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Medicare For All, Taxes for All

As the recent debates among the Democratic presidential candidates emphasized, the idea of government-managed health care is gaining popularity. “Medicare for all” or some form of “free” universal health care is certainly an appealing idea. Who among us wouldn’t appreciate someone else paying our medical bills?

I certainly would. My family’s personal health care costs, including premiums and out-of-pocket expenses, run just over $3,000 a month. If my health care were free, I could find a lot of uses for the savings.

But my skeptical side, and probably yours as well, knows that there is no such thing as a free medical procedure. Someone, by some means, has to pay for insurance coverage, doctor visits, hospitalizations, and other medical costs.

The tax tab for providing “Medicare for all,” as envisioned by Sen. Bernie Sanders, is $3 trillion a year, according to several analysts. Currently, the cost for Medicare is about one-sixth that amount, or $583 billion a year.

Sanders and other presidential candidates tell us the wealthy will pay this tab. The reality is that when we look at other countries that have similar universal health care plans, it isn’t just the wealthy that are paying for it.

Raising the more than $3 trillion needed annually to fund “Medicare for all” would require doubling all personal and corporate income taxes or tripling payroll taxes. This analysis comes from Marc Goldwein, a senior vice president at the non-partisan Committee for a Responsible Federal Budget. He was cited in a May 9, 2019, Bloomberg article by Laura Davison, “Tax hikes on wealthy alone can’t pay for Medicare for all plan.” “There is a lot of money out there, but there isn’t $30 trillion [over 10 years] sitting around from high earners,” Goldwein said. “It just doesn’t exist.”

I did a little investigating of the tax rates of European countries that have universal health care and found Goldwein’s statement to be true. For example, Denmark taxes income over $7,000, with rates starting at 40%. The US rate starts at 10%. This would indicate a doubling or tripling of income taxes or payroll taxes on the lowest earners is not a politically-skewed scare tactic, but an economic reality.

The top rate in Denmark is 56%, while the top rate in the US is 50% (37% federal and 13% state). This is just one of many examples I found in my searching that strongly indicate other countries that have universal health care haven’t found much room left to tax the wealthy. Based on their experience, the majority of the cost will need to come from lower income earners.

Sadly, this message is not being disseminated to voters by proponents of universal health care. While I am not advocating for or against universal health care here, I am advocating for full disclosure and transparency.

A topic as significant as this deserves a great deal of discussion based on clear, complete disclosure of facts and educated analysis. It requires the best available answers to questions like who will be covered, what will be covered, how much the program will cost, and who will pay for it.

Raising six times what we are currently spending for Medicare would be a huge task. Transferring one-eighth of the US economy from the private sector pocket to the public sector one would not be easy or painless. Making the transition to some form of tax-funded universal health care would be a major shift in direction for this country that would have a significant impact on all Americans. It is not a decision to make based on inadequate information, political rhetoric, or unreasonably optimistic assumptions.

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6 Responses to Medicare For All, Taxes for All

  1. Gary Elton July 8, 2019 at 10:35 am #

    That money is not on top of the current insurance premiums, I would rather have my 3K / month go to medicare for all.

    • Rick Kahler July 9, 2019 at 4:48 pm #

      Gary, A dollar for dollar trade off would be great. However, based on what we see in other countries, I don’t think that is realistic.

  2. Jeff July 8, 2019 at 12:27 pm #

    Rick, I think you missed a big component in your example of tax in Denmark, and other countries that have universal health care — value added tax (VAT). In addition to its income tax, Denmark’s VAT is 25%. This most likely hits lower incomes harder as it is, like sales tax, a consumption tax. The other funding component that needs to be addressed is the money companies will save by not funding employer-sponsored health plans. If the expectation is that employers will continue to fund a universal plan for their employees, then any sources of funding analysis would need to take that into consideration. This is not to say employers are ambivalent regarding where their employee benefit dollars go. Many employers attempt to contain health care costs through employee education and program design that encourage employees to be informed consumers of health care. Hard to imagine how this would be achieved in a government run program.

    • Rick Kahler July 9, 2019 at 4:45 pm #

      Jeff, You are right, I did not consider VAT. The cost is much higher than I indicated in my article.

  3. Peter Blau July 28, 2019 at 8:16 pm #

    Rick – just saw this on Advisor Perspectives, so my comment is somewhat delayed. I agree that the “Medicare for All” folks have no idea of costs, but your conflating Denmark’s high tax rate with the cost of socialized medicine is also way off-base.

    OECD data (https://data.oecd.org/healthres/health-spending.htm) shows that Denmark’s per-capita health spending is about $5,300, just a little more than half the U.S. expenditure of about $10,600. So, they are doing a lot more with that tax money than just paying for healthcare.

    Furthermore,,just about every other wealthy nation has a socialized healthcare system, and most of them do not have maximum tax rates nearly as high as Denmark. The UK’s maximum personal rate is 47%, France’s is 45% (49% over 500K Euros) and Germany’s is 47.65%. Ours is 37% plus state income taxes that average maybe 7%.

    Net net, if you paid the somewhat higher income taxes in the 3 major Western European countries – but no longer had to pay that $36,000 in healthcare costs you say apply to your family- you’d most likely be coming out ahead. Plus you’d have the comfort of knowing that your less-fortunate neighbors and relatives would not have to worry about being financially wiped out by illness — or even worse, denied treatment,

    • Rick Kahler July 30, 2019 at 11:22 am #

      Peter,
      Thanks for your feedback. I didn’t mention that many of the countries that have Universal Health Care also have a VAT tax that ranges from 10% to 25%. This is perhaps why the top rates are not much different from ours.

      My research found that the average state tax on someone in the 37% bracket is 13%, so that’s where I came up with the 50%. I find it interesting that the UK, France (post their 75% tax failure), and Germany have lower rates on the wealthy. This underscores my point that the majority of the funding of Universal Health Care will come from those currently in lower brackets.

      I am curious if the costs yu found on the per capita health spending include health insurance premiums?