mind was the law of unintended consequences.
What would really happen if the senator’s bill was passed into law? Let’s try not to be political, but rather let’s look at the facts and review both positive and negative consequences of such an action.
First, on the positive side, every American would have insurance and would no longer have to worry about the “out-of-pocket” cost of health care. Under Senator Sanders’ plan, a long list of benefits, including primary care visits, maternity care and hospital stays would be paid for without a co-pay. The problem of 20 million uninsured Americans would be solved. Struggling to pay high out of pocket expenses for hospitalization and other expensive treatments would be a thing of the past. The burden that health insurance premiums put on American businesses would go away. At this point, the uninformed might want to stop reading and say, “What’s not to love! How can we get this billed passed?” This is where that nasty law of unintended consequences comes in. What I have just described is the intended impact of such a law. To be fully informed you have to study the unintended consequences.
Let’s begin by asking ourselves how much this will cost the government and how they’ll pay for it. Senator Sanders tries to avoid this harsh reality, saying; “Rather than give a detailed proposal about how we’re going to raise $3 trillion a year, we’d rather give the American people options,” Well, unfortunately, that doesn’t work for me. I’d really like to know how we’re going to pay for something before I get behind it. Lets examine the numbers. Right now we spend $3 trillion a year on health care in this country, of which the Federal Government spends a little over $1 trillion. So, the government would have to come up with roughly $1.8 trillion more dollars to cover the 20 million currently uninsured Americans and pick up the tab for all the employers, individuals, and states currently paying their own portion of the $3 trillion total. That assumes no change in how providers are paid. What if the states’ portion, as they currently pay it, is simply transferred and added to the Federal budget? Now we only need $1.2 trillion more. We can provide Medicare for everyone if we can only figure out a way to come up with an extra $1.2 trillion dollars in tax revenue! If only we could figure out how to get more tax revenue…
If we split the $1.2 trillion equally between individual income tax rates and corporate payroll tax rates, we arrive at the following reality: individuals would need to be taxed at 15% to 56%. Add in the new individual payroll tax rate of 11% and you have an effective tax rate between 26% and 67%. People in the highest tax bracket would have two-thirds of every dollar they make taken by the Federal Government.The corporate story isn’t much better. Corporate tax rates would need to be from 21% to 50%, plus the new corporate payroll tax rate of 11%, giving us an effective tax rate between 32% and 61% for corporations in America.
This level of taxation would create significant incentives for corporations and individuals to seek ways to avoid paying said taxes. The incentive for corporations to move overseas, for example, would be incredible. As corporations decide it’s financially advantageous to operate outside the country, unemployment would increase and thereby harm our economy. This new rate of personal income taxation would position the U.S. as having the highest tax rate in the industrialized world. Those who could move their residency and incomes out of the country wouldn’t hesitate. The attraction of the American way of life would suffer greatly.
But don’t worry, there’s a solution to these problems! We’d just make sure the new Medicare-for-all law requires all hospitals and physicians to be paid at the same rate they currently get from Medicare for everyone. This would drive a significant amount of cost out of the system and thus reduce the tax burden on individuals and corporations. Simple, right? Again, we have to think about those pesky unintended consequences. You see, expense reduction is revenue reduction viewed from the other side.
Most of my physician clients couldn’t survive if they were compensated at Medicare levels for all of their patients. In order to remain in business, they’d have to significantly change the way they provide care. In this scenario, health care delivery in America could quickly turn into something that would make the old VA system look good.
So, the long and short of it is this: There is no magic bullet. Medicare-for-all sounds good, as long as you don’t look too deeply into the details. The reality is it would crush our economy through tax increases or crush our health care delivery system. The most likely outcome would be that both the economy and our delivery system would experience significant damage.
The problem is deeper than just changing how we finance health care in this country. We’ll have to fundamentally change the way we provide care. There will be hard choices about what we’re going to pay for and when. We’ll have to dive into difficult issues like personal accountability and health care as a right versus a privilege. We’ll need to deal with tort reform and leveraging technology, and include economic factors into our decisions about advancements in medicine. These are all serious issues and none of them are addressed by just shouting “Medicare-for-all!” as an alternative to the system we have now.
If Senator Sanders’ bill starts a debate, an honest discussion about all of the issues around health care in this country, then it will have done some good. We need more discussion and debate on this topic. If, on the other hand, it’s simply accepted as a possible solution to our problems, I fear we may find that the cure really can be far worse than the disease.