The Eye-Popping Tax Hikes Needed to Pay for Medicare for All

The Eye-Popping Tax Hikes Needed to Pay for Medicare for All

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Plus, the Navy can't afford the fleet it wants
Monday, October 28, 2019

The Eye-Popping Tax Hikes Needed to Pay for Medicare for All

The Committee for a Responsible Federal Budget is the latest group to take a stab at answering the big question looming over the Medicare-for-All debate — and Elizabeth Warren’s presidential campaign: How to finance a transition that would shift essentially all private health-care costs to the federal government.

The budget watchdog group says it will issue a detailed analysis of how to finance Medicare for All in the coming months, but its preliminary estimates include these choices that highlight just how dramatic the shift would be. (Hint: if you’re looking for realistic options, focus on the bottom one).

  • A 32 percent payroll tax
  • A 25 percent income surtax
  • A 42 percent value-added tax (VAT)
  • A mandatory public premium averaging $7,500 per capita – the equivalent of $12,000 per individual not otherwise on public insurance
  • More than doubling all individual and corporate income tax rates
  • An 80 percent reduction in non-health federal spending
  • A 108 percent of Gross Domestic Product (GDP) increase in the national debt
  • Impossibly high taxes on high earners, corporations, and the financial sector
  • A combination of approaches.

Howard Gleckman of the Tax Policy Center provides a useful reminder that much of the tax increase needed to finance the roughly $32 trillion increase in federal costs “would be offset by a decline in personal health care spending. And some of the reduction in health spending by employers would result in higher wages or larger business profits that would be subject to tax. Still, most of the $32 trillion will have to come from unpopular tax hikes.”

And Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation, says that the “eye-popping numbers” in the list above highlight two points:

“1. The tax increase would be a political lightning rod.
2. We are spending a whole lot on health care today, since these tax increases would largely replace premiums and deductibles.”

Levitt expands on that second point by noting, “We spend almost 18% of GDP on health care. So, a Medicare-for-all system would have to tax roughly one-fifth of income on average. If our health costs were like the rest of the world, the tax would be a lot lower.”

Lower Hopes for Bills to Lower Drug Prices

Legislation to lower prescription drug prices may be derailed this year by intraparty differences and the ongoing impeachment inquiry against President Trump.

The Wall Street Journal’s Stephanie Armour reports:

“The White House, eager for a win as other drug-price initiatives have sputtered, is pushing Congress to compromise, but a plan in the Democratic-controlled House has become saddled with demands from progressives who say it doesn’t go far enough, and a bipartisan Senate bill is also on shaky ground, with some Republicans objecting to price controls.”

Progressive Democrats continue to push for House Speaker Nancy Pelosi’s drug plan to allow the government to negotiate prices on all drugs in Medicare rather than a subset of at least 35 and as many as 250 of the most expensive medicines. Pelosi’s staff is “pushing to kill” one progressive amendment, adopted by the Education and Labor Committee last week, that would require a feasibility report to Congress by the end of 2021 on whether drugmakers can be forced to refund money to employer-provided health plans if they raise prices above the rate of inflation. But the progressive objections reportedly mean that a full House vote on Pelosi’s bill won’t take place until at least next month.

On the Senate side, Majority Leader Mitch McConnell has already said he won’t bring up Pelosi’s bill for a vote and a separate, bipartisan bill from Senators Chuck Grassley and Ron Wyden has run into opposition from some Republicans who object to what they see as government price controls. Vulnerable Republican incumbents up for reelection next year have mostly expressed concerns about the bill or declined to back it, The Hill reports. Those senators include Cory Gardner of Colorado, Joni Ernst of Iowa, Martha McSally of Arizona and Thom Tillis of North Carolina.

“Senators who haven't supported the bill are highlighting the bind they face,” The Hill’s peter Sullivan writes. “On the one hand, the bill has the support of President Trump, and lowering drug prices is a popular issue with voters. But on the other hand, supporting the bill breaks with GOP orthodoxy and invites a backlash from both conservatives and the pharmaceutical industry.”

