Financing Medicare For All

If you only read mainstream media you’d think Bernie Sanders’ Medicare for All bill was terrifyingly expensive. An opinion piece behind the paywall in the Wall Street Journal cites a couple of studies with huge headline numbers like $2.5 trillion dollars in the first year, from the Urban Institute. Taxes will soar, government takeover of health care blah blah blah. It comes from centrist Democrats like Jonathan Chait and Ezra Klein who I saw in an appearance on Seth Meyer’s show. Here are two things to bear in mind in self-defense.

1. In 2015, we spent about $3.2 trillion on health care in the US. There is a cool graphic here showing where it was spent and who paid that amount. Maybe the cost of health care covering everyone for the kinds of things the Affordable Care Act requires would cost more than that. (The Sanders Plan covers other services as well as those under the ACA, but let’s ignore that because I can’t find numbers.) We calculate the additional amount we would need by adding the cost of all uninsured people and the cost of the care that people with insurance can’t afford because of deductibles and other co-pays, and subtracting the savings from the new plan. Any analysis that doesn’t start with this is bullshit.

It’s true that the Sanders plan would change who pays and how much, so someone would have to redo that cool graphic I mentioned. Some businesses would pay more, others less, and there would be a change in corporate taxation as deductible costs of insurance change. Some individuals would pay more and others less. But whatever those changes might be, the amount we need to raise isn’t frightening, and practically everyone will be better off.

It’s easy to see the savings from negotiating drug prices, lowering the reimbursement to doctors and hospitals, reducing excess profits from the health insurance companies, and reducing the costs of administration throughout the health care business.

It’s also easy to see that the additional costs are not that high. Approximately 9.1% of us were uninsured in 2015, so the cost might be as high as 10%, or $320 billion. That doesn’t seem too terrible when the savings are deducted. It will be easy to finance that if we want to. I have a long list of things to cut if anyone cares, starting with dismantling the carceral state.

2. We need to think clearly about taxation. We live in a fiat money system; the US is sovereign in its own currency and cannot go bankrupt. I’ve read Modern Monetary Theory by Randall Wray and many shorter pieces and I am convinced. I could make an interesting argument from MMT about this whole matter, but I won’t and I not going to focus on that. If single-payer a hard sale, convincing the devotees of Econ 101 (course title: My Neoliberalism) about MMT is hopeless. Actually with the excellent Stephanie Kelton as a teacher and leader I could well be wrong. Check out this on the Twitter, and follow her if you don’t already.

I agree with Warren Mosler, another MMT theorist, that taxes for revenue are obsolete. But that doesn’t mean that taxes are obsolete. Quite the contrary. Mosler quotes from a 1945 speech by Beardsley Ruml, chair of the New York Fed, to the American Bar Association. Ruml gives four grounds for taxation other than revenue:

1. As an instrument of fiscal policy to help stabilize the purchasing power of the dollar;

2. To express public policy in the distribution of wealth and of income, as in the case of the progressive income and estate taxes;

3. To express public policy in subsidizing or in penalizing various industries and economic groups;

4. To isolate and assess directly the costs of certain national benefits, such as highways and social security.

We can make a case for taxes and other measures to support Medicare for All relying solely on those four principles, without explicitly discussing MMT. If we do that, we lay a foundation for future tax issues, and for a sensible discussion of tax reform more broadly. I have a list of tax changes that will meet those standards. How about that NASCAR deduction for a starter. We raise a bit of money and get rid of a bit of corruption with one change.

This is a great teachable moment for MMT, just as the government shutdowns were with the heated arguments about the trillion dollar coin. I know Kelton and others will push on the MMT side. We need to win this, and we can’t afford to fight on two fronts. In particular, it isn’t helpful to attack people who don’t want to argue about MMT on the way to fixing our health care system. People like me.

Notre Dame undergrad (math); JD, Indiana University at Bloomington; 1st Lieutenant, US Army.; private practice in corporate and securities law; Assistant AG in Tennessee for consumer protection and securities; Blue Sky Securities Commissioner, Tennessee; private practice, bankruptcy and corporate law.

