Oh my, until Tuesday we again
faced a Republican radical alternative to the Affordable Care Act (ACA). One
more repeal effort with great feeling, but no wisdom.
This time the Republican
folly was the Graham-Cassidy bill, which had virtually nothing to do with
healthcare and everything to do with febrile efforts to resurrect states’
rights, block grants, keeping donors contented and passing anything that has “healthcare”
somewhere in its first sentence or two. The announcements that Senators Rand
Paul, John McCain and Susan Collins would not support this latest Republican
effort to dismantle the ACA is what passes the low threshold of good news for
the 319 million (M) people who have some
type of healthcare coverage.
However, Graham-Cassidy is
not the only radical idea that Congress has for replacing the ACA. Nope, on
September 13 Senator Bernie Sanders introduced his “Medicare for All Act of
2017” proposal that would end the ACA, replace it by expanding Medicare and provide
it to every American, not just to those of us who are 65 or older. It would
also increase the services now provided by Medicare to include dental, vision
and hearing aid coverage. In 2015 (the latest year data are available) Medicare
covered 43.3M people, representing 13.4% of Americans. The goal of expanding
healthcare coverage to be universal is worthy; it’s the objective of the ACA.
The progressive left-side of
the Democratic Party has enthusiastically supported Sen. Sanders’ new,
universal healthcare proposal for the nation. These supporters include 16 other
senators who are co-sponsoring his proposal, six of whom are up for election
next fall, and 119 Democratic Representatives in the House. Sen. Sanders’
proposal, like the previous one he created nearly four years ago, has zero
chance of being considered in this Republican-led Congress because by
themselves the minority Democrats have no legislative power.
Nevertheless, his 2017 Medicare
for All plan is rapidly becoming a necessary political talisman for liberal Democrats,
reflecting a leftward shift of the Democratic Party. Its supporters are a rising
political clan that has defiantly stuck its single-payer healthcare flag into
the political sandbox. These Democrats reflexively prefer the Medicare for All
designation rather than “single-payer” because Medicare is a well-regarded, very
popular government program; even right-wing Tea Partiers have usually avoided
directly denouncing Medicare. In contrast, single-payer frankly connotes BIG
government, something that may appeal to long-devoted progressives, but far fewer
others. So Medicare for All it is.
These are relatively cheery
times for Bernie’s single-payer healthcare backers. Because it has yet to be an
actual piece of legislation, no one needs to provide many details about how it
would be structured or financed and no one needs to round up Congressional
votes.
The proposed bill proffers nothing about how Medicare for All
would be funded. His proposed Act says that American healthcare will be greatly
improved, offers a basic description of the plan and how this improvement would
be implemented. As now described, Bernie’s plan would phase in the provision of
universal healthcare to these hundreds of millions of people over a four-year
period. To say this four-year implementation effort would be a challenge is to
significantly downplay the extent of the new healthcare market’s likely
turmoil.
Sen. Sanders has separately provided
funding “options” that
added up to $1.62 trillion (T) dollars per year during its first decade. I’ll
talk about these later. Critics say this funding level is wholly inadequate.
They have a point, in 2015 the US spent $3.2T
on healthcare ($9,990 per person), representing an all too impressive 17.8% of
our GDP. Sen. Sanders’ funding options would cover just 50.6% of current
healthcare expenditures.
I believe Bernie’s’ new
Medicare for All plan can serve an important purpose to muster Democrats into
action amid the Republican’s fusillade of ill-considered efforts to replace
Obamacare. The Graham-Cassidy bill is merely the latest and most contemptable,
which is saying something, but not the last. However, I fear that by making
Medicare for All the official Democratic plan for fixing American
healthcare (that in this case means completely retreating from the ACA), it
could become a modern-day Cross of Gold for Democrats in next year’s elections.
At the July 1896 Democratic
National Convention William Jennings Bryan delivered one of the greatest
political speeches in American history, his Cross of Gold speech. The defining issue of that year’s presidential
campaign was how to get the American economy out of the continuing, severe depression
that starting in 1893 and bring the nation back to prosperity. The Bank Panic
of 1896 (when many depositors simultaneously asked for their checking account
funds in cash) was emblematic of the severe economic troubles that beset most
Americans that year. The previous three years were equally bleak. There was a
bank panic in 1893, one-quarter of US railroads – then the new technology
sector – declared bankruptcy (including the Pennsylvania Railroad), Wall Street
stocks dropped precipitously, a series of violent labor strikes occurred and
unemployment rose to between 12% and 14.5% in the election year, unemployment
in some cities was twice as high. And we think the 2007-09 recession was bad.
