Financing and savings ideas for Elizabeth Warren Medicare- for- All plan bear no relation to reality!
By Wall Street Journal Editorial Board
Nov. 3, 2019
Now we know why Elizabeth Warren took so long to release the financing details of her Medicare-for-All plan. The 20 pages of explanation she released Friday reveal that she is counting on ideas for cost-savings and new revenue that are a fiscal and health-care fantasy.
You certainly can’t criticize the new Iowa Democratic caucus front-runner for lack of ambition. Despite criticism from fellow Democrats, she is sticking to her plan for a government takeover of American health care, including the elimination of private insurance that 170 million or so Americans now have. She continues to claim that this will cost “not one penny in middle-class tax increases.” She walks on water too.
Start with the overall fiscal math, which by itself is staggering. She concedes that her plan will cost only “slightly” less than the $52 trillion that the U.S. is expected to spend on health care in the next 10 years. She deducts from that what the feds now spend on Medicare and Medicaid, plus $6 trillion that the states contribute to Medicaid, the state-federal children’s health program and government worker benefits.
That leaves $30 trillion to finance, but Senator Warren waves her wand and says the bill will really be $20.5 trillion. She makes the rest vanish by positing magical savings from things like “comprehensive payment reform.” One of her ideas is the hardy perennial known as “bundled payments,” which have failed to reduce costs as promised by Obama Care.
She says hospitals, under Medicare-for-all, would be reimbursed at an average of 110% of current Medicare rates, which is supposed to address the criticism that Medicare currently under-compensates patient care. But hospitals now rely on private insurance payments to stay in business, and 110% of what Medicare now pays will hardly be enough to compensate for the loss of that private money.
Amusingly, she also proposes savings from “restoring health care competition.” Because everyone will have good insurance, she says, “providers will have to compete on better care and reduced wait times in order to attract more patients.” But if government is controlling all prices and reimbursements, what incentive is there to compete at all?
There’s a reason every government-run health system in the world rations care. Ms. Warren won’t admit this explicitly about her brave new health world, but she comes close. If U.S. health-care spending exceeds GDP growth, she says, “I will use available policy tools, which include global budgets, population-based budgets, and automatic rate reductions, to bring it back into line.”
In a word, rationing. And that’s no surprise, since she credits the advice for developing much of her plan to Donald Berwick. He was an advocate for ObamaCare’s Independent Payment Advisory Board—known uncharitably as the death panel—that Congress repealed last year in a bipartisan vote.
Ms. Warren would also impose foreign price controls on U.S. drug makers, which is why patients in France and the U.K. have access to only about half of new medicines that are available in the U.S. Manufacturers that don’t agree to Ms. Warren’s price negotiation would get whacked with a hefty excise tax on their profits. She also threatens to confiscate their patents.
The details of how she’d pay for the other $20.5 trillion are even more fantastical. Start with her “Employer Medicare Contribution.” Instead of paying employee health-care premiums, businesses would cut a check to Uncle Sam to the tune of $8.8 trillion over 10 years based on what they pay now.
She says per-employee health costs for every employer would remain about the same, but payroll costs of this sort are essentially middle-class taxes on employees. Fixing per-employee business costs at some future date would also be an incentive for companies to reduce their coverage now to reduce future costs.
So employees would get worse coverage than they have now. If this “employer contribution” raises less money than projected, her fall-back is to whack “big companies with extremely high executive compensation and stock buyback rates.”
Meantime, she’d also raise the corporate tax rate back to 35% from 21% and extend it to income earned worldwide with no deferrals for foreign taxes. She claims this would generate $1.75 trillion over 10 years, which is fanciful since it would be an immediate incentive for companies to relocate overseas.
She also doubles down on her plans to soak the rich, assuming there are any left after her other tax proposals. She wants a new annual tax on unrealized capital gains of the wealthiest 1% of households (raising $2 trillion over 10 years), which would mean you owe a tax even if you haven’t sold the asset. She graciously says taxpayers could offset the gains with losses in bad years, but that would lead to extreme revenue fluctuations from year to year.
Ms. Warren has already proposed a 2% wealth tax on assets of more than $50 million, which is supposed to pay for her education, child-care and college-debt forgiveness plans. She now wants to add a 6% annual tax on Americans with more than $1 billion in assets that she says would raise $3 trillion. Most economists, including Democrat Larry Summers, believe a wealth tax would raise far less due to tax avoidance, which is why so many European countries have repealed their wealth taxes.
But, no worries, Ms. Warren would hire a new army of tax collectors to close what she calls the 15% “tax gap” between what people owe and what they pay. The Senator says this will be worth $2.3 trillion in additional revenue. This is another old Congressional standby that never yields what is predicted.
Oh, and she’d save $800 billion by cutting defense spending for Overseas Contingency Operations. Senator Warren calls this a “slush fund,” but it’s really the account to finance current overseas operations as well as readiness. This would return to the Obama years of slashing defense even as global threats from regional powers and new technology are increasing. This is a hyper-fantasy.
The political vulnerability of all this isn’t lost on Ms. Warren’s Democratic competitors. A spokeswoman for Joe Biden said Saturday that Ms. Warren is “lowballing the cost of her plan by well over $10 trillion” and isn’t telling the truth about her taxes “that would come out of workers’ pockets.” The likeliest outcome, if her plan ever became law, would be a value-added consumption tax on the middle class.
Ms. Warren is trying to sell an illusion and make it sound like political courage. Donald Trump’s boast that Mexico would pay for the wall was more believable.
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