Getting to universal health care (wonky)

Much sturm und drang has attached to Elizabeth Warren's reticence about the financing of a so-called Medicare for All program. So I'll tell you up front that the reason is the optical problem of raising taxes. She has said that total expenditures on health care for middle class people will be less, which is likely true or certainly can be. But some of what people are paying now they aren't even aware that they are paying. This takes the form of employer-provided health care, and that portion of state and federal tax revenues that goes to Medicaid and various subsidies for the health care system. The latter wouldn't really be affected, so let's talk for a moment about employment-based insurance.

This became a thing during WWII when there were wage and price controls, and at the same time for obvious reasons a labor shortage. So in order to attract employees without raising wages, employers offered health insurance, which didn't count against the wage controls. After the war this continued to be popular because the insurance wasn't subject to income tax, so it was a way of increasing compensation at the expense of the federal government. It also tended to tie employees to their jobs, which employers like. Unions also like it because they can claim credit for winning the benefit.

This is not a very smart, efficient or equitable way to provide health care. It leaves out people who work for small businesses that can't offer insurance, people who are self-employed, and people who retire before age 65, and part time workers, among others. As health care has become more expensive, employers have off-loaded more of the costs onto employees through premium sharing, deductibles and co-pays. It is administratively very inefficient. Facing numerous different payers, with different benefits and payment rates, providers have to spend a lot on billing; while insurance companies suck up a lot in marketing costs and profits, while finding sneaky ways of denying benefits. For reasons I won't go into here, it also does nothing to constrain that inexorable growth of health care costs which is ultimately unsustainable.

So a single payer system can eliminate most of the administrative waste (Medicare is far more efficient than private insurance), cover everybody equitably, and provide leverage to restrain costs. However, there will of course be winners and losers. For a green eyeshade, presumably apolitical analysis of the overall cost implications, let us turn to the Rand Corporation. (And anyone who remembers the 60s will be offended by my linking to them.) Anyway, they estimate that because everybody would have health insurance demand for health care would go up substantially. Nevertheless, because of savings in administrative costs overall national health expenditures would increase only slightly, by 1.8%. However, this assumes the government doesn't use it's newfound monopsony power to constrain prices. Here's how they see the distribution of costs changing:



As you can see, your out-of-pocket costs would plummet and your insurance premiums, whether paid by your or your employer, would vanish. However, that Medicare for All line would need to come from somewhere and that would be, yes, higher taxes. If you tell people you are going to raise their taxes, it's hard to get across the idea that they will still actually be saving money. And of course, not everybody will be saving money -- some people will undoubtedly pay more in taxes than they are paying now for health care. The question is who those people will be. There are good arguments why the amount won't be as much as Rand says, and they will be the first to tell you that their assumptions are conservative in not allowing for additional changes to the status quo. Nevertheless, somebody has to pay.

It is true that Warren's proposed tax increases on high income and wealthy people wouldn't cover the whole thing. Politico discusses some of the options in essentially qualitative terms. While their overall tone seems tendentiously negative, I would agree that the political obstacles to these reforms are formidable.

(Note that one of their arguments is fundamentally faulty. They write "Economists say the vast majority of higher payroll taxes would be passed on to workers in the form of lower wages." While this is true [somewhat], the payroll taxes would be replacing the insurance premiums they currently pay, so this would not actually reduce wages. Depending on the specifics, wages could even rise. Again, however, explaining to people that a tax increase will actually save them money is difficult, to say the least.)

We all know that as soon as Warren says she's going to raise taxes, no matter how hard she or anybody else tries to explain that most people will be better off, that will not cut through the din. Especially so since the corporate media will just channel the "biggest tax increase in history" screaming without any context or criticism. So I actually think that running on this proposal is not a good idea.

Just tactically, let's strengthen the ACA, add a public option, and take it from there.