I have had a lifelong interest in economics. For most of my career, that interest was practical, focused on the problems in front of me. Lately I have been more interested in economics as a theory, especially its impact on the lives of people like those I met in my bankruptcy practice, and on the politics of money in the US. I also enjoy reading philosophers, starting in college and steadily expanding my reading ever since. I wrote at FireDogLake for a number of years.

Generally, I think the problem facing the US is the dominance of neoliberal discourse. I think it clouds the vision, and limits the kinds of problems that can be identified and solved. For example, the existence and danger of climate change can easily be identified in a scientific discussion. However, the problem does not fit the neoliberal discourse because science insists that the pursuit of individual and corporate self-interest will lead to devastation. In neoliberal discourse, the pursuit of self-interest always leads to Eden.

The neoliberal project has two prongs. One is the police function of crushing dissent and alternative views. The police function is provided by government agencies and private and institutional actors. The counterpart is the economic system , which is operated by government and by private and institutional actors. Some of these actors operate in both spheres. I focus on the second prong.

16 replies
  1. Rapier says:

    I really want to be nice but reading MMT and letting that set monetary matters is, stupid, ignorant, insane…..I could go on. Not that the current system of endless credit expansion is the answer. There is no answer, if the question is will the planet survive by dint of monetary means. Monetary means are the road to hell.

    Put somewhat differently MMT and the current unlimited credit expansion models are based in the end on the notion that human want and meeting human needs has always been a matter of a shortage of money.

    More money will not save us. Just the opposite.

  2. wmd says:

    Isn’t it time that we acknowledge loss of aggregate demand has happened in 21st century U.S.? Say’s law is demonstrably false as was known to Say’s himself, but the austerity brigade can be counted upon to scream inflation whenever measures to bring demand back are discussed.

    Supply does not create it’s own demand. The broken window fallacy is a parable for the austerity crowd; the truth is the demand created does create economic benefit.

    Same applies to Medicare for All.

  3. SpaceLifeForm says:

    Where econ problems lie. Note the players. Note that insurance, banking, big pharma all in bed together, and it is all about impoverishing the 99 percent.

    Expansion of fiat money only leads to more impoverishment, and more control by DS.

    https://theintercept.com/2017/09/17/goldman-sachs-gary-cohn-donald-trump-administration/

    STEVE BANNON was in the room the day Donald Trump first fell for Gary Cohn. So were Reince Priebus, Jared Kushner, and Trump’s pick for secretary of Treasury, Steve Mnuchin. It was the end of November, three weeks after Trump’s improbable victory, and Cohn, then still the president of Goldman Sachs, was at Trump Tower presumably at the invitation of Kushner, with whom he was friendly. Cohn was there to offer his views about jobs and the economy. But, like the man he was there to meet, he was at heart a salesman.

    On the campaign trail, Trump had spoken often about the importance of investing in infrastructure. Yet the president-elect had apparently failed to appreciate that the government would need to come up with hundreds of billions of dollars to fund his plans. Cohn, brash and bold, wired to attack any moneymaking opportunity, pitched a fix that would put Wall Street firms at the center: Private-industry partners could help infrastructure get fixed, saving the federal government from going deeper into debt. The way the moment was captured by the New York Times, among other publications, Trump was dumbfounded. “Is this true?” he asked. Was a trillion-dollar infrastructure plan likely to increase the deficit by a trillion dollars? Confronted by nodding heads, an unhappy president-elect said, “Why did I have to wait to have this guy tell me?”

    Within two weeks, the transition team announced that Cohn would take over as director of the president’s National Economic Council.

  4. Cujo359 says:

    re: MMT, I usually just tell people that the federal government can’t run out of money, because the Constitution gives it the sole right to issue US money and determine its value*. If anyone doesn’t understand that, I ask them if they could legally print all the money they wanted, or could use their smart phones to make their bank balance whatever they wanted, would they ever run out? Obvious answer is that unless you want to run out of money or go insane, you won’t. People usually understand that.

    Tell voters this whenever there’s another “debt crisis” looming in DC, and I think they’ll get the notion that whatever Congress is worried about, it isn’t running out of money.

