Warren, one of the front-runners in the Democratic presidential primary, had faced criticism and derision during recent debates for issuing promises of free healthcare without the details to back it up,
To avoid “taxing” the middle class, she offered a simple solution: Take the money that private employers would have spent on health plans and simply transfer the wealth instead to the federal government.
What could go wrong?
Other questionable sources of revenues include raising billions by providing a pathway to citizenship for illegal immigrants, cutting defense funding and soaking the rich with a series of wealth taxes.
Even so, a lot rides on her theory—with little evidence to support it—that the government-run plan could drastically cut costs by improving efficiency and coverage without sacrificing care.
Shuffling the Costs
Warren promised Friday to spend more than $20 trillion over the next decade to provide government-funded health care to every American without raising middle class taxes—finally offering ideas about how to implement the massive “Medicare for All” program without taking a larger bite out of most Americans’ salaries.
That is, unless one considers health benefits to be part of a total compensation package, which would likely mean drastic pay cuts that, being spread among multitudes of uninsured and unemployed Americans, will almost certainly impact the quality of care.
Warren’s plan is built on transferring to the government 98% of the $8.8 trillion she estimates that employers will spend on private insurance for their employees.
“We can generate almost half of what we need to cover Medicare for All just by asking employers to pay slightly less than what they are projected to pay today, and through existing taxes,” Warren wrote in a 20-page online post detailing her program.
One group that has been vocal in its opposition to the socialized healthcare plans offered by Democrats is the labor unions who have long fought with employers to increase such benefits.
However, Warren claimed, companies with fewer than 50 employees would be exempted and employers already offering health benefits reached under collective bargaining agreements will be allowed to reduce how much they send to federal coffers—provided that they pass those savings on to employees.
If the program fails to raise $8.8 trillion, Warren said she would make up the difference by imposing a supplemental contribution requirement for big companies “with extremely high executive compensation and stock buyback rates.”
Put Up or Shut Up
Warren famously claimed she “has a plan” for everything from providing universal child care to canceling college debt, but details of how she’d pay for her health plan come with far higher political stakes.
She spent weeks, and two straight Democratic presidential primary debates, refusing to provide a straight answer on if she’d have to increase middle class taxes to make the numbers work.
Medicare for All’s chief proponent, Sen. Bernie Sanders of Vermont, was asked on CNBC this week if he’d provide full details on how he’d pay for his universal health insurance plan and replied, “I don’t think I have to do that right now.”
Still, Sanders had previously released payment options, including a 4% tax “premium” on income that kicks in after the first $29,000 for a family of four—very much affecting the middle class.
Warren instead insisted that overall health care costs would increase for big corporations and the wealthy while falling for most everyone else.
But dubiously, many of those figures stem from an overly optimistic hope that government-run healthcare will improve upon the efficiency of the private market and that shoveling more federal money into bureaucracies like the IRS will somehow raise revenues in the long-term.
Spending (Tax) Money to Make Money
Warren said wiping out of private health insurance’s premiums, deductibles and co-pays will effectively result in an $11 trillion pay raise for Americans, which will generate $1.4 trillion in new taxes.
“When fully implemented, my approach to Medicare for All would mark one of the greatest federal expansions of middle class wealth in our history,” Warren wrote.
She plans to generate another $2.3 trillion by increasing funding to the Internal Revenue Service to better enforce existing tax laws.
Another $3 trillion would come from tax increases on capital gains and on the wealthiest 1% of Americans—a segment of the population that would already be affected by Warren’s separate wealth tax of 2% on fortunes worth more than $50 million.
On Friday, she proposed an additional 6% tax on fortunes worth more than $1 billion.
Warren also plans to impose new investment taxes—including on the sale of stocks and bonds, and on large banks, as well as increase levies for large corporations—to generate $3.8 billion in new federal revenue.
Her plan also calls for providing a “pathway to citizenship” for people in the country illegally, and increasing legal U.S. immigration, which she says will result in $400 billion in new tax revenue.
Finally, she plans to generate $798 billion over 10 years by eliminating what she called a Pentagon “slush fund” for defense spending.
All told, that would provide $20.5 trillion—or more than four times the current fiscal year’s federal budget. Still, the price tag could be far higher.
Cutting Costs through More Government
A critical question for Warren is how she would slash the cost of her plan well below what independent experts have estimated it would take to implement the unwieldy Medicare for All.
Hospitals and doctors would have to adjust to lower payments from the new government plan than they now get from private insurers. Medicare currently pays hospitals below their costs and they make up the difference by charging others more.
Coming up with new lower payment rates that avoid disrupting the system would be a major challenge for a Warren administration and a difficult problem for Congress, where her plan could bog down.
Other estimates have put the decade-long price tag for universal health care at $34 trillion.
Adapted from reporting by the Associated Press