The Costs and Financing of Elizabeth Warren’s Medicare for All Plan
Senator Warren has just released new financing details and new cost projections of her Medicare for All Plan. Several weeks ago the Urban Institute released a ten-year cost projection of $34 trillion in new federal funding needed for Senator Warren and Senator Sanders’ Medicare for All Plan. She was challenged by Vice President Biden and Mayor Pete and others as to how she intended to pay for it. She was also challenged as to how to pay for it without raising taxes on the middle class.
She has just released her version of the costs and how to pay for Medicare for All (Warren style) without any increase in taxes for the middle class. Her plan would cover everyone for comprehensive services with no consumer copays, deductibles or premiums. It would eliminate private insurance through employers and individuals; it would end Medicaid and CHIP. It would build on the models of Medicare – fee for service, freedom of choice of providers and federally set reimbursement rates — but not the Medicare Advantage private insurance option.
In essence, she reduces the projected ten-year, new federal costs of the program from $34 trillion to $20.5 trillion and raises taxes on employers, corporations and wealthy individuals to pay for it.
The details and highlights of the federal costs of her newly released plans are as follows.
1. Reduce administrative spending. The Urban Institute analysis assumed 6% administrative spending. Senator Warren’s plan builds on the current Medicare fee for service system’s administrative costs of 2.3%. Savings of $1.8 trillion.
2. Senator Warren would reduce reimbursements for prescription drugs by $1.7 trillion over the next ten years by setting drug reimbursements at the average of Medicare and Medicaid.
3. Senator Warren would set hospital reimbursement rates at 110% of Medicare and doctor reimbursement rates at 100% of Medicare and expand the successful Medicare reimbursement pilots such a bundled rates, ACOs. Primary care reimbursement rates would be increased and specialty care rates reduced. The experts also recommend value based purchasing, global hospital budgets, and population based reimbursement rates (i.e. capitation). Total ten year savings of $2.9 trillion.
4. Program spending growth would be capped at the growth in GDP. Ten-year savings of $1.1 trillion.
5. State and local spending on health care such as the Medicaid and CHIP matches would be captured and used to finance the program. Savings of $6.1 trillion over ten years. This really belongs on the financing side of the equation.
Senator Warren’s financing of the $20.5 trillion in new federal costs is as follows:
1. Employer payroll tax of $8.8 trillion. Employers would pay 98% of what they currently spend on their employee’s health coverage.
2. Employee’s take home pay is increased because they no longer pay their share of health premiums. The federal taxes (at existing tax rates) on this increase in employee’s gross pay equals $1.4 trillion.
3. Taxes on financial sector, wealthy individuals (the Warren wealth tax) and large corporations (repeal of the Trump reductions in corporate tax rates) would generate $6.8 trillion.
4. Better enforcement of existing tax laws (i.e. tax compliance) would generate $2.3 trillion.
5. Immigration reform would increase federal revenues by $400 billion.
6. Elimination of the overseas contingency operations fund produces savings of $800 billion.
References: https://assets.ctfassets.net/4ubxbgy9463z/2Tg9oB55ICu2vtYBaKKcVr/d124e0eeb128ad3a8d8ab8a6ccae44c0/20191031_Medicare_for_All_Cost_Letter___Appendices_FINAL.pdf and https://assets.ctfassets.net/4ubxbgy9463z/27ao9rfB6MbQgGmaXK4eGc/d06d5a224665324432c6155199afe0bf/Medicare_for_All_Revenue_Letter___Appendix.pdf
Prepared by: Lucien Wulsin
Dated: 11/4/19