    MMT is helpful for explaining why using government spending to create money isn’t a bad thing. No, it doesn’t have to cause inflation, it doesn’t have to make our money worthless, etc. MMT also makes the case that deficit spending is a good thing in our current circumstances, and is generally not to be feared.

    * and, of course, it pays its debts in US dollars.

  5. Evangelista says:

    Ed,

    A quick economic point regarding your statement, “Approximately 9.1% of us were uninsured in 2015,”:

    Deductibles are uninsurings.

    If you have an insurance ‘plan’ and that ‘plan’ assigns a deductible, up to and including the stated amount of the deductible you are uninsured.  In that range, or band, you are on your own.  Your insurance ‘plan’ is, while your expenses are below the deductible, in ‘hiatus’.  You are uninsured (except for having a little card saying that you have bought insurance and so are ‘in compliance’ with any bureaucratic rules saying you should have, even though the rules, and the card, provide nothing to anybody except statistical placement for you in statistical listings of “insured persons”).

    To hammer the meaning of this home, when your insurer wants to lower its contractual insuring obligation to increase its profits it needs only increase the range of your uninsured-ness by increasing the ceiling level of your ‘deductible’.  For example, if you were last year not insured for medical expences below $2500, and so, had to pay for yourself your own medical expences between $0 and $2500, to dodge more obligation your insurer could, this year, increase your ‘deductible’ amount to, say, $6000.  This year, until you have paid out $6000 for your own medical expenses you have zero insurance coverage.

    If you lose your job and do not have $6000 to pay for medical expences, you have no insurance, even if your premiums to your insurer might be paid.

    Before anything can be done more than only more bullshitting around about ‘inurance coverage”, for anybody, the basics and bottom-line facts the bullshitting is purposed to covering up must become recognized.  Until then all the talk is all talk, with, at the poverty-line level, insurers stealing money from the least able to afford with promises they hollow out to avoid having to provide anything in return.

  6. pseudonymous in nc says:

    The median per capita healthcare expenditure in OECD nations excluding the US is around $5,000 per year. That encompasses a lot of very different populations with different universal healthcare systems, but the clustering around that number suggests that people in developed nations are mostly the same from a medical perspective, and medical practice in developed nations is mostly the same, which ought not to be a surprise. It should be incumbent on defenders of the status quo to spell out what the US gets for its extra $4,000 per capita, because it sure as hell isn’t visible to most people.

    There is a legitimate question about the loss of many middle-class jobs doing the stupid shit of American healthcare under any kind of sane universal system. If competitive medical coding goes away because of single-tariff billing — pretty much a core element of any universal system — then coders need to find other jobs with not-very-transferrable skills. My gut feeling there is “too bad, so sad.” But America is bad at getting rid of stupid inanimate objects — e.g. the penny — so imagine how bad it will be at getting rid of stupid jobs.

    • Ed Walker says:

      This is an important point, which Lambert made over at Naked Capitalism in his latest post on single-payer. Two things. First, there will be job loss, but I can’t find estimates. remember that Medicare and Medicaid use insurance companies to process claims. That part of the business won’t change, and might even grow as new accounts are added.

      Also under Bernie Sanders’ plan, insurance companies will be able to sell the equivalent of medi-gap policies, so that part of the business won’t change much at first.

      I don’t know what other losses or gains there might be. I do know that customer service jobs will be added. I think many hospitals and medical practices will want to use this as an opportunity to retrain their better workers into medical workers to handle the increase in patients.

      Maybe I’m too sanguine about this, though.

    • Cujo359 says:

      Since the price for keeping those jobs is tens of thousands of Americans annually who die because they don’t have access to health care, I’m in the “too sad” group, too, I suppose.

       

      However, we can also look at this as yet another example of liberals/progressives making changes that cost jobs, then leaving the people who had those jobs to fend for themselves. This is why one of my requirements for politicians who want my vote is that they have to, in one way or another, support policies that will result in full employment. These days, few Democrats do.