William Jennings Bryan was a
populist who supported “free silver,” farmers and factory workers. He decried
big business and the gold standard that he believed had largely caused the bank
panics and depression. His mesmerizing nomination speech at the Convention
concluded with the often-quoted phrase, “You shall not crucify mankind upon a
cross of gold.”
His speech propelled him to
the Democratic presidential nomination. He lost to Republican William McKinley
on November 3 by 95 Electoral College votes. William Harpine, a noted historian
who has studied Bryan’s candidacy and the 1896 campaign, said
“Bryan's speech cast a net for the true believers, but only for the true believers. By appealing in such an uncompromising
way to the agrarian elements and to the [American] West, Bryan neglected the
national audience who would vote in the November election.” In a real sense,
Bryan’s populist Cross of Gold speech was the glittery vein that led to the
realigning 1896 election, which kept the Democrats outside the White House for
28 of the next 36 years.
The 2016 election was
certainly a realigning one, at least in the initial nine-months of Mr. Trump’s
besotted presidency. If the Democrats rearrange their policy priorities around
a progressive, true-believer single-payer healthcare system, I find it all too
straightforward to believe it would inimically affect their electoral chances
in 2018 and perhaps beyond.
As a slogan, Medicare for All
sounds more enticing than any of the Republicans’ ideas to “enhance”
healthcare. But in many ways it’s a far more radical departure from ACA than
any alternative yet considered. It would fundamentally restructure our
healthcare system by placing the federal government completely in charge as the
“single payer.” In its expanded role, single-payer healthcare will require far more
tax revenues.
Under Medicare for All the 178M
people who
have healthcare plans either through their employer or the individual market and
the 112M on either Medicare, Medicaid or another public program, there would no
longer be health insurance companies or the current health exchanges providing it.
Private health insurance companies like Aetna, UnitedHealth, Kaiser and Anthem
(Blue Cross/Blue Shield) would entirely disappear and the over 500,000 people
who work in the health insurance industry would mostly be out of their jobs.
When implemented, only the federal government would provide and pay for
individuals’ healthcare. Most beneficially, the 29M people who remain uninsured
would receive healthcare (it’s “for All,” after all).
With Medicare for All, doctors,
nurses, hospitals, pharmaceutical companies and their customers would face a
completely different market with one supplier, different stakeholders, incentives,
operational requirements and regulations. Despite the potential benefits that
supporters proclaim, with a brand-new national healthcare system, the psychic
pain and frustration during its initial operation will be substantial. If you
doubt this, just remember the flawed roll-out of the ACA’s website access to HHS
health exchange.
Under Sen. Sanders’ plan,
individual’s health insurance premium payments would drop to zero for virtually
all people and businesses who offer health insurance for their employees. This
is good, very good. In their stead, the government would pay for all healthcare
expenses via higher taxes.
Unfortunately, these clear savings
may not be that obvious for many people. That’s because the millions of
employees whose healthcare is connected with their job, don’t directly write a
monthly premium check to their healthcare provider. Instead, it’s indirect and
automatically deducted from their paycheck, via the firm’s payroll system. Virtually
all (96%) of
US employees receive their paychecks from a payroll service’s direct-deposit
service.
If employers decide to
increase wages/salaries by the full amount of their premium savings, take-home
pay would be larger, less the increased federal tax withheld.[1]
This is good. But it’s not apparent in Sen. Sanders’ Act that employers would
be obligated to do that. Thus, the premium savings may not be all that obvious.
However, increases in nearly everyone’s federal taxes would be much more noticeable,
if only from the media’s likely substantial attention.
How does Sen. Sanders suggest
his Medicare for All plan would be paid for? Federal taxes would broadly expand
and rise for almost everyone and every business, substantially for some
higher-income people and businesses. The payment options Sen. Sanders’ proposes
include a 7.5% payroll tax increase paid by businesses (except for small
businesses) that could likely reduce people’s premium savings, a 4% personal
income tax premium, probably more for high-income households, a broader and
increased estate tax, a new “wealth tax” levied on the Top 0.1%, a financial
transactions tax and a “one-time” tax on overseas corporate profits.
