Medicare for All

Elizabeth Warren Wants To Pay for Medicare for All With a $9 Trillion Tax That Will Hit the Middle Class

Warren says it’s not a tax. But what else would you call a requirement that employers send money to the federal government to finance a public program?

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warren-m4atax-zumaamericastwentyfive625822 | Allison Dinner/ZUMA Press/Newscom
(Allison Dinner/ZUMA Press/Newscom)

For months, Sen. Elizabeth Warren (D—Mass.) has hedged on the question of whether she would raise middle class taxes to pay for Medicare for All, the single-payer health care plan she says she supports. Warren has stuck with a talking point about total costs, saying that the middle class would pay less, while critics, political rivals, and even liberal economists friendly to single payer have argued that the enormous additional government spending required by such a plan would inevitably hit the middle class.

Today, Warren released a plan to finance Medicare for All at a total price tag of nearly $52 trillion, including about $20 trillion of new government spending (an estimate that is probably low). Although her plan declares that no middle-class taxes will be necessary to finance the system, it includes what is effectively a new tax on employers that would undoubtedly hit middle-class Americans.

Today, American health care is financed by a mix of public and private payers. Under a single-payer system—what Warren and rival presidential hopeful Sen. Bernie Sanders (I–Vt.) call Medicare for All—virtually all health care spending would instead run through the federal government.

Right now, Warren's plan says, employers spend about $9 trillion a decade on health insurance coverage. Her plan aims to move the private spending onto the federal budget. Under her proposal, large employers who currently pay for health coverage would be required to pay a comparable amount (equivalent to 98 percent of what they pay now, adjusted for the number of workers they employ) in order to help finance Medicare for All.

Warren shies away from calling this a tax, and she even claims "we don't need to raise taxes on the middle class by one penny to finance Medicare for All." Instead, she refers to it as an employer Medicare contribution, under which companies "would send payments to the federal government for Medicare."

But there is a commonly accepted term for a plan that requires companies to send payments to the federal government in order to finance government programs. That word is tax. And that is essentially what this is—a nearly $9 trillion payroll tax (or, perhaps, a head tax with some small-business carve outs). It is thus hard to see this as anything other than a massive middle-class tax hike.

That is the argument that former Vice President Joe Biden, another Democratic presidential hopeful, is already making, with a campaign staffer responding to the release of her plan by saying, "For months, Elizabeth Warren has refused to say if her health care plan would raise taxes on the middle class, and now we know why: because it does. Senator Warren would place a new tax of nearly $9 trillion that will fall on American workers."

Warren and her defenders will likely try to shift the discussion back to total costs, but that's just a way of repeating the dodge that has dogged her campaign for much of the year. Warren will no doubt claim that costs would go down under her plan, but there are reasons to doubt this, including an analysis from health care economist Kenneth Thorpe finding that under a Sanders-style plan, more than 70 percent of people who currently have private insurance would see costs increase, as well as an Urban Institute analysis projecting that single-payer plans would raise national health care spending by $7 trillion over a decade.

Nor is this the only problem with her plan. As The Washington Post reports, "some analysts have warned that companies would have strong incentives, in the years before such a law's enactment, to make it appear their health-care costs are low. Businesses may be encouraged to split off into two entities, one of which might be able to avoid the required health-care contributions because it had none the year before the program kicked off." At minimum, the incentives and feedback effects of Warren's plan would be complex and difficult to predict.

Warren's plan includes other new taxes as well: a six percent tax on billionaires beyond the wealth tax she has already proposed, an increased tax on capital gains, and a 35 percent tax on corporate earnings earned overseas. She also proposes raising trillions in tax revenue through increased enforcement—far exceeding what mainstream experts have suggested is possible.

Indeed, much of Warren's plan is based on unlikely, and at times outright fantastical, assumptions about what sort of additional revenue could be raised, what health care costs could be contained, and what might be politically feasible. Among other things, she proposes raising $400 billion by passing comprehensive immigration reform, which, given the politics of immigration policy, is only a little more realistic than planning to pay off your mortgage by winning the lottery. The Washington Examiner's Philip Klein has published a useful roundup of Warren's less plausible ideas; the takeaway is that even if Warren somehow managed to raise the enormous amounts of tax she proposes, it probably would still not be anywhere close to enough to finance her plan. (More on this in a future post.)

In some ways, Warren's plan amounts to a list of technically sophisticated magic asterisks. It is as much an attempt to obscure the economic and political feasibility of passing and implementing a single-payer health care plan as a good-faith attempt to describe what it would practically require.

Yet in another way, it reveals something about both Warren and the economic reality of single-payer: Despite running a campaign based on wonky academic credentials and detail-oriented policy chops, Warren has, until now, repeatedly refused to directly answer questions about precisely how she would finance Medicare for All and whether she would foist new taxes on the middle class. Turns out she didn't dodge the question because the answer was complex or hard to explain. She dodged it because the answer was so simple it could be expressed in a single word: yes.