Thursday, May 25, 2017

What if the single payer doesn't have the money?

Creating a single-payer health care system in California would cost $400 billion a year — including $200 billion in new tax revenue, according to an analysis of legislation released Monday by the Senate Appropriations Committee.

The projected cost far surpasses the annual state budget of $180 billion, and skeptics of the bill say the price tag is “a nonstarter.”

Half of the $400 billion would come from existing federal, state and local spending on health care. An additional $200 billion would have to be raised by imposing a 15 percent payroll tax on California employers and employees, the analysis found.
 So where does the rest of the money come from?
But the cost of the new tax would be partially offset by reduced spending on health care coverage by employers and employees — which is how nearly half of Californians receive health insurance.
So does that mean single payer is more efficient? Or will that reduced spending come from slow-walking, or denying outright, procedures that currently get covered? Wouldn't you want to know that up front?

Meanwhile, across the country in New York, the math is also daunting:
The single-payer health care plan that cleared the lower chamber of New York's state legislature on Tuesday would require massive tax increases to double—or possibly even quadruple—the state's current annual revenue levels.

The state Assembly voted 87-38 on Tuesday night to pass the New York Health Plan, which would abolish private insurance plans in the state and provide all New Yorkers (except those enrolled in Medicaid and Medicare) with health insurance through the state government. The same proposal cleared the state Assembly in 2015 and 2016, but never received a vote from the state Senate.
So, about that math:
New York collected about $71 billion in tax revenue last year. In 2019, when the single-payer plan would be enacted, the state expects to vacuum up about $82 billion. To pay for health care for all New Yorkers, though, the state would need to find another $91 billion annually.

And that's the optimistic view. In reality, the program is likely to cost more—a lot more.

Gerald Friedman, an economist at UMass Amherst and longtime advocate for single-payer health care, estimated in 2015 (when the New York Health Act was first passed by the state Assembly) that implementing single-payer in New York would cost more than every other function of the state government. Even if New Yorkers benefit from an expected reduction of $44 billion in health spending, which Friedman says would be the result of less fraud and less administrative overhead, the tax increases would cancel out those gains.
The money has to come from somewhere. Where would that be?
To pay for the single-payer system, Friedman suggested that New York create a new tax on dividends, interest, and capital gains that would range from 9 percent to 16 percent, depending on how much investment income an individual reports, and a new payroll tax that would similarly range from 9 percent to 16 percent depending on an individual's income.
When you factor in the taxing that's already taking place in California and New York, you're looking at an effective tax rate approaching 60%. Do you think that will fly?


Gino said...

'short walking and denying outright' is what many of us already do to ourselves in answer to prohibitive deductable. So what's the difference?

Will it 'fly'? Meaning, politically? From where I sit, put it to a vote of the people and it will pass... For any number of motivations.

Mr. D said...

I hear you, Gino. I can easily envision single-payer passing, but if those who are supposed to pay the freight move away, and a lot of them will do just that, then what happens? That reminds me — we need to continue a conversation we started a few weeks back.

Bike Bubba said...

Any nation with single payer health care demonstrates what happens when there's not enough money. Those with money to escape the system do so, those without suffer. It's why Mayo has so many international patients, really. Rochester is as a result far more cosmopolitan than you would expect a city of ~ 105,000 to be, even accounting for doctors and such born out of the country.

One thing I like about the Trump tax plan is that it ends the deductibility of state taxes. You want to tax people up the wazoo, great, but don't count on Uncle Sam to pay the bill, please.

R.A. Crankbait said...

"Do you think that will fly?"

The only thing that will fly is the capital - and it will fly out of state.

Adam said...

Yeah, there will be a 1-2% tax if you work for an employer (the rest paid by your employer), or a 9-16% tax (the high end being for those making over $400,000) if you are self-employed. People making under $25,000 pay $0. The tax is progressive, and 98% of households will save money on healthcare. How? Because they will not pay a cent for premiums, copays, or deductibles. Why do people always bring up tax increases and completely forget to factor in the incredible savings of not being nickel and dimed at every stage by insurance companies?

Mr. D said...

How? Because they will not pay a cent for premiums, copays, or deductibles. Why do people always bring up tax increases and completely forget to factor in the incredible savings of not being nickel and dimed at every stage by insurance companies?

To paraphrase P. J. O'Rourke, if you think health care is expensive now, just wait until it's free. I'd be interested in seeing your math on this one. The money isn't going to fall out of the sky. Someone will be paying the bill, and if it isn't you, who will it be? And are you so certain that payer will be ponying up?

Bike Bubba said...

Adam, even if "98% will pay less", they are employed by and large by the 2% who will not, and who are likely to decide that their business might do better to relocate. Then it will be a lot more than 2% who will pay more.

Bike Bubba said...

Another way of phrasing this; if indeed the wealthy are committed to a certain standard of living, their "contribution" to the plan will come right out of the salaries of the 98%. Guaranteed. Remember, money is fungible.