A great divide has appeared in the Democratic presidential primary between traditional candidates and populists who have latched onto proposals that sound great — at least to anyone who doesn’t do the math. The current frontrunner, Elizabeth Warren (D-Mass.), is among the candidates trading on the proposed policy of “Medicare for All” plan. Make no mistake: Medicare for All makes for a great soundbite but probably would never be approved even by a Democratic House, let alone a Republican Senate.
Let’s start with the basics: Medicare for All is a euphemism for single-payer health care, where the government would control most facets of health care and pay for it with higher taxes. There would be no co-pays or out-of-pocket costs for anyone in America. But we also would see wait times surge, innovation stifled, a rampant shortage of doctors and millions of people likely would avoid the government-run health care system altogether and pay their own way in private hospitals.
Most private insurance, including employer-provided plans, which currently cover about half of Americans, would be outlawed. That’s not a very popular concept to those who enjoy the benefits of great employer-based plans. What about local, state and government employees, who have some of the best health insurance plans in the nation?
The elephant in the waiting room remains the staggering cost of this new system. There’s a reason why Warren avoids the conversation about how we’re going to pay for Medicare for All. In fact, anyone with a pencil and paper and third-grade math skills would quickly figure out that this proposal simply cannot work.
Depending on whom you ask, cost estimates range from $2.5 trillion to $4.7 trillion per year. It’s important to keep in mind that the entire federal budget for fiscal year 2020 is $4.7 trillion (including a $1.1 trillion-dollar deficit). Basically, we would have to double the size of the government through higher taxes on every American employee and fundamentally alter the structure of the American economy.
Young Americans are more entrepreneurial than ever and need public policy that supports startups and the growth of emerging businesses. The taxes that would accompany Medicare for All could diminish business creation and career opportunities for millennials and Gen Z.
In fact, every tax proposal that’s been floated by the Democratic primary candidates, including a wealth tax, increasing the payroll tax and repealing Trump’s tax cuts would not be enough to pay for Medicare for All. Even the most optimistic economists believe funding this system would require the largest peacetime tax increase in history.
No tax could be off the table to fund Medicare for All, as the government would need new ways to raise revenue, including a European-style VAT or sales tax of more than 25 percent on nearly every single transaction. Naturally, increasing the cost of shopping by 25 percent would be as popular as the flu among voters.
Needless to say, the onslaught of these taxes could doom the American economy, lead to the loss of millions of jobs and make our country less competitive on a global scale. Enacting such legislation could trigger a massive recession.
In the end, under Medicare for All, most middle-class people would pay more for health care than they currently do today. This directly contradicts what Warren has promised voters. Instead, we would pay more for less and endanger future prosperity. All the while, overall health and longevity would be expected to decline as government intervention quashed life-saving advances in health care that are largely driven – and paid for – by the profit motive.
Such a system has been tried before in this country. In candidate Bernie Sanders’ home state of Vermont, the roll-out of a single-payer system failed. It is now dead. The governor of Vermont acknowledged that the cost and the risk of an economic shock for the Green Mountain state made the plan untenable. On a national scale, we would probably witness the same monumental barriers.
While Medicare for All is not the answer, it’s clear that we need to do something about runaway health care costs. Anyone who has recently visited a doctor or a hospital knows that the sector desperately needs reform.
The numbers are staggering, as health care costs are a tapeworm continually gobbling up a larger share of our economy (currently at 18 percent and growing). Health care costs imperil the future of the American economy and our way of life. Sadly, there is no evidence that Medicare for All would do anything to meaningfully contain the growing cost of care.
Medicare for All fans propose to demolish our current health care system that certainly needs streamlining, more competition between insurance companies and plans and new and better technology. Other issues that must be addressed are drug manufacturing and distribution networks and hospital consolidation.
While we desperately need reform, any realistic policy proposal would recognize that 90 percent of Americans currently have health insurance. Instead, reasonable politicians should focus on how to cover those who are uninsured or underinsured in our current system.
David Grasso is media director of GenBiz.org, a nonprofit that promotes financial literacy and entrepreneurship for young Americans.