Bernie Sanders and two economics professors explain the benefits of Medicare for All


Sanders keeps making very clear arguments about its benefits in order to counter the distortions.

Economists Emmanuel Saez and Gabriel Zucman explain how the Sanders’s plan for Medicare for All will result in reduced taxes, because what we now pay in health care premiums are in fact taxes, something that opponents of universal health care plans try to ignore.

A frequent objection to calling health insurance premiums a tax is that people have some choice. Can’t the poor, the argument goes, enroll in cheap health plans? If you start calling health insurance premiums a tax, then shouldn’t we also call spending on food and clothes a tax?

This argument, however, is wrong, because cheap healthcare does not exist. There are cheap meals, there are cheap clothes, but there is no cheap way to treat your heart attack, to cure your cancer, or to give birth. Cheap health insurance means no healthcare when you need it. All wealthy nations, even those that try hard to control costs, spend 10% of their national income on health – the equivalent of $7,500 a year per adult in the United States. The view that healthcare services are like haircuts or restaurant meals – services for which there is a product tailored to any budget – is a myth. Healthcare is like education: everybody needs it, regardless of their budget, but it’s expensive. That’s why all advanced economies, except the United States, fund it through taxation.

The main difference between the insurance premiums currently paid by American workers and the taxes paid by workers in other countries is that taxes are based on ability to pay. The income tax has a rate that rises with income. Payroll taxes are proportional to income, at least up to a limit. Insurance premiums, by contrast, are not based on ability to pay. They are a fixed amount per covered worker and only depend on age and the number of family members covered. Insurance premiums are the most regressive possible type of tax: a poll tax. The secretary pays the same amount as the executive.

This is the context needed to understand the current debate at the heart of the presidential elections. Proposals such as Medicare for All would replace the current privatized poll tax by taxes based on ability to pay. Some believe that it would result in a big tax increase for America’s middle class. But the data show that it would, in fact, lead to large income gains for the vast majority of workers.

Supporters of Medicare for All are right. Funding universal health insurance through taxes would lead to a large tax cut for the vast majority of workers. It would abolish the huge poll tax they currently shoulder, and the data show that for most workers, it would lead to the biggest take-home pay raise in a generation.

How issues are framed goes a long way to determining how people respond. It must be said over and over again: the health care premiums that we pay have to be considered as taxes and must be included in any discussion of whether taxes will go up or down.

Comments

  1. DonDueed says

    The complicating factor is that, for many workers, a considerable part of those health insurance premiums are paid by the employer, and are essentially invisible to the employee. Advocates for universal health insurance should emphasize that fact, and should ensure that in any process of converting from the current system, those company-paid premiums revert to the workers rather than the owners/investors. (Of course some or all of those premiums would be absorbed into the taxes for the universal health program.)

  2. moarscienceplz says

    NPR had a short story on All Things Considered in 2009 that explained how the US ended up with such a byzantine medical insurance system. I’ve forgotten how to copy and embed links on this tablet, but just search for “Accidents Of History Created U.S. Health System”.
    In a nutshell, health insurance was unnecessary for almost everyone prior to the 1940s because Medicine just couldn’t do much for you. Prior to the availabilty of penicillin, if you got sick enough to need to go to the hospital, you usually came out of it in a box.
    But during WWII, there was a labor shortage and a federal restriction on raising wages too much in order to curb inflation. So, many firms started offering free medical insurance to attract talented workers. This became standard for most white collar jobs even in peacetime, and the blue collar workers who had unions eventually got it too. Since non-union minimum wage workers had no political voice, nobody worried much about them.
    Eventually, Medicine got good enough that people had a reasonable chance of leaving the hospital on their feet, but all this new tech was costly and getting ever costlier. Retirees noticed it first, because they were more likely to get sick, and many of them had enjoyed free healthcare when they had been employed, but often lost it when they retired. Older people vote more than younger people, so eventually Congress created Medicare for them. Then, Medicaid was created for some of the poor, and it was now commonplace for many people to have some kind of health insurance, so most of us continued to be unconcerned even as costs kept rising and rising, until we find ourselves in a crisis today. Almost nobody in America even in their wildest dreams would have contemplated a medical system than consumes 10% of our GDP, even just a couple of decades ago, so many of the members of Congress (a lot of whom are quite old, and have really sweet medical insurance for themselves) are just not mentally prepared to even face the problem.

  3. John Morales says

    [anecdote]

    I used to work for the South Australian Government, and all our mainframe shops got outsourced to EDS (Ross Perot’s company) back in 1995. We staff had the choice of redundancy or to work for them — and their sales pitch was inordinately focused on the wonderful health care insurance they provided. None of us really got this emphasis at the time, after all, health care was free (though admittedly, this did not include dental).

    Only years later did I become aware of the USA’s system, and why they thought that was an incentive for staff. Different paradigms.

    (I ended up quitting after a couple of years, their business model was to do what only was necessary and not one iota more, it was just profit profit profit for them, and squeezing the workers to the max, and getting shitty obsolete equipment with which to work — they got rid of the good stuff and we got hand-me-downs. Bloody septics!)

  4. xohjoh2n says

    The complicating factor is that, for many workers, a considerable part of those health insurance premiums are paid by the employer, and are essentially invisible to the employee.

    That just reminds me of the scene from Elysium…

    (Corporate) Android Medic: You have been exposed to a lethal dose of radiation. You will experience catastrophic organ failure. In five days’ time, you will die. […] Please sign this to receive medication. Miporol, extremely potent, will keep you functioning normally until your death. Please take one pill with each meal. Thank you for your service.

  5. flex says

    Having reviewed my yearly benefit package yesterday, I can tell you that every paycheck $300 is taken out by my employer to pay for health care for my wife and I. This does not include life insurance, but does include dental and vision. This does include some money going into an HSA, but with society-wide health care I wouldn’t need an HSA. That’s a cost to me of $7,800/year.

  6. mnb0 says

    “the health care premiums that we pay have to be considered as taxes”
    From a purely rhetorical point of view I think this clumsy. The public won’t buy it, simply because taxes exclusively are associated with governments. Instead I suggest something like “somewhat higher taxes, much lower Insurance premiums”. Because government may be bad, Insurance companies are worse.

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