Elizabeth Warren’s $20.5 Trillion Medicare-for-All Plan

Elizabeth Warren’s $20.5 Trillion Medicare-for-All Plan

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Plus, the national debt just hit $23 trillion
Friday, November 1, 2019

Elizabeth Warren Releases $20.5 Trillion Plan to Fund Medicare for All

Elizabeth Warren on Friday detailed how she intends to pay for Medicare for All without raising costs for middle-class households. The senator from Massachusetts said her plan will cover everyone in the country without raising overall spending, “while putting $11 trillion back in the pockets of the American people by eliminating premiums and virtually eliminating out-of-pocket costs.”

Warren’s plan relies in large part on redirecting existing spending toward a universal, federal health care system, while adding new revenues from taxes on the wealthy, the financial sector and large corporations. “We can generate almost half of what we need to cover Medicare for All just by asking employers to pay slightly less than what they are projected to pay today, and through existing taxes,” Warren said.

Some key details from the Warren plan:

Much lower cost estimate: Warren starts with the Urban Institute’s estimate that the federal government would need $34 trillion more over 10 years to pay for Medicare for All, but she slices that number dramatically — down to $20.5 trillion — by using existing federal and state spending on programs including Medicaid to fund a portion of her proposal, along with larger assumed savings produced by a streamlined system paying lower rates to hospitals, doctors and other health care providers.

Total health care spending stays about the same: Warren projects about $52 trillion in national health care spending over 10 years, close to estimates for the existing system, despite covering more people and offering more generous benefits, including long-term care, audio, vision and dental benefits. Applying Medicare payment levels across the health care system is projected to produce substantial savings that would be used to finance the expanded size and scope of the plan.

Heavy reliance on employer funding: The employer contribution to Medicare for All is pegged at $8.8 trillion, with employers required to contribute to the federal government 98% of what they would pay in employee premiums. Businesses with fewer than 50 employees would be exempt.

Public spending continues: State and local governments would be still on the hook for the $6 trillion they currently spend on Medicaid, the Children's Health Insurance Program and public employee premiums.

New taxes on the wealthy: Warren proposes a new 3% tax on household wealth over $1 billion — and that’s on top of her proposed wealth tax, which calls for a separate 3% tax on wealth over $1 billion (and a 2% tax on wealth between $50 million and $1 billion). Combined with an annual capital gains tax on the top 1% of households, her proposal projects that the new health-care-focused wealth taxes would produce $3 trillion.

Taxes on business and finance: Warren says she can raise $3.8 trillion through “targeted” taxes on big business and financial transactions, including a financial transaction tax of .01% on the sale of stocks, bonds and derivatives.

Reduced tax evasion: Cracking down on tax evasion is projected to bring in $2.3 trillion. “The federal government has a nearly 15% ‘tax gap’ between what it collects in taxes what is actually owed because of systematic under-enforcement of our tax laws, tax evasion, and fraud,” Warren said. “By investing in stronger enforcement and adopting best practices on tax reporting, withholding, and filing, experts predict that we can close the tax gap by a third.”

Revenue increase from higher take-home pay: Employees would no longer pay premiums for health insurance, providing a pay hike and higher tax revenues, estimated to total $1.4 trillion.

Abolishing the Overseas Contingency Operations fund: Warren is calling for reduced military spending, with a focus on what some call the “slush fund” that covers the cost of overseas military operations. Eliminating this off-budget spending is projected to save $800 billion.

Immigration reform: Expanded legal immigration would bring in $400 billion in revenue as more incomes are subject to taxes, Warren says.

A record tax cut? Once the new revenues and cost savings are added up, Warren says her plan will deliver what amounts to an historic tax cut. “No middle class tax increases. $11 trillion in household expenses back in the pockets of American families. That’s substantially larger than the largest tax cut in American history.”

What They're Saying About It

Warren won plaudits from some analysts and policy wonks for releasing a plan, but the details she laid out are also being picked apart by critics and rivals, with some experts already expressing doubts about her assumptions and numbers. Here’s some of the reaction:

Congratulations from a conservative: “Kudos to Senator Warren for actually releasing a plan,” said Scott Greenberg, formerly an analyst with the right-leaning Tax Foundation. “There are a lot of things in here that will draw attacks from the left and from the right, and it might have been politically easier not to release it at all. But Warren has stuck by her commitment to explain her proposals.”

Criticism from a key rival: “The mathematical gymnastics in this plan are all geared towards hiding a simple truth from voters: it's impossible to pay for Medicare for All without middle class tax increases,"  said Kate Bedingfield, deputy campaign manager for Joe Biden. Bedingfield argued that employees would end up paying the tax on employers.

Dire warnings from the White House: “It is the middle class who would have to pay the extra $100 billion or more to finance this kind of socialist government takeover of health care,” said Larry Kudlow, President Trump’s top economic adviser. “It would have a catastrophic effect on the economy and all these numbers that we're seeing, all these numbers, on incomes per household, on wage increases, on jobs, all these numbers would literally evaporate and by the by, so would the stock market.”

Tax vs. premium: Warren’s plan will likely kick off a debate about the difference between taxes and health care premiums, and whether that difference matters, says William Gale of the Brookings Institution. “Does [the Warren plan] raise ‘taxes’ on the middle class?,” Gale asked Friday. “Short answer -- it does not raise ‘burdens’ on the middle class.”

