I confess to being a die-hard “Hamilton” fan — so much so that I cannot help but view our current political discourse through that lens. At first glance Bernie Sanders might seem most like the main character, the founding father who wanted to expand the role of the federal government. However, Senator Sanders is no Alexander Hamilton; at least Hamilton’s policies made economic sense.
Sanders’s health care platform calls for the United States to transition its hybrid public-private system to a single-payer one in which health care is publicly financed by the government. Though the senator calls his plan “Medicare for All,” his program would be much more generous. Under his national health insurance program, or NHI, co-pays, deductibles and other forms of cost-sharing would be eliminated and insurance would be comprehensive.
On the surface, Senator Sanders’ plan sounds great, but the common adage holds true here: if it sounds too good to be true, it usually is. Upon closer scrutiny, it seems less and less plausible. Sanders predicts that a single-payer plan can cut overall health care spending by 20 percent over a decade while simultaneously adding 29 million previously uninsured individuals into the health care system and increasing benefits. The only nation in recent history to have cut health care spending by that much is Greece — hardly an example of responsible fiscal control. Meanwhile, Sanders would eliminate cost-sharing which would inevitably lead to higher demand. That combined with the lavish all-inclusive care that the senator promises makes his cost-cutting promise an implausible act of fiscal acrobatics.
On the surface, Senator Sanders’ plan sounds great, but the common adage holds true here: if it sounds too good to be true, it usually is.
Even if those savings were to happen, the majority would come from cutting payments to doctors and hospitals. Medicare keeps its purse strings tight by reimbursing doctors just 80 percent of what private insurers pay them. Making this universal would be, in effect, a drastic pay cut for an industry that employs nine percent of American workers. Cuts of that magnitude would shutter hospitals and strangle the research and innovation that make advances in care possible.
Sanders’ draconian tax policies would raise less revenue than he needs to fund his massive spending increases. Under the candidate’s plan, the wealthy (those making $250,000 or more a year) would face a 40 percent increase in taxes. While the revenue maximizing rate — the percentage at which the government gains the most revenue — for higher income brackets would be roughly an effective rate (not to be confused with the marginal tax rate) of 63 percent, the Senator proposes the equivalent of 73 percent after state and local taxes.
For capital gains, the optimal rate is an even lower 28 to 32 percent. Economists agree that capital gains should be taxed lower than income in order to encourage investments that would benefit the economy overall, a sentiment reflected in public policy around the world. Sanders throws that reasoning out the window by proposing the highest capital gains rate in the world. Such a policy would have the double bonus of hurting investment and raising less government revenue. In the words of “Hamilton,” Sanders’ tax policy, far from being a financial diuretic, would be an economic sedative.
Economists agree that capital gains should be taxed lower than income in order to encourage investments that would benefit the economy overall, a sentiment reflected in public policy around the world.
Given all those factors, it should be no surprise that the Sanders health care plan would cost much, much more than promised. A study by Kenneth Thorpe, a health economist at Emory University, estimates that the NHI would actually cost $2.5 trillion per year, leading to a whopping $1.1 trillion deficit for the program. In context, that deficit alone is more than the federal government spends on defense, education, scientific research, transportation and infrastructure combined. The Council for a Responsible Federal Budget estimates that Sanders’ plan would irresponsibly balloon the federal debt up to 150 percent of GDP in a decade.
To compensate, Sanders’ 6.2 percent payroll tax for health care would have to increase to 14.3 percent, and the 2.2 percent income-based premium would increase to 5.7 percent. This would have to be done while retaining the extravagant income/capital-gains tax rates that the senator proposes. These proposed payroll tax increases would disproportionately affect middle-class and working-class Americans. Most economists agree that the burden of payroll taxes, even the share employers pay, fall almost exclusively on employees themselves in the form of lower wages.
For many employees in small businesses, the new tax would essentially become a cut in wages. In practical terms, this would mean that 71 percent of working households that currently have private plans and 85 percent of those on Medicaid would pay more for insurance under a single-payer system. For a program that supposedly helps lower-income working families, the Sanders health care plan would fail spectacularly.
The Green Mountain State’s proposed plan would have required an 11.5 percent business tax and a graduated progressive tax of up to 9.5 percent on individuals.
Ironically, the most prominent example of why single-payer would not work comes from Bernie Sanders’ own state of Vermont. The Green Mountain State’s proposed plan would have required an 11.5 percent business tax and a graduated progressive tax of up to 9.5 percent on individuals. Governor Peter Shumlin, an ardent supporter of publicly-financed health care, admitted that “the potential economic disruption and risks would be too great for small businesses, working families and the state’s economy.” If such a plan could not work for Vermont, one of the most receptive states in the nation, then how can such a plan work for the entire country?