Unlike now, his Medicare for
All program would operate with an annual budget, a significant change.
Establishing a yearly Medicare budget represents a fundamental modification that
would soon force tradeoffs between services offered and expenses, to stay
within budget. Such a Medicare budget would be subject to political forces that
have been highly skewed away from cost-cutting or limiting what medical
procedures are available to patients. Additionally, because 80% of US healthcare
system spending is
on medical care provided by doctors and hospitals, it’s likely that cutting
healthcare costs will be as torturous and painful as it has been under ACA.
Because of their prominence, reductions in doctors’ and other healthcare
processionals’ compensation would be prime targets for savings.
The American Medical
Association (representing doctors’ interests), the American Hospital
Association (representing hospitals’ interests) and other medical/health lobbies
have been very effective in
preserving their clients’ well-being for decades. As an example, an American
family doctor’s average salary is $207,000, about 160% higher than an English general
practitioner’s operating within the UK single-payer system. Effecting cost
reductions and improved efficiencies with Medicare for All will be
exceptionally tough, just as it has been with ACA. For these reasons Bernie’s
Medicare for All will likely remain fairly pricy.
Thus, if Medicare for All
ever sees the legislative light of day, the adage, healthcare policy always
involves tax policy will hold. Creating the required new and increased taxes
will be highly contentious and broadly disliked. It is the rare citizen who
gladly pays more taxes, especially new ones.
Governments have imposed
taxes since at least Egyptian times, when Pharaohs
used tax collectors then known as scribes
to amass needed money, including from taxes on cooking oil. More recently, American
history is replete with citizens protesting taxes, including the famous Boston
Tea Party in 1773, when the words were uttered, “no taxation without
representation” to dispute British taxes on tea. Our Revolution started two
years later.
In June the media broadly
announced the results of a Kaiser Family Foundation Health Tracking Poll that
indicated there was a modest increase in the public’s support for single-payer
health insurance to a majority; 55% of respondents said they were in favor of a
government-based national health plan (single-payer/Medicare-for-all), 40% were
opposed. Less reported was that the slim, “in favor” majority was quite fragile
and disappeared when those people in favor were told that opponents might state such a plan would either ”give the government too much control over
healthcare” or “require many Americans to pay more in taxes.” Respondents in
favor of Medicare for all then changed their mind; opposition to single-payer increased
and became a 62% majority of respondents (from hearing about more government
control) and increased to 60% (from more taxes).
Significant popular
opposition to single-payer healthcare and its perceived large costs have halted
each of three liberal, blue states – California, Colorado and Vermont – from
implementing their state-wide universal healthcare plans. A single-payer bill,
the Healthy California Act, was introduced in the California Legislature this
spring but was later dropped after the bill’s hefty anticipated costs – $400B
per year – became known and opposition grew. I have previously discussed
California’s fractured initial foray into single-payer healthcare. A Colorado single-payer
referendum last November was decisively voted down 79% to 21%. Issues included
an additional 10% payroll tax to fund ColoradoCare and how Medicare patients
would be served.
Finally, in 2011 Bernie’s
home state legislature passed the structure for a Vermont single-payer
healthcare system, the first and only state to do so at this point. But three
years later the legislature abandoned the effort because they couldn’t figure
out how to finance it. Experts had estimated that the system would require
state taxes to double, roughly $2B in extra tax revenues.
Could Medicare for All be
another Democratic cross of gold? I believe it’s a risky, radical policy position
for Democrats to take because it would run completely counter to the tamer, more
broadly-accepted approach of improving the existing ACA. Appealing to voters
for at least a $162B tax increase for the initial decade of Medicare for All
will be an election-losing fantasy that, like William Jennings Bryan’s defeat,
could lead to longer-term negative consequences. Democrats should remember what
happened 121 years ago. Lashing themselves to a cross of golden healthcare is a
mistake.
[1]
It’s not clear whether the Medicare for All Act’s increased payroll tax would
preserve the substantial tax-break businesses have long received by paying for
employees’ healthcare expenses with pre-tax dollars. This tax-break has been
estimated to be $250B per year, probably the government’s largest single
subsidy, more than 60% larger than the mortgage interest deduction subsidy.