Cost reduction is crucial: “The key to Warren's plan for financing Medicare for all is aggressively constraining prices paid to hospitals, physicians, and drug companies. We'd still have the most expensive health system in the world, but it would be less expensive than it is now,” said Larry Levitt of the Kaiser Family Foundation. “Warren's plan to aggressively constrain health care prices under Medicare for all would be quite disruptive. On the other hand, every other developed country has managed to figure it out, so we know it's possible.”

The battle is ultimately political: “In laying out the specifics of her Medicare for all plan, Warren's challenge is more about politics than arithmetic,” Levitt continued. “She is taking on the wealthy, corporations, and pretty much every part of the health care and insurance industries. Those are some powerful enemies.”

So don’t expect major legislation soon: “Experts will argue for months whether [Warren is] being too optimistic — whether her cost estimates are too low and her revenue estimates too high, whether we can really do this without middle-class tax hikes,” said New York Times columnist Paul Krugman. “You might say that time will tell, but it probably won’t: Even if Warren becomes president, and Dems take the Senate too, it’s very unlikely that Medicare for all will happen any time soon.”

Quote of the Day

“I’m not a big fan of Medicare for All. I mean, I welcome the debate. I think we should have health care for all. I think the affordable care benefit is better than the Medicare benefit. … But it [Medicare for All] is expensive. Who pays is very important. What are the benefits that come in there? I would think that, hopefully, as we emerge into the election year the mantra will be more ‘health care for all Americans.’”

– House Speaker Nancy Pelosi, in an interview with Bloomberg Television on Friday. Pelosi also said she thinks it’s possible to reach a deal with President Trump to lower prescription drug prices and that she sees little chance that the president will force a government shutdown over impeachment proceedings and funding for his border wall.

National Debt Hits $23 Trillion

Total federal debt has surpassed $23 trillion for the first time, according to data released by the Treasury Department Friday. Of that amount, $17 trillion is debt held by the public, which is generally regarded as the most economically meaningful measure of the debt. The remaining $6 billion is largely intragovernmental debt, which has no net effect on government finances.

The national debt has risen by more than $1 trillion in just the past 10 months, driven by higher spending and reduced tax revenues in the wake of the 2017 tax law. President Trump once vowed to eliminate the debt in eight years, but it has risen by more than $3 trillion during his time in office.

Trump’s Florida Tax Move

President Trump is making Palm Beach, Florida, his primary residence. The New York Times reported Thursday that the president and first lady filed documents in late September making their Mar-a-Lago estate their permanent home.

Trump has been a lifelong New Yorker, born and raised in Queens before moving to Manhattan. He has lived in Trump Tower since 1983, though he has spent more time at Mar-a-Lago than in New York since taking office.

Trump confirmed the change on Twitter, where he wrote: “I cherish New York, and the people of New York, and always will, but unfortunately, despite the fact that I pay millions of dollars in city, state and local taxes each year, I have been treated very badly by the political leaders of both the city and state. Few have been treated worse.”

Trump has never released his state or federal taxes, so his claims about paying "millions of dollars" in taxes can’t be verified.

The move is primarily about taxes: New York State has a top tax rate of nearly 9% and New York City has a top rate near 4%. The state also imposes a top estate tax rate of 16% for estates larger than $10.1 million. Florida, by contrast, has no state income tax or inheritance tax. “Trump’s move is not uncommon, especially among ultra-high net worth individuals over the age of 65,” MarketWatch’s Quentin Fottrell writes. “Billionaires tend to move out of states with estate taxes, according to a recent study by researchers at the University of California, Berkeley and the Federal Reserve Bank of San Francisco. The trend grows stronger as billionaires grow older, they said.”

And Trump might avoid his own tax hike: “Moving to Florida would potentially spare Trump one of the stiffest tax increases included in his 2017 overhaul of the code — a new $10,000 cap on state and local tax deductions,” Politico reports. “That hits wealthy people in blue states particularly hard, because they pay so much in taxes and therefore have a lot to deduct, although it’s unclear how much Trump pays.”

Trump mitigates some other risk in Florida: “Florida has a robust asset protection law that allows people to protect property, investments and other substantial assets in the event of unfavorable legal rulings,” Politico adds. “Lawyers in Florida tout former football player O.J. Simpson’s use of this law to dodge creditors by sinking his money into a large estate in Florida.”

But Trump might not get an easy tax win: New York Gov. Andrew Cuomo was less than broken up about Trump’s move:

But the state's auditors might not be so willing to say he's a Florida resident. It will take more than filing a form to convince them that Trump shouldn't pay taxes in the state. “New York has a multipart test that takes in everything from where a taxpayer’s family is to where he or she keeps ‘items near and dear,’ like family heirlooms,” James Barron writes at The New York Times. “Auditors also examine whether a taxpayer continues to maintain a business in New York.”

What Trump does after he leaves office might be key: “Trump’s sons are running the Trump Organization while he is president, but if he returns to his role with the company after he leaves office, that could be a red flag for auditors – even if he is making decisions from his Palm Beach residence,” Brittany De Lea of FoxBusiness reports.

Your Prize for Making It Through the Week

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