The Affordable Care Act, which mixes both public and private health insurance, seems downright conservative in comparison to a single-payer system. Yet even that law has faced a rocky implementation process as the health care system struggled to adapt. Imagine the even greater shock of redirecting trillions of dollars of health care spending while simultaneously expecting little to no economic repercussions. It should come as no surprise then that even economists like Kenneth Thorpe, who actually helped spearhead single-payer health care in Vermont, have voiced their skepticism.
Imagine the even greater shock of redirecting trillions of dollars of health care spending while simultaneously expecting little to no economic repercussions.
We should look at practical solutions instead of focusing on a supposed panacea that would be impractical and hurt our economy. To paraphrase the immortal words of George Washington in the musical “Hamilton,” “Dreaming is easy, implementing is harder.”
Calvin Chiu remains an advocate for common sense, and a die-hard Hamilton fan.
“Impractical”? Mr. Chiu declines even to hint at the impracticalities (putting it euphemistically) and inequities of the current system. The direct cost of long-established single-payer systems in other countries is roughly 40-50% cheaper than health care in the US, and those systems generate equal or better outcomes on aggregate. Those results sound practical to more than a few people. The moral cost of the US system is quite the impracticality in its own right. And, to confine myself to just one more, the anemic rate of small-business formation over the last couple of decades in the US is another serious… Read more »
There are significant differences between the United States and “long-established single-payer systems in other countries” which make such statements false analogies. To focus on the second half of that, here’s the list of countries that actually have single payer as of 2014: Norway, UK, Japan, Kuwait, Sweden, Bahrain, Brunei, Canada, UAE, Finland, Slovenia, Italy, Portugal, Cyprus, Spain, and Iceland. Those 16 countries combined have a total population of about 371 million people and an average of 23 million per. Take out the outlier Japan (127 million) and the average plummets to 16 million. The US has about 320 million people.… Read more »
That’s the spirit, Chiu, tell us we’re different, that we’re too big. The advantages of scale are supposed to scare us off? That’s deep. Medicare, notwithstanding all its imperfections, already amounts to a version of single-payer for those above 65, which is no small pond. And your other concern is for insurance industry jobs? “Union jobs”? Really? The health insurance companies are loaded with union labor? We’re supposed to worry that health insurance and billing jobs would evaporate in a transition to Medicare for all? We’re crying already. You’d rather have our society maintain a system bloated with unnecessary labor,… Read more »
Reports of my supposed intellectual deficiencies are greatly exaggerated. I’m not sure what led you to assume that the person who disagreed with you in the comments could have only been me, but we’ll set that aside. But seriously, it reflects extremely poorly on you when you choose instead to attack the person you disagree with instead of the argument. Having said that, let me try to answer your points: 1. I don’t disagree that the current health care system could use improvement. We can definitely do a much better job of getting more people insured, but that issue isn’t… Read more »
Hell yeah Calvin, this was an excellent article and an excellent response. The bigotry and self-righteousness emanating off the individual that trolled this post is just superb.
How much heroin is in your system? Your thinking is why this ass clown has a following, peanut allergies adhd gluten intolerance Starbucks…what is warping these kids brains today? Other countries? Christ almighty STOP watching the fucking daily show pick up a calculator and a history book you raging mongaloid…everybody’s already fucked with obozos SHIT plan…when you start working for a living you’ll finally get it.
What about the tax dollars that Bernie Sanders proposals will generate for the IRS? The lowly 3% tax Bernie wants to impose on Wall St speculation will generate 300 billion dollars in revenue alone. Bernie’s plan for higher education only costs 70 Billion nationally. Leaving, uhm, 270 billion dollars in excess revenue? That plan took two seconds to explain… Bernie Sanders is clearly the correct choice, and I am not afraid to take on the scrutiny as an author.. Also, not all economists agree on Bernie Sanders Health Care reform. Plenty of well published, easily read authors give a much… Read more »
Riley Brann – Author
300-70= 230 billion (not 270) in “excess revenue” you stupid troll.
Obamacare was just another corporate empowerment (of insurance, hospitals, pharma) at the expense of taxpayers (the middle class in particular). As always, I’m sure the politicians got their palms greased a little to sell out their fellow Americans. My wife and I now spend about $5,000/year more on health insurance than we did 8 years ago and are required by law to do so.