According to a new study by economists for the University of Massachusetts Political Economy Research Institute (PERI), Medicare for All is not only economically viable, but it could save the United States trillions of dollars.
The new study, released Friday at the Sanders Institute Gathering, outlines seven major aspects of transforming the U.S. health care system along with detailed instructions on how to move us to true universal health care. The report then details universal health care’s impact on individuals, families, businesses and government.
The biggest question about Medicare for All has long been “How do we pay for it?” Well according to Robert Pollin, economics professor at the University of Massachusetts Amherst and lead author of the paper, “It’s easy to pay for something that costs less.”
The 200 page paper analyzes Senator Bernie Sanders’ Medicare for All Act of 2017 and finds “based on 2017 U.S. healthcare expenditure figures, the cumulative savings for the first decade operating under Medicare for All would be $5.1 trillion, equal to 2.1 percent of cumulative GDP, without accounting for broader macroeconomic benefits such as increased productivity, greater income equality, and net job creation through lower operating costs for small- and medium-sized businesses.”
“As of 2017, the U.S. was spending about $3.24 trillion on personal health care—about 17 percent of total GDP. Meanwhile, 9 percent of U.S. residents have no insurance and 26 percent are underinsured—they are unable to access needed care because of prohibitively high costs,” says Pollin. “Other high-income countries spend an average of about 40 percent less per person and produce better health outcomes. Medicare for All could reduce total health care spending in the U.S. by nearly 10 percent, to $2.93 trillion, while creating stable access to good care for all U.S. residents.”
The report states that Medicare for All would reduce annual health care spending to $2.93 trillion from the current level of $3.24 trillion. Currently, public health care revenue sources provide about 60 percent of U.S. health care financing. The remainder of the money needed to pay for Medicare for All, after removing other costs attributed to the current system, would “leave a gap of $1.05 trillion.” Researchers propose that this could be raised by doing the following:
- Continuing business health care premiums, but with a cut of 8 percent relative to existing spending per worker. Businesses that have been providing coverage for their employees would thereby see their health care costs fall by between about 8-13 percent. ($623 billion)
- A 3.75 percent sales tax on non-necessities, which includes exemptions for spending on necessities such as food and beverages consumed at home, housing and utilities, education and non-profits. The researchers include a 3.75 percent income tax credit for families currently insured by Medicaid. ($196 billion)
- A net worth tax of 0.38 percent, with an exemption for the first $1 million in net worth. The researchers state that this tax would therefore apply to only the wealthiest 12 percent of U.S. households. ($193 billion)
- Taxing long-term capital gains as ordinary income. ($69 billion)
“Medicare for All will produce large cost savings for both businesses and households,” says co-author Jeannette Wicks-Lim, associate research professor at PERI. “Under our proposal, all businesses that now provide health care coverage for their employees will receive an across-the-board 8 percent cut in premiums. For families, our results show that Medicare for All will promote both lower average costs and greater equity. For example, middle-income families who now purchase private insurance on the individual market would see their health care costs fall by an average of 14 percent under Medicare for All.”
Jeffrey Sachs, public policy expert and University Professor at Columbia University says the study is “the most comprehensive, detailed, authoritative study ever undertaken of Medicare for All.” Sachs also says that the study shows Medicare for All “offers a proven and wholly workable way forward.”
William Hsiao, K.T. Li Professor of Economics at the Harvard University T.H. Chan School of Public Health, said the study “presents an objective, unbiased, comprehensive and thorough economic analysis of Medicare for All.”