‘Medicare for All’ Is A Trap for Businesses and Employees

Some business leaders are hopping aboard the Medicare for All bandwagon. The Business Alliance for a Healthy California, for example, now has 300 businesses calling for universal healthcare.

But any businessman considering getting behind Medicare for All should know the sales pitch is flawed.

The architects of Medicare for All promise everything to everyone. No insurance premiums. No co-pays. No deductibles. No limits on care. For employers, less time and money spent dealing with health coverage.

A deeper look at Medicare for All shows that it will cost businesses a fortune. And their employees won’t like the care they receive.

True, Medicare for All will eliminate the health insurance line item on businesses’ budgets. But it’ll vastly increase their tax bills.

Senator Bernie Sanders, the pied piper of single-payer health care, has floated several ideas for paying for Medicare for All. Among them: a 7.5% employer payroll tax that will extract $3.9 trillion over ten years from employers. Large financial institutions could be hit with $117 billion in taxes over ten years. Sanders has even called for changes to accounting rules that would result in $112 billion in additional corporate taxes.

Those are just the taxes that hit businesses directly. Many business owners take low salaries but realize most of their income as capital gains or dividends. Sanders would raise taxes on capital income for those who make more than $250,000 a year.

Individual employees will not be exempt from Medicare for All’s flurry of new taxes. Sanders proposes to raise $3.5 trillion over a decade by levying a new 4% tax on every American household.

All these new taxes will be insufficient to cover Medicare for All’s tab. Former Medicare trustee Charles Blahous estimated that Sanders’s 2017 Medicare for All plan, which covers fewer benefits than the one he introduced in 2019, would increase federal spending by more than $32 trillion over ten years. Doubling projected federal corporate and income tax receipts still wouldn’t reach that lofty figure.

And as Blahous has pointed out, it’s likely that “the actual cost of M4A would be substantially greater than these estimates.”

The plan assumes the government will be able to administer Medicare for All at the same low rate of cost as it does the existing Medicare program. But that’s unlikely. The legacy program’s administrative costs appear low as a percentage of total expenditures because the Medicare population has higher per-capita health costs. That makes sense—Medicare’s beneficiaries are older, and thus consume more health care.

In other words, Medicare isn’t uniquely efficient—it just spends a lot on health care.

Second, one of the trade-offs for low administrative costs is high rates of fraud. In 2016, the Government Accountability Office discovered $96 billion in improper payments in Medicare and Medicaid. That’s double what the government spent administering all its health programs.

Under Medicare for All, the federal government will have to get aggressive about policing fraud, and thus sacrifice much of its supposed administrative efficiency, or get comfortable with hundreds of billions of dollars in improper payments. Neither scenario is appealing—or cheap.

Medicare for All also presumes providers will acquiesce to reimbursement rates that are 40% lower than those paid by private insurers. Payment cuts like that could put some providers underwater and force them to close their doors.

Historically, Congress has postponed Medicare payment cuts to doctors and hospitals just about every time it’s had the chance. If those lower payment rates never come about, then businesses and individuals will be looking at much higher taxes than Sanders and company suggest.

Finally, Medicare for All would take away one of the primary ways employers differentiate themselves in the quest for talent—their benefits plans. According to the U.S. Census, more than 180 million people received health insurance through work in 2017. Research from Gallup shows that seven in 10 people with employer-sponsored coverage are satisfied with their plan.

They won’t be satisfied under Medicare for All. That’s in part because they’ll have to wait for care.

Look to Canada, whose single-payer system bears a close resemblance to Medicare for All. Our neighbors to the north wait a median of nearly 20 weeks to get treatment from a specialist after receiving a referral from a general practitioner. Patients in certain areas wait even longer. In New Brunswick, it takes a median of 45.1 weeks to get specialist treatment.

Many patients aren’t willing to wait. So they head abroad. SecondStreet.org, a Canadian think tank, estimates that more than 217,000 people left Canada in 2017 to seek care.

Medicare for All sounds like a good deal. But it will only hurt businesses, their employees, and all Americans.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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