Medicare for all is a viable option that would save money and yield better health care outcomes, according to a team of economists at the University of Massachusetts.
Single-payer health insurance, also known as Medicare for All because it would provide for all qualified Americans the same benefits seniors and the disabled now receive under Medicare, would save money for individuals and business owners at the same time that it would provide good insurance, the economists concluded after an in depth study, “Economic Analysis of Medicare for All.”
Amid the year’s long debate in the United States about how to provide health insurance to the maximum number of people, several options have emerged. Senator Bernie Sanders has introduced a bill, the Medicare for All Act of 2017 that provides for a single payer health insurance system.
The team of economists from the University of Massachusetts Political Economy Research Institute said utilizing Sanders’ proposal would reduce U.S. health insurance expenditures by nearly 10 percent to $2.93 trillion, while providing decent health care coverage to all Americans.
“The most fundamental goals of Medicare for All are to significantly improve health care outcomes for everyone living in the United States while also establishing effective cost controls throughout the health care system. These two purposes are both achievable,” said lead author Robert Pollin, Distinguished Professor in economics at UMass Amherst and co-director of institute.
“As of 2017, the U.S. was spending about $3.24 trillion on personal health care, which is about 17 percent of total GDP. Meanwhile, 9 percent of U.S. residents have no insurance and 26 percent are underinsured,” he added. Other high-income countries spend an average of about 40 percent less per person and produce better health outcomes.
A single-payer health insurance system would have several funding sources under the economists’ proposal. Public health care revenue sources that presently provide about 60 percent of all U.S. health care financing, including funding for Medicare and Medicaid, would provide $1.88 trillion of financing for the new system. Removing costs that are part of the current system, such as administrative costs and profits, would leave a gap of $1.05 trillion for the amount needed. The economists made several suggestions for closing the gap.
The researchers propose continuing premiums businesses pay for employees’ health insurance, but cutting that cost by 8 percent. Businesses that have been providing coverage for their employees would thereby see their health care costs fall.
They also propose a 3.75 percent sales tax on non-necessities. Purchases such as food and beverages consumed at home, housing and utilities, education and non-profits, would be exempt from the tax. The researchers included a 3.75 percent income tax credit for families currently insured by Medicaid.
The plan includes an annual net worth tax of 0.38 percent for those with a net worth of more than $1 million assets. This tax would apply to only the wealthiest 12 percent of U.S. households.
The economists propose taxing long-term capital gains as ordinary income.
Individuals would save by not having to buy health insurance and businesses' costs for employee insurance would be reduced. Studies also have shown that overhead and administrative costs for Medicare are below that of private insurance companies.
Using these standards, the researchers found that the net costs of health care for middle-income families would fall by between 2.6 and 14 percent of income. For high-income families health care costs will rise, but only to an average of 3.7 percent of income for those in the top 20 percent income group, and to 4.7 percent of income for the top 5 percent.
Based on 2017 health care expenditures, 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, the research said.
“Middle-income families that 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,” said Jeannette Wicks-Lim, co-author of the report and associate research professor at the institute.
“Medicare for All promises a system that is fairer, more efficient, and vastly less expensive than America’s bloated, monopolized, over-priced and under-performing private health insurance system,” said economist and public policy expert Jeffrey Sachs, a professor at Columbia University. “America spends far more on health care and gets far less for its money than any other high-income country.”
The report can be found here.