Whether he ever becomes president or not, Bernie Sanders has put discussion of Medicare for All squarely on the national agenda, with some help from Elizabeth Warren. It is not too soon to think about the details, just in case.
Some Medicare for All advocates (but not, I believe, Sen. Sanders) want to finance it with a payroll tax. This would be a bad idea.
Payroll taxes are regressive. They hit average people harder than those whose incomes consist largely of things not subject to payroll taxes: interest, dividends and capital gains. It is arguable whether progressive or flat-rate taxes are best, but regressive taxes are clearly a bad idea given today's increasing economic inequality.
Payroll taxes have multiple disadvantages for low-earning workers. A payroll tax that is paid directly by the worker, of course, decreases the already small take-home pay. If it is paid by the employer, it discourages hiring because it creates a significant increase in the cost of the employee, as well as in the complexity of payroll management.
The best way to pay for Medicare for All will be to increase the federal income tax. But this would be politically impossible unless Congress requires employers to increase each worker's pay by the amount saved by no longer insuring that worker — in effect, a large pay bonus. Otherwise, workers objecting to a higher income tax without any additional income to pay for it would strongly oppose the new insurance system.
Of course, employers couldn't pay out the same money twice — both as additional payroll tax to the government and as a bonus to the employees.
You have free articles remaining.
Financing Medicare for All through the income tax would eliminate the expensive administrative complexity of Obamacare. Under Obamacare, the lower one's income, the higher the government subsidy. Determining people's eligibility for Medicaid or subsidies therefore requires intrusive and constant government monitoring of people's incomes.
Medicare for All would cover everyone no matter what their income, but lower-income people would still be paying less because they pay less income tax. Financing insurance through the income tax would eliminate government's high administrative costs of means-testing benefits. It would also eliminate Obamacare's paperwork hassle for patients who "churn" from one kind of eligibility to another as their incomes fluctuate.
Retired people are not on a payroll, so a new payroll tax wouldn't hurt them, but they do pay income taxes. If these are increased to finance Medicare for All, people already on Medicare would pay increased taxes. And they wouldn't get the offsetting wage bonus that employed people would receive from their employers. Everything else being equal, they would therefore oppose Medicare for All.
Everything else would not be equal, though. Medicare for All would save current retirees substantial amounts. Most proposals for Medicare for All eliminate deductibles and feature limited or no co-pays. Retirees would no longer pay the large amounts now subtracted from their Social Security to pay for Medicare Part B. They would no longer need Medigap insurance to cover expenses not covered by today's Medicare, or to pay these expenses themselves. They would not have to pay for Part D insurance for prescriptions. They would also receive any extra coverage, such as dentistry, provided by an improved Medicare-for-all.
These savings would offset and possibly totally equal their income tax increase.
Even if retirees' savings don't completely offset their increased income taxes, neutralizing political opposition to Medicare for All by current retirees would not require financing it with a payroll tax. We could just increase the income tax but provide a tax credit canceling out retirees' net tax increase.
Eliminating opposition by the large number of already retired people could help make what is politically impossible today — replacing Medicare for Some with Medicare for All — tomorrow's reality.
Paul F. deLespinasse of Corvallis is Professor Emeritus of Political Science and Computer Science at Adrian College. His most recent book is "Beyond Capitalism: A Classless Society With (Mostly) Free Markets." His columns have appeared in newspapers in Michigan, Oregon, and a number of other states. This column originally appeared in NewsMax.