       

  7. Jim says:

    One rather simple point to tell the non-specialist, i.e. the people:  Your taxes will go up, but your insurance premiums will go to zero.  Certainly an acceptable trade-off.

  8. Willis Warren says:

    Payments have nothing to do with how health care is billed, beyond theoretical supply/demand models that don’t seem to hold water when it comes to healthcare. Healthcare is too expensive because Doctors and hospitals charge too much.

    The “how are we going to pay for it” crowd doesn’t seem to realize there’s a ton of empirical data in the world to answer that question. Or, I should say, they don’t care. The Kochs just told Republicans to pass Repeal and Replace or they get rid of the “piggy banks” or whatever. I haven’t read beyond the headlines, but I feel I’ve done my due diligence there already.

    I’ll read the MMT links, thanks for those.

  9. orionATL says:

    so the old red-faced windmill walks thru the village piping a tune and, sure enough, a bunch of good-hearted dem villagers fall in behind him mumbling their sureties.

    as some sort of high-in-the-sky asperation to worship, a government run medical payout system does no harm to worship. as a matter of current practical politics it is as politically useless as piping about income inequality was last year.

    – right now dems have a major campaign issue being handed to them – the destruction of the affordable care act and the medicaid extensions that came with it. these are two birds in hand worth dems efforts to fight for because they have immediate impact on 10’s of millions of americans. dems do not need to go out and set up a new, strange (to the voter) fight when they have the good aca fight provided them.

    – the affordable care act now has 7 years worth of experience administering a complicated nation-wide medical payout system. it would be callous (and highly inefficient) to toss this long experience and go off and begin, merely begin, to set up a different national medical payout system. and no, a single payer system is not anything like a scale-up of affordable care + corporate provided care.

    – most americans get their insurance from organizations they work for. how smart is it politically to tell them that the dem party is proposing to replace their penn state, general motors, electricians union, ibm, state teachers, dept of defense health insurance with a brand spanking new health care payout system with the federal government in charge?

    – why would any sane voter who has watched what the republican party in house, senate, supreme court, and presidency have done to the affordable care act/medicare be willing to trust the federal (and red wing states if repubs have anything to say about the matter) government to set rules for and run a national health payout system? anybody watch social security politics? retire at 67?

    – there is merit in having several to many different organizations (corporations mostly) managing a nationwide health insurance program as opposed to having a single huge, usg, organization. centralized, top-down planning is unwise for several reasons, not least because it slows both innovation and meeting special needs.

    – regulation is essential to any competently run health insurance system. we already have 7 yrs experience with aca insurance regulations to build on.

    – it is annoying to see our resident state planners upending long-in-place health insurance matters that mean the difference between being sick or not, being dead or not, or being in medically-induced financial trouble or not, just for the benefit of “greater efficiency in health delivery”. the goal should be health care for everyone with NO disruption in payout delivery.

    – forget MMT. it is a beautifully worked out and convincing set of economic understandings. but you don’t need it to know that governments can print all the money they want. just think of war. anytime we go to war we never think of the consequences, only of what do we need to build or buy to win. we can always afford war, say a 16 years and ongoing war in afghanistan.

    – always remember that when a republican tells you “we can’t afford it.” he is just using on of the common controlling arguments we use everyday with each other – “i think we need some new kitchen appliances.” “not now, honey. we can’t afford it.”

    – i see no reason why all health insurance corporations should not be chartered as non-profits only. there’d still be lots of money to pay corporate heads, but wall street and pension funds would be out of the game of squeezing health payment organizations.

    – the goal of health insurance policy right now should be everybody insured for all medical needs including, need i add, contraception, abortion, and entirely personal decision making about when and how to end one’s life.

  10. greengiant says:

    It is said that health care costs in the US are 3 times what they should because of lack of enforcement of anti trust rules against the differential pricing used as well as suffered and government mandated monopolies. Such a sweet deal vulture capitalists are all over it. In this context Medicare is a form of price control. Average Medicare billings for 57 million people are around 500 dollars a month. However the privatized Medicare, Medicare Advantage is around 900 a month because they are on the “honor” system with no effective audits.

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