Elizabeth Warren has tied her political stock to her campaign's ability to come up with a plan to pay for “Medicare for all” that doesn't raise costs for the middle class — a task some budget experts believe is impossible.
After repeatedly dodging questions about whether her proposal would raise middle-class taxes, and receiving a barrage of criticism from her Democratic rivals over her evasiveness, Warren pledged earlier this month to unveil her financing mechanism for the system in “the next few weeks."
Whatever she comes up with is bound to face scrutiny from public finance experts, risking her claim to be the candidate with comprehensive plans for the country’s problems.
“How to pay for her version of ‘Medicare for all’ is complicating things for Warren at the moment, just as other aspects of her campaign appears to be thriving,” said University of Wisconsin-Madison Elections Research Center Director Barry Burden. “In keeping with her identity as having a ‘plan’ for most everything, there is an extra incentive to nail the broad parameters of how her healthcare expansion will work.”
Absence of a funding proposal has already sown doubt in her candidacy. According to Morning Consult polling, 37% of voters think she is being dishonest about how much “Medicare for all” will cost the federal government, the second-highest dishonesty rating among leading candidates behind Joe Biden.
Here are the basic fiscal considerations: A plan along the lines of "Medicare for all" would require an additional $34 trillion in federal government spending over 10 years, according to the Urban Institute, a center-left think tank.
Raising that much would be extremely difficult by any means. Doing so in a way that doesn't leave many middle- and lower-class households worse off makes it far harder.
Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, said funding Warren's plan without higher taxes borne by the middle class would be “impossible.”
“If by ‘Medicare for all’ we mean the legislation that she and Harris and Sanders have cosponsored, that very generous coverage … you cannot finance that from the upper class alone,” Goldwein said.
Goldwein's group, which advocates for lower deficits, estimated this week that funding "Medicare for all" would require a new 32% payroll tax, doubling all individual and corporate income tax rates, or a 42% value-added tax, among other options.
"Medicare for all" advocates have only put forward a few ideas for financing the plan, each of which comes with clear downsides.
One, proposed by University of Massachusetts at Amherst professor and Warren campaign adviser Robert Pollin, would fund the bulk of the program by diverting funding away from many government programs, including healthcare programs that would be redundant under "Medicare for all," such as Medicare and Medicaid, as well as the Department of Veterans Affairs, the Defense Department, workers' compensation, and more.
That would free up $1.88 trillion a year in funding, leaving the federal government to raise, by his estimation, another $1.05 trillion a year to cover the cost of "Medicare for all." Pollin said the remainder could be raised through a 1.8% gross receipts tax — a form of sales tax, or an 8.2% payroll tax on businesses earning more than $1 million and a 0.38% tax on wealthy individuals earning more than $1 million. In that scenario, a 3.75% sales tax would also be placed on non-necessities, but Medicaid beneficiaries would have the option of receiving a 3.75% tax credit when they spend money on essential items like food to be eaten at home, housing, utilities, and education.
“As a political proposition, my own view is that implementing a ‘Medicare for all’ healthcare system should be very popular,” Pollin said.
The big caveat to Pollin's funding proposal, though, is that it is based on an all-in cost of a totally government-financed healthcare system — about $30 trillion over 10 years — that is only about half that of other outside estimates, like that of the Urban Institute, which places the figure at $59 trillion.
Pollin noted that other countries with universal government-financed healthcare, such as Canada, spend less than the United States, justifying a cost estimate of "Medicare for all" in which overall healthcare spending falls. The Medicare for All Act endorsed by Warren, however, calls for health coverage much more generous than that of Canada.
Another approach to financing "Medicare for all," advanced by outside campaign adviser and Cornell law professor Robert Hockett, would be to institute a "public premium" that would be deducted from paychecks. The idea is that premium, which would function the same way as a payroll tax, would replace the deductions from paychecks for today's employer-provided health insurance plans, benefiting workers and businesses — even if the public premium is, in a philosophical sense, a new tax.
“The thing to remember is that employers pay these premia, and what they care about is the amount, not the name,” Hockett told the Washington Examiner. “If I am a CFO and you tell me I can now pay half as much for my employees’ health insurance than I have had to pay over the last 70 years, I’m going to say 'hell yeah,' and won’t care whether you call it a premium or a penguin.”
Yet the risk to the "public premium" approach is that it would result in many low- and middle-income households facing higher costs, on net. That's because payroll taxes, which all workers pay, are regressive: The bottom fifth of households will pay an average of 6.9% of income in payroll taxes this year, versus just 2.3% for the top 1%, according to the Center on Budget and Policy Priorities.
So, the "public premium" plan could result, via higher payroll taxes, in higher net costs for some working poor or middle-class households that today get government-subsidized healthcare.
“If you’re in a Medicaid expansion state, you may not be paying anything now, and if you don't design the tax in the right way, you’d be worse off by paying for something you’d usually get for free,” said Gerald Friedman, an economist at the University of Massachusetts at Amherst, referring to states that expanded Medicaid coverage to more people after being authorized to do so by Obamacare. Friedman is a "Medicare for all" supporter.
It would require a new payroll tax of 32%, equally divided between employers and workers, to finance "Medicare for all," according to the Committee for a Responsible Federal Budget, to add to the 15.3% payroll tax that today applies to most wage income.
“Medicaid beneficiaries would be crushed," said Brian Riedl, a fiscal expert at the Manhattan Institute and a former Senate Republican staffer.
Running a campaign on a proposal that would raise overall healthcare costs for people earning modest incomes, even if just a minority, would be politically difficult.
“If the thesis is that you’re trying to socialize the cost for everybody via a tax increase, and this has been the crux of the debate from Warren, are you going to raise taxes in the working cohort?" asked Lanhee Chen, an expert at the conservative Hoover Institution and adviser to past Republican campaigns. "One of the biggest challenges is — you do expect that working people will pay more in taxes.”
[Opinion: Confiscating wealth of all billionaires wouldn't pay for three average years of 'Medicare for all']