Friday, June 24, 2016

Medicare For All: Clarifying Costs and Benefits

Win or lose in his presidential quest,  Bernie Sanders will have contributed greatly if he convinces Americans that Medicare For All is a good idea.  To date,  however,  he has not done this. 

It does not help that he has grossly understated the tax increases for ordinary Americans necessary to finance his proposed single-payer insurance system.  One does not finance a system accounting for 18% of  the gross domestic product by increasing a family’s taxes by $500, so his claim is not credible on its face.  It invites charges that he is just another demagogue promising to pay for expensive programs by soaking only the rich.  Everyone knows that something sounding too good to be true probably isn’t. 

Speaking frankly about the necessary tax increases would make it harder for Sanders to convince people they will come out ahead financially despite the increased taxes.  But there is actually a very strong case Sanders could make that this would be true for most people. 

The biggest obstacle to convincing people that Medicare For All would save them money is that most Americans grossly underestimate how much medical insurance already costs them.  They only see co-pays,  deductibles,  and the so-called “employee share” of employment based insurance.  But for many people this is a small part of the total cost of their insurance.  Substantial premiums are remitted by employers directly to insurance companies without ever showing up in cash wages and other taxable income.   

This so-called “employer share” is usually misunderstood to mean that the employer is not just remitting the money but is actually bearing the cost. But for the employer this money is not a cost of insurance but a cost of labor.  Like cash wages, the insurance is of great value to employees.  If an  employer paying market wages were to discontinue insurance without raising wages by the amount saved, total worker compensation would no longer be competitive.    

In other words,  employees are really paying—directly or indirectly--- for all of their medical insurance:  typical amounts range from $8,000 per year for individuals to $16,000  or more for family coverage.  So as long as taxes go up by less than this,  people would come out ahead, since all of the costs they are currently paying would disappear.    

Taxes would go up by less because Medicare For All would reduce or eliminate many current costs, thereby reducing the costs of the entire system. Eliminating high-priced executives and corporate profits would produce a small part of the savings.  More substantially,  huge staffs are now employed by hospitals and doctors to deal with complicated and varied policies of dozens of private insurance companies, which themselves have huge staffs processing claims and figuring out excuses for rejecting them.  With only one insurer to deal with,  expensive staffs could be decimated, producing immense savings. 

If Americans understand where their bread is really buttered,  they will support a single-payer system.  Even if he does not become president,  a totally frank Sanders’ campaign can increase national understanding and pave the way for eventual progress.  Win or lose,  he will have made a real difference.

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