Tuesday, January 19, 2016

HEALTH CARE - The Bernie Sanders Plan

"Medicare-for-All Plan Detailed by Sanders:  Improves Health Care, Cuts Costs" (press release) 1/17/2016

U.S. Sen. Bernie Sanders on Sunday detailed a Medicare-for-all plan to provide better health care for all Americans at less cost.

“Universal health care is an idea that has been supported in the United States by Democratic presidents going back to Franklin Roosevelt and Harry Truman,” Sanders said.  “It is time for our country to join every other major industrialized nation on earth and guarantee health care to all citizens as a right, not a privilege.”

The proposal would expand Medicare, the popular and successful health care program for seniors, and build on the success of the Affordable Care Act, which Sanders helped craft.  Patients would be able to choose their own doctors and receive comprehensive care for everything from hospital stays to emergency room visits to primary and specialty care.

Sanders’ Medicare-for-all plan would save $6 trillion over the next 10 years compared to the current system, according to a detailed analysis by Gerald Friedman, an economist at University of Massachusetts at Amherst who is a leading expert on health care costs.

In a nation that now spends $3 trillion a year on health care – nearly $10,000 per person – Sanders’ plan would save consumers money by eliminating expensive and wasteful private health insurance.  The plan would save taxpayers money by dramatically reducing overall health care costs and bringing down skyrocketing prescription drug prices which are far greater in the United States than in any other country.

The typical family earning $50,000 a year would save nearly $6,000 annually in health care costs, Friedman calculated.  The average working family now pays $4,955 in premiums for private insurance and spends another $1,318 on deductibles for care that isn’t covered.  Under Sanders’ plan, a family of four earning $50,000 would pay just $466 per year to the Medicare-for-all program.

Businesses would save more than $9,400 a year in health care costs under Sanders’ plan.  The average annual cost to the employer for a worker with a family who makes $50,000 a year would go from $12,591 to just $3,100.

The shift to universal health care would be paid for with a 2.2 percent health care premium (calculated under the rules for federal income taxes); a 6.2 percent health care payroll tax paid by employers; an estate tax on the wealthiest Americans and changes in the tax code to make federal income tax rates more progressive.

Under the plan, individuals making $250,000 to $500,000 a year would be taxed at a rate of 37 percent.  The top rate, 52 percent, would apply to those earning $10 million or more a year, a category that in 2013 included only the 13,000 wealthiest households in the United States.

Additional savings would be achieved from reducing outlays for taxpayer-supported health care expenditures.

Sanders laid out his health care plan and progressive tax reform proposals here in South Carolina where he and former Secretary of State Hillary Clinton and former Maryland Gov. Martin O’Malley were to take part on Sunday night in a nationally televised debate in their contest for the Democratic Party presidential nomination.

"Bernie Sanders’s health-care plan is the biggest attack on the rich of this campaign" by Max Ehrenfreund and Jim Tankersley, Washington Post 1/17/2016

Last fall, the Wall Street Journal estimated Bernie Sanders' single-payer health care plan would cost the government a whopping $15 trillion over a decade.  Sanders' campaign objected - loudly - over that price tag.  On Sunday evening, just before the Democratic presidential debate in South Carolina, Sanders finally released details of his plan, including a headline price tag.  It was $14 trillion.

Sanders' chief Democratic opponent, Hillary Clinton, has long claimed his plan would have to raise taxes on the middle class.  We now know it would.  We also know that, by Sanders' accounting, the plan would actually put more money into the pockets of all but the very richest Americans.

That's because the planned tax increases would be more than offset by a decline in how much most Americans pay for their health care — their premiums, their deductibles, their co-pays, all of it — per Sanders' math.

There are still lots of questions about how the middle class would fare under his new plan.  But it's clear they would definitely do better than the rich.

Employers would put up about half of what Sanders’ staff think the campaign would cost.  They’d pay a new payroll tax of 6.2 percent, equal to the amount employers already pay to Social Security.  That tax would raise $630 billion a year, the campaign projects.

