Charlie Neibergall/AP Photo
Elizabeth Warren greets a student after speaking at a high school in Des Moines, Iowa, October 21, 2019.
After receiving significant criticism from her rivals, Senator Elizabeth Warren now promises to release a plan on how to pay for Medicare for All. She has resisted giving a sound bite that middle-class taxes would increase under a universal Medicare plan, while insisting that overall health care costs for ordinary Americans would go down. But this is Warren’s chance to be bold and stand out, by promising to pay for Medicare for All without any middle-class taxes or premiums. The way to do that is get extremely serious about dramatically bringing down health care prices.
Federal and local governments spend 8.5 percent of the GDP on health care, mainly to provide partial coverage to the elderly and people with lower incomes. Other countries with single-payer systems cover everyone for significantly less than that. In Canada, the government spends just 7.4 percent of GDP on health care, and in the United Kingdom it is 7.7 percent. If we are willing to quickly and dramatically reduce our outrageous health care prices to bring them in line with international norms, we could cover everyone for what the government is currently spending. All Warren would need to do is redirect state spending to the new federal program with maintenance-of-effort requirements, like those found in Beto O’Rourke and Joe Biden’s plans.
Single-payer activists love to point out that most other industrialized countries provide universal health care at half the cost, but are reluctant to have (or in some cases downright oppose having) Medicare for All pay similar prices. Even Bernie Sanders doesn’t call for trying to get large reductions in national health expenditures, which is why he says his plan will require new middle-class taxes. Yet if we are going to have a massive fight over the systemwide transformation of 18 percent of the economy, we might as well rip the Band-Aid off and truly transform all of it.
This Is the Smart Policy Move for Warren
There is little indication we are getting any significant value for the extra $1 trillion a year we spend on health care compared to other industrialized countries, especially given our poor health indicators. Almost any other use of these resources would be better for society. Bringing down the out-of-control salaries and prices in our health care system, while increasing wages elsewhere, would also go a long way to advance Warren’s goal of reducing income inequality.
It also gives a sound justification for her controversial decision to outlaw even the nominal private insurance found in countries like the United Kingdom. One of the few benefits of barring private insurance is that it strengthens the government’s ability to drive down provider prices even further. Banning private insurance without taking advantage of that leverage is the worst of all worlds. Warren repeatedly says she wants to cover people at the lowest cost possible. So she should be serious about making that the center of her message.
For Warren, It Is the Right Political Move
This gives Warren a strong new rationale for Medicare for All. If we drive our health care spending down to international norms so we don’t need any new taxes or premiums, much of the roughly $20,000 a year working families pay in private health care will result in higher wages (or at least, that’s the economic theory). Voters will likely be willing to put up with many changes they are skeptical about if it translates into a large potential personal financial gain.
The absurd complexity of our financing system makes it almost impossible to design a funding plan that will definitively leave everyone in the middle class better off, unless we significantly reduce health care prices. As long as we keep national health care spending around current levels, even if you design a funding plan to mostly just tax the rich, there will still be a small percentage of middle-class workers who will be worse off. Even if it is just 1 or 2 percent, the news will highlight their story endlessly.
Single-payer activists often don’t push for these big price reductions, based on a political miscalculation that promising continued high salaries for the foreseeable future can win over doctors and hospitals to the cause. This is a massive pre-compromise that few openly talk about. But this strategy is flawed. The hospitals have already lined up overwhelmingly to oppose Medicare for All. Since they are going to fight reform anyway, Warren might as well really hit them hard.
We can either have the highest-paid doctors, most expensive procedures, and richest hospital administrators in the world, with a big new middle-class tax, or cover people without new taxes, if we pay prices based on international norms. The choice Warren now faces is clear and inescapable.
The Best Long-Term Move for Warren
Most importantly, this is the best long-term move for Warren. In my opinion, given the current lineup in Congress, it is very unlikely that Medicare for All will pass in the next four years, regardless of whether the plan to pay for it is with new taxes or big price cuts. For that reason, Warren spending the next year defending a new 10 percent payroll tax or a large new VAT or a significant income tax increase would likely be a lot of political effort wasted defending an unpopular idea.
On the other hand, if Warren makes clear that she is backing Medicare for All to stop every part of the American health care system from ripping off workers, that is a useful message, even if she can’t pass the big bill. It fits the whole theme of her campaign, that powerful interests in Washington frustrate structural change and must be fought. It does the dual service of also laying the groundwork for smaller actions she also wants to take, like strong antitrust enforcement against health care monopolies and government manufacture of generic drugs.
Adopting Medicare for All in the next eight years will be extremely difficult. But if Warren is going to make Medicare for All a North Star to guide her effort, she should point us toward the best possible version.
