Sen. Elizabeth Warren’s new Medicare for All plan proves P.J. O’Rourke was right: If you think health care’s expensive now, just wait ’til it’s free.
Never mind expensive, Warren’s plan isn’t even workable. It would bury America in historic new taxes, leave health providers scrambling and likely push budget deficits to peacetime-records.
Start with the chutzpah of a politician and her team of elite college professors spending three weeks redesigning a fifth of the US economy.
Six years ago, Washington failed to design a functioning ObamaCare Web site, but now the best and brightest are going to shepherd 330 million Americans into a top-down, centrally planned health system. Hey, what could go wrong?
ObamaCare was promoted as a trillion-dollar path to health insurance for all Americans, and lower costs. Today’s liberal momentum for Medicare for All is an admission that it failed, even as the planners tell us to trust them to get it right this time.
Warren’s plan begins with the $52 trillion in national health expenditures currently projected for the next decade. Universal “free” health care without premiums or copayments is estimated to add $7 trillion in new demand, pushing expenses to $59 trillion. The senator would pay this tab (equal to the size of the entire federal government) in four parts, each about as plausible as fairy dust.
First, she’d tap $16 trillion in current federal health spending (from programs like Medicare and Medicaid). Except that much of this spending has no actual funding behind it; Medicare payroll taxes and premiums cover less than half of all Medicare costs, and the program’s annual cash shortfall (including interest) is projected to soar from $374 billion to $1.13 trillion over the next decade.
How can we expand Medicare when we can’t even afford it now?
Next, she’d force state and local governments to provide Washington with the $6 trillion they now spend on Medicaid and employee health benefits. As Megan McArdle notes, this likely violates the Tenth Amendment and the anti-commandeering doctrine, which requires that states be given a choice whether to finance federal policies.
Warren would next include a staggering $19.7 trillion in new tax revenues, plus $800 billion in defense cuts — all while claiming her plan “doesn’t raise taxes on anybody but billionaires.”
This claim is spectacularly false. Her plan converts employer-paid health premiums into an $8.8 trillion employer tax. Yet virtually all economists agree bosses get that money from workers’ pay and benefits.
She’d also boost capital-gains tax rates to approximately 50 percent for those earning over around $250,000 and tax financial transactions for people of all incomes. And much of her new taxes on corporations, banks and overall wealth would ultimately be passed on to the middle-class in the form of higher bank fees, lower wages and stock-market declines.
Truth is, Warren’s assertion that America can nationalize nearly 20 percent of its economy on the backs of its 607 billionaires is mathematically impossible. Her attempt to do so would push tax rates on the wealthy far beyond even those of Europe.
Corporate rates would rise to 42 percent, or more than twice the rate of many of our competitors.
The combination of exorbitant capital-gains taxes and the world’s steepest wealth taxes would create effective tax rates on investment far exceeding 100 percent. Even noted liberal economist Lawrence Summers calculates that taxes on the wealthy would exceed the entire collective annual income of all millionaires.
The proposal also assumes the IRS can collect unpaid taxes at a rate 65 times higher than the Congressional Budget Office estimates.
The final $16.5 trillion in savings would come from the health-care industry through administrative savings and deep cuts in provider reimbursements. More fairy dust: While some efficiencies can be found, squeezing more than 25 percent of the $59 trillion in spending is absurdly unrealistic. It’s nearly twice as much as even the liberal Urban Institute deems possible. And her reimbursement rates for hospitals could endanger their solvency.
A real-world accounting of Warren’s scheme would show a fiscal hole of more than $20 trillion, especially if the courts strike down the wealth tax and required state government contributions. Filling this gap would require an additional 22 percent payroll tax on every worker in America.
Clearly, the proposal isn’t meant to be taken literally. Its goal is simply to let Warren claim she has a Medicare for All plan that won’t tax non-billionaires. Americans should see it for what it is: a big bag of fairy dust.
This piece originally appeared at the New York Post
______________________
Brian M. Riedl is a senior fellow at the Manhattan Institute. Follow him on Twitter here.
This piece originally appeared in New York Post