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How Much Healthcare Will Cost When It’s Free

How Much Healthcare Will Cost When It’s Free

Last updated on: November 13, 2019 at 6:00 am by Gene Veith

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How Much Healthcare Will Cost When It’s Free 2019-11-09T14:01:29-05:00 Gene Veith

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Wouldn’t it be great to have free healthcare, with no co-pays or deductibles? That’s what some Democratic candidates for president are offering. They are calling it “Medicare for All,” even though Medicare as it now exists has lots of fees, co-pays, and deductibles. Still, the prospect of free health care for everyone definitely has its appeal. The problem is, free health care will likely cost Americans more than they are paying now.

Kevin Williamson crunches the numbers on Elizabeth Warren’s plan:

Warren estimates that her health-care scheme would cost about $2 trillion — every year, forever. As often is the case when we are talking about the federal budget, the numbers sound incomprehensible to many people: millions, billions, trillions, squidillions, whatever. To put that $2 trillion a year into perspective, a comparison: That is more money than the federal government collects annually in all of the personal and corporate income taxes combined. Put another way, even if the federal government were able to successfully double the revenue it gets from personal and corporate income taxes, the additional revenue would not pay for Warren’s health-care plan.

In fiscal year 2019, all federal tax revenue from all sources combined amounted to $3.4 trillion. If a Warren administration and a Democratic Congress were successful in raising Americans’ taxes by 50 percent, the extra revenue still wouldn’t be enough to fund Warren’s health-care program.

And that does not take into account the rest of the fiscal scene, which is pretty grim. While Warren talks about Medicare for All, as it is the unfunded liability of Medicare over the next 75 years already tops $42 trillion, or just over twelve years’ worth of total federal tax revenue. Put another way: If the federal government continued collecting taxes at the current rate, stopped spending even a nickel on anything else, and put all of that money into Medicare, it would have to do so for twelve years just in order to cover the difference between what Medicare already has promised to pay out and what dedicated Medicare taxes will actually fund.

And never mind, for the moment, that there are lots of things Warren and the other Democrats want to spend money on besides expanding Medicare: trillions of dollars in subsidies for college students and student-loan forgiveness, alternative-energy subsidies, etc. Warren proposes the better part of another trillion dollars a year in new spending on top of the $2 trillion a year for expanding Medicare.

To pay for that, she would have to raise federal tax revenue by around 80 percent — and that still would do nothing about the trillion-dollar deficits we already have or the unfunded liabilities of Social Security and other entitlement programs that already are piling up even faster than the official national debt.

Yet Warren is promising that her plan would not raise taxes on the “middle class,” just very rich people. She has released her plan for funding her proposal, which includes shifting what employers now pay for their workers’ health care insurance to the federal government and making various savings. But even many liberals–including her primary rival Bernie Sanders, who first proposed Medicare for All and is not above taxing everybody–are saying that her numbers just don’t add up.

So how are other countries–such as the United Kingdom, Canada, Australia, the Scandinavian countries–able to have a “free” national health care system? Different ways, as this useful survey explains. But they are usually paid for by significantly higher taxes for everyone, often combined with private insurance and, yes, co-pays.

If everything we currently pay for health care went to the federal government in the form of taxes, we might be able to fund a similar system of our own. Basically, the government would run a vast health insurance program. But why do that?

Contrary to those who say that the United States is practically the only developed country without a national health care system, we DO HAVE a national health care system. It’s just mostly operated in the private sector. Most Americans have health care coverage through their place of employment. For those who are not employed, we have Medicare for retirees and Medicaid for the poor. For those whose employers are not giving them healthcare benefits and others who fall through the cracks, we have Obamacare, which requires and makes available medical insurance for those who can afford it and gives government subsidies for those who cannot.

Are there problems within this system? Of course. But policymakers need to identify those specific problems and craft ways of addressing them.

Are some conditions not fully covered? Are deductibles too big for some? Is medicine too expensive? What about nursing home coverage? Obamacare has lots of problems, including forcing low-income folks who don’t quite meet the subsidy threshold to buy policies they cannot afford and then adding insult to injury by fining them if they don’t. But whatever the problems are, let’s focus on addressing those. Some of them, at least, may not even require the government to “do something,” but can be resolved by innovations in insurance companies and the medical industry.

Address the specific problems, as opposed to scrapping our current healthcare system and starting something completely new, the transition to which can be devastating. The UK’s system, which spread to the Commonwealth, came into existence as part of the rebuilding of the nation after World War II. To completely tear down our modern medical industry and build a new one now would be incredibly disruptive not only to the economy but to Americans who need high quality health care.

Photo: From Senate Democrats [CC BY 2.0 (https://creativecommons.org/licenses/by/2.0)] via Wikimedia Commons

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