Elizabeth Warren has an excellent plan for how she can provide debate audiences with politically palatable answers to questions about how she would finance Medicare for All.
She also has some clever but flawed ideas about how to actually finance Medicare for All.
Fortunately, at this point in the arc of history, the former is probably more important.
On Friday, the progressive presidential candidate released her long-awaited list of single-payer “pay-fors.” And, through a combination of optimistic assumptions, wealth expropriations, and reallocations of existing health-care spending, Warren’s economists have produced a damn-near plausible version of a purportedly impossible policy: a universal health-care system that is free at the point of service — and does not raise the American middle class’s taxes by a dime.
At each of the first four Democratic presidential debates, Warren and Bernie Sanders endured a ritual flogging, from moderators and rivals alike, for their alleged plot to replace middle-class Americans’ private health-insurance premiums with payroll taxes. Sanders declined to dispute the allegation. Instead of denying that his plans for the American health-care system would require broad-based tax increases, Bernie has opted to fend off centrist concern trolls with the following three-pronged strategy:
1.) Insist that his will reduce the middle class’s overall household costs by saving them more on health care than they’ll need to fork over to Uncle Sam.
2.) Never release a comprehensive financing plan that would allow his rivals to subject that (totally plausible) claim to scrutiny.
3.) Pivot quickly back to his tried-and-true sermons on the obscenity of the American health-care system, and the extremity of corporate greed.
Warren, by contrast, had refused to explicitly concede that giving non-millionaire Americans premium- and deductible-free access to health care would require charging them more in taxes. She didn’t rule out such tax hikes; her rebuttals in the last debate actually implied an openness to tax increases, so long as the middle class’s overall costs did not go up. But her approach read as evasive, allowing Sanders to claim the mantle of honest broker, while Joe Biden & Co. attacked her clandestine plans to soak the non-rich.
So her campaign decided it needed a better answer — ideally, one that would allow her to credibly reject her critics’ entire premise. Given that America is the wealthiest nation in human history and already spends a higher percentage of GDP on health care than any peer nation, might there be some way to let the median voter have her free health care and status quo tax rate, too?
Warren’s plan answers that query with an emphatic, “in theory, sort of.” Her proposal has a lot of moving parts (the Medium post where she lays it out is nearly 10,000 words long). But she accomplishes the bulk of her challenge — paying for single-payer without raising ordinary people’s taxes — through two relatively simple moves. First, she endorses aggressive, rapid cuts in the payment rates of American hospitals, doctors, and drug companies. In the abstract, these cuts are quite reasonable; the U.S. massively overpays its health-care providers, relative to international standards. In practice, however, once you allow a major industry to build a business model around exorbitant payment rates, it’s hard to abruptly scale everything back, especially since the health-care industry has been so overpaid, it can afford a first-class lobbying and advocacy operation.
Second, she takes the money employers are currently spending on private insurance coverage and redirects 98 percent of it to the government’s coffers — a maneuver that pays for nearly half her program’s new spending. At that point, all she needs is a measly $11 trillion (over a decade) in new revenue sources — a hole small enough to fill with a grab bag of aggressive tax hikes on the rich, modest cuts to defense spending, and other relatively popular means.
Warren’s plan has a lot of drawbacks on the merits. Simply reallocating 98 percent of existing corporate spending on health care to Uncle Sam has a political elegance: It generates a ton of revenue while ostensibly lowering firms’ existing costs. But that doesn’t actually mean that all companies come out winners here.
In Warren’s system, every firm’s employees would enjoy the same comprehensive health coverage. But companies that did right by their workers before the passage of single-payer by providing them with costly, high-quality health-care coverage would have to pay much higher taxes than exploitative employers that had refused to provide their workers with health insurance. Which is to say: Generous employers would lose the recruitment advantage they previously enjoyed while retaining the high costs of their past generosity. Eventually, Warren would adjust all employers health-care tax rates to the same level. But small businesses (firms with fewer than 50 employees) that do not currently provide health care to their employees would remain entirely exempt from the tax — a policy that would simultaneously advantage small businesses that currently treat their workers poorly, and encourage larger firms to cut their own tax burdens by contracting out labor needs to small businesses that pay no health-care taxes.