The bottom line: If lawmakers can find a way come together on a legislative package, a Senate impeachment trial could still create timing and logistical challenges in trying to get anything passed. So the odds of Congress getting something done on drug prices this year is growing slimmer.

Column of the Day: Maxed Out on the Medicare Debate

Democrats have overdone it on the Medicare debate, writes New York Times columnist David Leonhardt:

“It’s time for the 2020 campaign — both the media and the candidates — to broaden its focus. Health care policy (health insurance policy, to be more specific) is obviously an important issue, but it’s not more important than climate change, voting rights and tax policy. So far, though, health care has received more debate time than all of those other topics combined.”

If a Democrat gets elected, Leonhardt argues, he or she may only have enough time to push through two big legislative priorities, and that’s only if we steer clear of another financial crisis. What should those priorities be? Here’s Leonhardt’s answer:

“Michael Linden, who runs the Groundwork Collaborative, a Washington group that advocates for a fairer economy, has a suggestion that seems right to me: One priority should be democratic reform, like voting rights. The other should be a major economic bill that increases taxes on the wealthy and spends the money helping the middle-class and poor and promoting economic growth.

“This second bill would include funding for clean energy, as well as limits on pollution. Depending on the politics, it might make sense to call the bill a Green New Deal.”

Read Leonhardt's full column here.

Quote of the Day

“We have the pensions. We have Social Security. We have the national debt. We have what’s called ‘deferred maintenance’ in infrastructure. Deferred maintenance is a BS word that just means we didn’t do anything about it. That’s another $4 trillion. We, of course, have climate, which has been a known problem since the ‘80s. … I think the main impediment right now is the death grip the boomers have had over the political system.”

– Bruce Gibney, author of “A Generation of Sociopaths,” on the legacy of the Baby Boom generation, in a new Politico article and podcast looking at “how the baby boomers broke America.”

US Navy Can’t Afford a 355-Ship Fleet: Admiral

In 2016, the U.S. Navy set a goal of growing its fleet to 355 ships, but a high-ranking admiral said Friday that there isn’t enough money in the budget to reach that target.

“Will we get to 355-ships?” Vice Chief of Naval Operations Adm. Robert Burke said, according to USNI News. “I think with today’s fiscal situation, where the Navy’s top line is right now, we can keep around 305 to 310 ships whole, properly manned, properly maintained, properly equipped and properly ready.”

The U.S. fleet currently consists of 290 battle force ships, including aircraft carriers, submarines, surface combatants, amphibious ships, combat logistics ships and some support ships. (You can check the Status of the Navy page for regular updates on the fleet.) While the Navy’s current building plan is still focused on the 355-ship goal, the Congressional Budget Office said in a report earlier this month that it would need roughly twice as much funding as the historical average over the last three decades in order to get there.

“If the Navy received the same average annual amount of funding (in constant dollars) for ship construction in each of the next 30 years that it has received over the past three decades, the service would not be able to afford its 2020 shipbuilding plan,” the CBO said. Budgets are projected to be flat or declining during that time.

The CBO also said that Navy officials have told Congress that they expect to release a new force structure plan by the end of the year, and that the force-size goal is “likely to change.”

The cost of building of new ships isn’t the only concern, the CBO said. Operating a larger fleet also requires billions more in funding. While the current fleet costs about $60 billion a year to operate and support, “by 2049 the 355-ship fleet would cost about $90 billion per year (in 2019 dollars).”

Biggest Contract Yet for the F-35

The Pentagon is close to a final agreement with Lockheed Martin for the largest batch of F-35 stealth jets, Bloomberg’s Julie Johnsson and Anthony Capaccio report. The contract for 478 jets would be worth about $34 billion, stretched out over several years, and would bring the total for F-35 orders to 978, out an expected run of at least 3,100.

The per unit price is expected to drop throughout the contract, hitting the $80 million mark about half way through the production run for some variants.

Even so, the jet is still undergoing testing and is months away from entering its “full rate” production schedule. And the long-term cost of the F-35 program continues to rise, increasing to $1.196 trillion in the latest assessment from the Pentagon.

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