Tuesday, March 5, 2019

The Economic Impact of Medicare for All

With relatively little fanfare given its importance to American taxpayers and their families, Rep. Pramila Jayapal (D-Wash.) introduced H.R. 1384 to Congress in late February 201.  The goal of the bill is to establish an improved Medicare for All national health insurance program.  While there is no summary of the text of the bill on the Congressional website yet, here are some quotes from Rep. Jayapal's website about the issue:

"Today’s healthcare system fails to provide quality, affordable healthcare as a right to all people living in the United States. Nearly 30 million Americans are uninsured and at least 40 million more cannot afford the costs of their co-pays and deductibles.

The quality of our healthcare is much worse than other industrialized countries—the life expectancy in the U.S. is lower than other nations, while our infant mortality rate is much higher. Yet the U.S. spends more money per capita on healthcare than any other industrialized nation. We waste hundreds of billions of dollars every year on unnecessary administrative costs, while healthcare industry executives measure success in profits, instead of patient care.

The current healthcare system in the United States is ineffective, inefficient and outrageously expensive. It is time to remove the profit motive in healthcare, to resolve the inefficiencies and to guarantee quality healthcare to every person living in the United States.

The Medicare for All Act of 2019 improves and expands the overwhelmingly successful and popular Medicare program, so that every person living in the United States has guaranteed access to healthcare with comprehensive benefits.

“Today in America, 30 million people are uninsured. 40 million are underinsured. We have the most expensive healthcare system in the world and yet our outcomes are the worst of all industrialized countries. I and the more than 100 co-sponsors of this bill refuse to allow this to continue.  It’s time to put people’s health over profit. Our bill will cover everyone. Not just those who are fortunate enough to have employer-sponsored insurance. Not just children. Not just seniors. Not just those who are healthy. Everyone. Because healthcare is a human right. We will need every single person in the country to help us, to stand with us, to organize and to fight for this,” said Rep. Jayapal. “Because the industry lobby is going to pour hundreds of millions of dollars into killing this bill, saying it costs too much, scaring you into thinking you’re giving up something, pitting the healthy against the sick and the young against the old. It’s time to ensure that healthcare is a right and not a privilege, guaranteed to every single person in our country.  It is time for Medicare for All.”
Here is a two page summary of the Medicare for All Act of 2019 thanks to Common Dreams:

One of the first question people have is how much this will cost taxpayers.  Fortunately, the Political Economy Research Institution (or PERI) at the University of Massachusetts Amherst have completed a detailed analysis of the economic impact of a Medicare for All system.  In this study, the authors note that 9 percent of Americans are uninsured (up to 13.7 percent in the last quarter of 2018) and 26 percent are underinsured.  While the demand for health care services will increase once these people access a Medicare for All system, the overall demand for health care services in the United States will only rise by 12 percent.  That said, the authors note that there is a significant cost savings potential under a Medicare for All system with the following savings:

1.) Administration - 9 percent savings

2.) Pharmaceutical - 5.9 percent savings

3.) Uniformity of Medicare rates - 2.8 percent savings.

4.) Waste and Fraud - 1.5 percent savings

All in all, the authors estimate that overall U.S. health care costs could fall by roughly 19.2 percent relative to the existing system.  With current Health Consumption Expenditures (other than public health programs) reaching 3.24 trillion in 2017, with a 12 percent overall demand increase and a 19.2 percent cost saving, total Health Consumption Expenditures would fall to $2.93 trillion, a saving of $310 million.  It is also interesting to note that United States Health Consumption Expenditures in 2017 were equal to 17.2 percent of GDP (up from 6.2 percent of GDP back in 1970), far higher than the eight other large industrial economies which range between 8.9 percent of GDP for Italy and 11.3 percent of GDP for Germany.  Under the analysis by PERI, U.S. Health Consumption Expenditures will fall to 15.8 percent of GDP under a Medicare for All system. 

Medicare for All will be funded in two ways:

1.) The same public health care revenue sources that prettily provide 60 percent of health care financing including funding for Medicare and Medicaid - this will provide $1.88 trillion in funds.

This leaves a shortfall of $1.05 trillion ($2.93 trillion minus $1.88 trillion) in additional funding requirements which would require additional revenue generation.

2.) Additional Revenue Generators:

a.) Firms that are not offering coverage for some or all of their employees will pay $500 per uncovered worker with small businesses being exempted.  The authors also developed proposals for an 8.2 percent payroll tax or 1.78 percent gross receipts tax that would apply to new businesses.  This would generate an additional $623 billion in revenue.

b.) A 3.75 percent sales tax on non-necessities (excluding housing and utilities, education, food consumed at home) which would raise $196 billion in revenue.

c.) A net worth tax of 0.38 percent on net wealth greater than $1 million which would apply to only the wealthiest 12 percent of households.  This would raise $193 billion in revenue.

d.) Tax long-term capital gains as ordinary income which would raise $69 billion in revenue.

Here is a table summarizing the revenues generated through the four proposed funding sources:

Let's close with this graphic from the Kaiser Family Foundation which shows the net favourability of a national Medicare for All plan after hearing these arguments positives and negatives about this type of plan (i.e in favour minus oppose):

H.R.1384 has been referred to the Committee on Energy and Commerce and the Committees on Ways and Means, Education and Labor, Oversight and Reform and Armed Services, the places where all good bills go to die.

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