Most Americans would have to pay a “premium” – although unlike a premium for a conventional insurance plan, this fee would increase with the household’s income.  That premium amounts to a 2.2 percent increase in taxes on earnings that would raise about $210 billion a year.  With the standard deduction, it would apply to households earning at least $28,800 a year, according to the campaign.

The rich would pay through the nose.  In addition to the premium, Sanders would increase the marginal rate on those earning at least $250,000 a year.  Those earning between that amount and $500,000 would pay 37 percent on any income in that range.  Income between $500,000 and $2 million would be taxed at a rate of 43 percent; income between $2 million and $10 million would be taxed at a rate of 48 percent.

Here’s the kicker:  Income above $10 million would be taxed at a rate of 52 percent.  With that big number, Sanders makes good on his promise last June to propose a marginal tax rate above 50 percent – although it would only apply to about 13,000 of the country’s richest households, according to the campaign.

Besides those marginal increases, which the campaign estimates would yield $110 billion a year, Sanders would also tax the rich by treating income from investments the same as earnings from wages and salaries.  Currently, income from investments, including dividends and capital gains, is taxed less heavily.  Taxing these sources of income at the same rate would raise $92 billion a year, according to Sanders’s campaign.  He’d also expand the estate tax, raising $21 billion a year.

In exchange for all of that, Americans wouldn’t have to pay deductibles or co-pays any longer, or premiums to private insurers.  Would they come out ahead?

Here are a few points to consider.

  • On paper, employers pay half of the cost of the plan through increased payroll taxes.  In practice, many economists say that businesses effectively make workers pay increased payroll taxes by refusing to raise their wages.  If they did so under Sanders’s plan, workers would have to take their reduced earnings into account as well.
  • Some economists are likely to predict that Sanders’s plan would also harm the middle class by reducing economic growth.  When taxes on work are increased and the tax on investment is raised to the same level, the reasoning goes, people will be discouraged from applying themselves on the job and from taking risks in the marketplace.  The result would be fewer opportunities for work.  It is difficult to know whether that scenario would materialize.  Other economists argue that the effects of increased taxes on economic growth are minimal.
  • Taxing income and capital might also be a good tool to curb the excesses of the financial sector - including the lucrative practice of converting labor income into capital income for the purposes of helping higher-earning taxpayers reduce their tax bills.
  • There's a chance the Sanders plan could boost corporate profits a lot more than it boosts workers.  Companies could, conceivably, stop providing health insurance to their employees - and instead of passing those savings on to workers, bank them as cost-savings.  If they did that, and also passed on the costs of the new payroll tax to workers, most Americans would see their actual take home pay go down.  By Sanders' math, the typical worker would then still wind up with about 6 percent more to spend every year than he or she would have.  But that's before you account for any potential effects of growth on salaries.
  • If you like your health plan, would you get to keep it under President Sanders?  That’s also unclear.  Sanders advertises his plan as “Medicare for All” – but part of the reason Medicare is so efficient and inexpensive is that the federal government doesn’t pay doctors as much to treat patients on Medicare.  For that reason, many doctors won’t treat Medicare patients.  Sanders doesn’t say at what rate health-care providers would be compensated under his plan, and that’s a huge unanswered question for your doctor.  If your doctor chose not to participate in Sanders's program, you might have to buy a private insurance plan and pay separately for that coverage along with the increased taxes.
  • Sanders has now proposed a lot of major tax increases on the wealthy.  He has proposed the 2.2 percent premium, the expanded estate tax, the elimination of special treatment for capital gains, and the increased marginal rates mentioned above.  He also has laid out an additional 6.2 percent hike in payroll taxes and a 6.2 percent surcharge on capital gains for those earning at least $250,000 a year to fund his plan for Social Security.  And he wants to impose a tax on financial transactions.  It seems probable that such a tax would be paid mainly by the rich employees and investors whose bread is buttered on Wall Street.

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