New Study Does the Math: Yes, We Can Afford Medicare for All

So it is exciting to see that the Political Economy Research Institute (PERI) at the University of Massachusetts-Amherst recently completed the most comprehensive, authoritative analysis of the costs and benefits of a Medicare for All system.

They did the math, and we have the results: the U.S. can provide universal, comprehensive, no-copay, no-deductible coverage at a cost that is $5.1 trillion less than we pay now. There are powerful forces dead set on retaining the profit-soaked status quo, so the argument that single-payer healthcare will cost too much will not magically disappear. But, as the saying goes, those of us favoring universal coverage now “have the receipts.”

The Death of Co-Pays, Premiums, and Deductibles

A quick overview of the calculations in the 200-plus page PERI/UMass report:   A Medicare for All system will lead to an increase in people accessing care, an undeniably good thing that nevertheless will raise our healthcare spending by about $400 billion a year. But that increased cost is more than offset by the huge annual savings of $700 billion from cutting out for-profit insurance’s bloated administrative costs, profits and marketing, along with reduced pharmaceutical and provider spending.

Under Medicare for All, premiums, co-pays, and deductibles that cause so much suffering and even death will disappear. In their place will be government investment of $1.05 trillion a year. The PERI study includes that cost, and also factors in the price of retraining and/or providing pension guarantees and wage replacement to 800,000 displaced private insurance industry workers, along with the inevitable administrative cost of transition to a new program.

PERI proposes that these costs be covered by: 

• A net worth tax of 0.38 percent, with an exemption for the first $1 million in net worth;
   
• Businesses paying health care premiums as they do now, but with a cut of 8 percent relative to their existing spending per worker;
   
• A 3.75 percent sales tax on non-necessities, which includes exemptions for food and beverages consumed at home, housing and utilities, and education  and non-profits. This tax would apply to only the wealthiest 12 percent of U.S. households;  
   
• Taxing long-term capital gains as ordinary income. 

Plugging Up the For-Profit Hole in the Healthcare Pipeline

There are far more granular details in the PERI report, of course. And the precise levels and targets of such taxes will be decided in the legislative sausage-making, not in an academic report. (For example, see here for an alternative approach that proposes funding Medicare for All by making payroll taxes apply more evenly to higher-wage workers than they do now.) But the numbers add up. And the question, “How can we afford it?” is answered, thoroughly and persuasively.  
            
Which should not be a surprise. Although the PERI-UMass study is the most comprehensive demonstration of Medicare for All cost savings, it is not the first. The U.S. General Accounting Office and Congressional Budget Office have come to the same conclusion, and the far-superior financial ledgers of single-payer programs in other countries show it, too. Even the conservative Mercatus Center study in 2018, initially trumpeted as showing the high price for Medicare for All, was revealed to conclude it would save $2 trillion compared to our current system.

Again, these results are to be expected. If you think of healthcare spending as a pipeline running from the money we all pay to the care we receive, our current system’s waste represents a massive diversion of that pipeline. We allow health insurance company CEO salaries, shareholder profits, and marketing budgets to drain away our healthcare resources. A pre-schooler can identify the waste in a system like ours, as well as the obvious value in stopping that for-profit diversion.

It is possible to have American life without healthcare co-pays, deductibles, and premiums. It is possible to live in a country where we no longer watch our neighbors and loved ones suffer and even die because they cannot afford the care they need and deserve. And now we have an academically and economically rigorous study that proves it.