Friedman analysis of HR 676: Medicare for All would save billions
‘Medicare for All’ would cover everyone, save billions in first year: new study
Physicians for a National Health Program
July 31, 2013
Upgrading the nation’s Medicare program and expanding it to cover people of all ages would yield over a half-trillion dollars in efficiency savings in its first year of operation, enough to pay for high-quality, comprehensive health benefits for all residents of the United States at a lower cost to most individuals, families and businesses.
That’s the chief finding of a new fiscal study by Gerald Friedman, a professor of economics at the University of Massachusetts, Amherst. There would even be money left over to help pay down the national debt, he said.
Friedman says his analysis shows that a nonprofit single-payer system based on the principles of the Expanded and Improved Medicare for All Act, H.R. 676, introduced by Rep. John Conyers Jr., D-Mich., and co-sponsored by 44 other lawmakers, would save an estimated $592 billion in 2014. That would be more than enough to cover all 44 million people the government estimates will be uninsured in that year and to upgrade benefits for everyone else.
“No other plan can achieve this magnitude of savings on health care,” Friedman said.
His findings were released this morning [Wednesday, July 31] at a congressional briefing in the Cannon House Office Building hosted by Public Citizen and Physicians for a National Health Program, followed by a 1 p.m. news conference with Rep. Conyers and others in observance of Medicare’s 48th anniversary at the House Triangle near the Capitol steps.
Funding HR 676: The Expanded and Improved Medicare for All Act: How we can afford a national single-payer health plan
By Gerald Friedman, Ph.D.
July 31, 2013
The Expanded and Improved Medicare for All Act, HR 676, introduced into the 113th Congress by Rep. John Conyers Jr. and 37 co-sponsors, would establish a single authority responsible for paying for medically necessary health care for all residents of the United States.
Under the single-payer system created by HR 676, the U.S. could save an estimated $592 billion annually by slashing the administrative waste associated with the private insurance industry ($476 billion) and reducing pharmaceutical prices to European levels ($116 billion). In 2014, the savings would be enough to cover all 44 million uninsured and upgrade benefits for everyone else. No other plan can achieve this magnitude of savings on health care.
Specifically, the savings from a single-payer plan would be more than enough to fund $343 billion in improvements to the health system such as expanded coverage, improved benefits, enhanced reimbursement of providers serving indigent patients, and the elimination of co-payments and deductibles in 2014. The savings would also fund $51 billion in transition costs such as retraining displaced workers and phasing out investor- owned, for-profit delivery systems.
Health care financing in the U.S. is regressive, weighing heaviest on the poor, the working class, and the sick. With the progressive financing plan outlined for HR 676 (below), 95% of all U.S. households would save money.
HR 676 (Section 211, Appendix 2) specifies a financing plan for single-payer that includes
• Maintaining current federal financing for health care
• Increasing personal income taxes on the top 5% of income earners
• Instituting a modest tax on unearned income
• Instituting a modest and progressive tax on payroll, self-employment
• Instituting a small tax on stock and bond transactions
The following progressive financing plan would meet the specifications of HR 676:
• Existing sources of federal revenues for health care
• Tax of 0.5% on stock trades and 0.01% tax per year to maturity on transactions in bonds, swaps, and trades
• 6% high-income surtax (applies to households with incomes > $225,000)
• 6% tax on unearned income from capital gains, dividends, interest, profits, and rents
• 6% payroll tax on top 60% of income earners (applies to incomes over $53,000, tax paid by employers)
• 3% payroll tax on the bottom 40% of income earners (applies to incomes under $53,000, tax paid by employers)
HR 676 would also establish a system for future cost control using proven-effective methods such as negotiated fees, global budgets, and capital planning. Over time, reduced health cost inflation over the next decade (“bending the cost curve”) would save $1.8 trillion, making comprehensive health benefits sustainable for future generations.
By Don McCanne, M.D.
This is the report that single payer advocates have been waiting for. Economics Professor Gerald Friedman of the University of Massachusetts at Amherst has provided us with an analysis of the financing of John Conyers' HR 676: The Expanded and Improved Medicare for All Act. The results are quite impressive, especially considering the comprehensiveness of the HR 676 reforms. Dr. Friedman's report will be invaluable in our advocacy for a single pager national health program.