There are other substantive issues with Warren’s plan. You can read more detailed, critical overviews of Warren’s plan from Vox’s Ezra Klein and the People’s Policy Project’s Matt Bruenig. But the basic issue is that her plan privileges the public’s status quo bias over optimal policy design. “There won’t be any new middle-class taxes, and companies will simply continue spending what they do now, except a little less” is more broadly appealing sentiment in America’s contemporary discourse than, “Yes, I’m going to raise payroll taxes but it will be worth it for you in the end.” But the latter’s probably a better approach on the merits.
Happily, for now, the merits don’t matter much! As of this writing, only 14 Democratic senators have co-sponsored Sanders’s Medicare for All bill, and many of them have already distanced themselves from the proposal. Meanwhile, Kyrsten Sinema won’t even commit to voting for a Democrat against Trump in 2020, let alone for the nationalization of the health-insurance industry. It’s theoretically possible that some social upheaval will fundamentally reconfigure the boundaries of political possibility in the United States between now and 2021 (in other countries, the times do seem to be a’changing lately). But a world in which 50 Democratic senators are willing to vote to abolish the filibuster and eliminate private health insurance is surely one in which it will be possible to tinker with the details of Warren’s revenue scheme.
Meanwhile, in the world where we currently reside, Warren’s plan is a campaign prop first, and a policy document second. Its primary aim is — and should be — to neutralize the “middle-class tax hike” talking point, and shift the health-care debate onto worthier terrain. Now that she has a plan for how she’s going to “pay for” single-payer, perhaps we can talk more about whether her moderate opponents have plans for ending medical bankruptcies.
Whether this gambit will prove successful remains to be seen. It’s possible that her opponents will find ways of making her policy’s substantive flaws politically salient. But at first blush, the drawbacks of Warren’s plan don’t seem to lend themselves to debate-stage soundbites. It’s very hard to accessibly explain in 30 seconds why directly reallocating existing corporate spending on health care creates problems. And it’s especially difficult to do so if your own hazily sketched public-option plan doesn’t actually hold up under technocratic scrutiny. The Biden campaign’s initial response testifies to the challenge: Rather than attacking the many genuine flaws in Warren’s proposal, they’ve opted to carry on assailing the middle-class tax hikes it does not contain.
But the virtues of Warren’s plan, as a narrative device, aren’t merely defensive. Although some of its assumptions on cost-cutting are politically optimistic — and a lot of its revenue-raising, technocratically flawed — her blueprint does drive home just how much money the U.S. government could be spending on social benefits for ordinary Americans, but isn’t. By allowing its health-care providers to charge patients more than double what the residents of other nations pay, the U.S. government effectively drains hundreds of billions of dollars from the middle class’s pockets each year. Warren’s plan calls attention to that fact. And her grab bag of smaller pay-fors offers a guided tour of other ways the status quo is failing middle-class Americans: By refusing to invest in the IRS’s enforcement capacity, our government is allowing the rich to steal $230 billion in annual revenue. By allowing the Pentagon to turn Overseas Contingency Operations Fund into a permanent part of its budget, we’re letting the military-industrial complex collect an annual bonus large enough to finance tuition-free public college. By neglecting to impose a tax on financial transactions, we’re leaving $800 billion on the table. The list goes on.
Centrists have tried to paint Medicare for All supporters as betrayers of the middle class. Warren’s new plan just might allow her to turn the tables: Whose really got the typical American family’s side — the Democrat who’s promising not to make their (increasingly unaffordable) health insurance any worse, or the one who’s saying we should make that insurance better by taking trillions of dollars from the rich and rentiers and spending it on new social benefits for working people?
If Warren’s plan reframes the Democratic debate around such questions, it will be a success. The substantive defects are a superficial. There’ll be plenty of time to design progressive VATs and payroll taxes after the revolution.
