Medicare for All

Elizabeth Warren Doesn't Really Have a Plan to Pay for Medicare for All

The presidential candidate wanted a proposal that was airtight and easy to explain. Her plan is neither.

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(K.C. Alfred/TNS/Newscom)

Late last month, as Sen. Elizabeth Warren (D–Mass.) was under increasing pressure to explain how she would pay for Medicare for All, the single-payer health care system she supports, The Washington Post reported that the presidential hopeful was working with liberal economists to put together a financing plan. 

This was a challenge, the piece noted, partly because the plan would require so much additional government spending, and partly because Warren herself had committed to not financing the program via middle-class taxes, as most countries with national health care systems have done. 

More broadly, Warren wanted a plan that was simple and straightforward. As one anonymous outside advisor told the Post, "They want to figure out—with one go—how to stop the 'How are you going to pay for it?' question…She wants something airtight but easy to understand."

In the end, her plan turned out to be neither. Her proposal is, on the one hand, unwieldy and complex, a lengthy list of provisions that are difficult to capture in a few sentences. And, in part because of its complexity, it is also far from airtight. The plan is full of dubious assumptions about the cost-savings that could be achieved under a single-payer system and the revenue that could be raised by the taxes and fees she would impose. It is not really a plan at all. 

That is the essential point that Avik Roy, president of the Foundation for Research on Equal Opportunity, drives home in a new analysis of the fiscal effects of Warren's financing plan. Roy's analysis assumes that all of the policies Warren calls for—even those that are quite politically unlikely, such as the passage of comprehensive immigration reform—actually go into effect. 

Roy concludes that Warren's plan would raise far less money than assumed, and would cost far more. Broadly speaking, Warren's plan doesn't account for the likely economic ripple effects it would almost certainly cause; instead, she assumes that even with an array of new taxes and fees on businesses and wealthy individuals, economic growth would continue without change. Corporate tax rates would go from 21 percent to 35 percent, which, as Roy notes, "would have a meaningful effect on employment and economic growth, especially in the manufacturing sector and other capital-intensive industries." This allows her to claim far more tax revenue than is realistic.

In addition, Warren assumes that by moving nearly all of America's health care financing to the federal government, administrative costs—the overhead that supports the actual delivery of care—can be cut down to levels that few independent experts believe possible. 

For example, Roy points out, rooting out waste, fraud, and abuse is an administrative cost; currently, about 10 percent of Medicare spending falls into one of these categories. With radically reduced administrative spending, that figure would likely be far higher than Warren estimates, leading to about $3 trillion in additional spending over a decade. 

All together, Roy estimates that far from fully financing Medicare for All, Warren's plan would end up increasing deficits by about $15 trillion over a decade. 

Roy is a former Republican health policy adviser who has often been skeptical of large-scale liberal health plans. But what's notable about his estimate is how close it is to a similar figure put forth by Emory University health policy scholar Kenneth Thorpe, who has at times been supportive of single-payer health care plans. Although some of the particular underlying assumptions differ, Thorpe estimates that Warren's plan comes up about $14 trillion short. 

Like Roy, Thorpe takes issue with Warren's savings estimates. Quoted in a new essay by Philip Klein of The Washington Examiner, Thorpe calls her administrative savings numbers "unrealistically low," and is particularly harsh on her estimates for prescription drug savings: 

The Warren campaign claims that through more aggressive negotiation and threats to rescind patent and licensing protections, it could cut the price that Medicare pays by 70% for brand-name prescription drugs and by 30% for generics, saving $1.7 trillion relative to the Urban Institute forecast. But Emory's Thorpe says such targets are "not even close" to realistic. "It would be the end of any type of research and development and innovation in this country," Thorpe says. "Nobody would invest in the pharmaceutical industry at those numbers."

Klein went through the various points of Warren's plan, and throughout the process, Klein writes, Thorpe kept repeating some variation on the phrase: "That doesn't make any sense." 

The point, I suspect, isn't to make sense, or to add up in any conventional sense. The point is to divert the discussion into technical analysis that many people will tune out, and wave away critics who point out that her assumptions are hokum. 

And you don't necessarily need to dig into the finer points of health care economics to see how flimsy her proposal is. Just look at how Warren herself is describing it. Her Medicare for All plan includes a 6 percent wealth tax on billionaires, up from the 2 percent-plus-surtax rate she proposed earlier this year. (The 2 percent rate would continue to apply to those with smaller fortunes.) Yet she has continued to describe it as a two-cent tax on billionaires. 

Warren is apparently so unconcerned with the details that she isn't bothering to get the basics right herself. In some ways, then, you can set aside the wonky arguments about growth rates and revenue expectations and implausible reductions to health care spending. All you really need to know is that even Warren isn't taking her plan seriously.