The analysis shows that we really can provide everyone with comprehensive health care without causing a financial hardship for anyone. This is made possible by depending on progressive tax policies. Since it is likely that the opposition will become apoplectic when they see the proposed taxes, we should be prepared to explain why progressive tax policies to fund health care are a good thing rather than a bad thing.
Let's begin with two fundamental principles: 1) All of us should have the health care that we need, and 2) Obtaining health care should not ever result in financial hardship. Having health problems is enough without adding the financial penalties of paying for health care simply because of having the misfortune of being sick or injured.
Our audience is not those who disagree with these principles. We will never be able to satisfy them. Rather we need to address those who agree but cringe and withdraw when they see a recommendation for TAXES!
We need to keep in mind that we are not working with the spending baseline that we had when we began to advocate for single payer a couple decades ago. (They should have listened to us then!) Health costs are now a much larger percentage of our economy. Health care costs for the average working family of four are now over $22,000, when median household income is about $50,000. It is now impossible to meet the goal of providing affordable health care for everyone without making the wealthy pay more than the rest of us. Financing must be progressive it we are to meet our goals.
The Affordable Care Act (ACA) has included several policies that do increase the progressivity of financing, but it depends on an administratively wasteful, fragmented system that is the source of many of the problems in health care today. Many who cannot afford their allocated share will still pay too much, and many more will not even receive the care that they should have merely because of the dysfunctional financing method perpetuated by ACA. In contrast, the administrative simplicity of progressive taxes ensures an equitable method of financing care, making it affordable for everyone.
For those who say that we can't afford the taxes, remind them that the taxes displace much of our current spending for health care. Because of the efficiencies of the single payer model of financing, the amount that we would spend in increased taxes for health care is less than the amount we would save in recovering the administrative and clinical waste of our current system. Not only will we be paying less in taxes than the excessive amount that we are currently paying for our dysfunctional system, the payment will become much more transparent so that we finally would know what health care really costs us. Much of the costs are hidden today.
People often think that health care costs are what they or their employers pay in private insurance premiums, plus out-of-pocket expenses. In fact, in 2012 we paid only about $884 billion in private insurance premiums, though our total national health expediters were about $2,831 billion. It is that other $1,947 billion of relatively hidden health care costs that we are already paying that will be more transparent under a public tax system. When you think of these numbers, you can better understand why the proposed taxes seem to be so high.
Rather than fixating on just the taxes proposed in HR 676, it is much more important to look at the change in income that each person faces as a result of these tax policies. Use the link above to access Professor Friedman's report and go to Figure 2. The bar graph and its explanation in the note below should be studied carefully to understand the changes.
The four bars on the left represent the bottom four quintiles of household income - 80 percent of the population. The four bars on the right represent the top 20 percent. The fifth bar, representing those with incomes from the 80th to the 95th percentile have an average household income of $216,922. Yet they and also those with incomes below them - 95 percent of all households - will see an INCREASE in their net income in spite of what they may perceive to be onerous taxes. It is only the top 5 percent that will be paying more in taxes than they will be receiving in health care benefits.
Okay. That's fair for most of us, but is it really fair for those with incomes of a half million dollars or more - especially for those with average incomes of $3 million or even $166 million? Remember that wealth has moved upwards with high income individuals benefiting from the increased productivity of the workers, while workers' incomes have remained flat. This massive, unfair upward shift of income and wealth screams out for justice. Progressive tax policies are precisely what we need to correct this injustice. HR 676 does exactly that - not only ensuring health care for everyone, but finally making it affordable for everyone while establishing public policies to slow the financial drain that the wealthy have placed upon the rest of us.
The Koch brothers and the Walton family may not like this proposal, but it's not like we're taking away their mansions or their personal jets. They'll never miss the money that HR 676 would divert to taxes. Even those with a current $500,000 after tax income will see their net income reduced to about $460,000. They may whine, but if they are honest with themselves, they would have to agree that they really won't see any significant differences in their lifestyles either. Some of them will even think that it is worth it if it ensures that absolutely everyone finally has the right to affordable health care.
We can have an Expanded and Improved Medicare for All if we simply dispense with our irrational tax phobia.