Health care reform is a big priority for Democratic senator and presidential hopeful Bernie Sanders. The biggest obstacle is how this would be paid for, but he has some ideas.
It’s not hard to make a good case for the U.S. health care system needing some serious remediation, and Senator Bernie Sanders of Vermont is on the forefront of the battle. Sanders put up a good fight to be the Democratic nominee for president in 2016, but came up short against Hilary Clinton. One of his major planks was universal health care for Americans, and as he prepares for perhaps another shot at the presidency, it still remains a prominent project.
The U.S. is the only major modern country that does not have universal health care delivered by the government, and instead maintains a hybrid system, where the government picks up the tab for the poor and the old, with those in between needing to rely on private insurance to be covered.
This does leave some big cracks, and while many people have health coverage through their employer, a lot of employers don’t offer it. The costs of health care in the United States are extreme, partly from having a fragmented private system for most, so buying coverage yourself is beyond the means of a lot of these people, as these jobs generally are the ones with the lowest wages.
The main thrust of the efforts of people like Bernie Sanders and other left-wing politicians is to not leave all these people without adequate coverage, and from this socialist view, universal coverage would be a big win for them. There’s also the matter of such a system being able to be run more efficiently, mostly from the monopoly that this would create where administrators would have a lot more power to regulate prices.
Health care costs more in the United States than it does in other countries, a lot more. The amount that Americans spend on health care is already well out of hand and is set to get worse and worse as the years go by, and this is a real concern that will need to be addressed in some fashion at some point as these expenditures consume more and more of GDP every year.
The U.S. Spends a Lot More on Health Care and Gets Less for It
As of 2017, the United States spent 17.4% of its GDP on health care, well above the country with the second highest percentage, Switzerland, at 12.3%. The U.S. spends about twice as much on average than what other industrial democratic country spends, and when you multiply that by U.S. GDP, you get a very big amount of what we could consider extra spending.
This is not a matter of Americans getting better bang for their buck, and the quality of health in the U.S. is below many other countries who spend a lot less per person. All we need to do is look at the cost of certain procedures in the U.S. versus other countries and we learn the whole story right there, that American health care is wildly overpriced.
Having a big chunk of a country’s health care managed privately is the part that adds all the extra cost, by way of inefficiencies of administration costs, by the complexity of the system, and especially by its being priced according to the normal economic forces of supply and demand.
The easiest way to understand where most of the savings would come from in a completely public system such as Sen. Sanders and other Democrats are proposing is to compare a free market with a monopoly. People dislike monopolies because pricing is not according to the market, but is artificially manipulated. We can charge more for something if we have a monopoly, which is the bad part of it from an economic perspective, but we can also use this power to pay less.
Under such an arrangement, if a health care company doesn’t like the price that is set by the government for something, they have a choice between lowering their price or simply not doing business. This places a downward force on prices, and we settle in not with the equilibrium between supply and demand, but if done right, we end with the cheapest prices that anyone is willing to offer for the service.
To leverage this further, this would require the government to take even more control over the process, for instance like some countries do with hospitals. In Canada for instance, all hospitals are publicly owned and private ones aren’t allowed, and doctors are paid according to a strict schedule, which provides the government with the ability to use its monopoly to price everything.
Medicare for all would presumably be a pure insurance scheme, which at least would allow for a good amount of control over what is paid out, similar to how Medicare and Medicaid operate. Medicare for all would treat everyone like they are on Medicare, instead of just offering this to seniors.
Public Heath Care Can Be a Good Idea, But Only if It is a Realistic One
Some may argue that health care should be left up to the free market, but certain things, by their nature, need to be left up to the government to manage. Security for instance is one, and one that even libertarians will concede to, as a pay for security plan would only provide it for those who could afford it, with the rest being overrun, with the rest being doomed to a life that, as Thomas Hobbes put it, would be poor, nasty, brutish, and short.
Health care is enough like this that we could make the same argument, and the fact that people don’t get the help they need and perhaps die, or suffer from neglect, is a similar concern.
As far as the economic side of things, the fact that this monster has already grown so large with no end in sight is a matter of just how inelastic demand is for health care, almost to the point where price is no object. If you need a drug and it costs a million dollars a year to be on it, you will do whatever you can to get it, even beg on the internet if you have to.
In an ideal world, we would have Medicare for all, but there are two major problems here. The first one is how we would be able to transition to this, which no one has really addressed properly, and the second is how we would pay for it all.
Sanders recently shared his plan here, and it is a collection of a number of simply unrealistic or broken ideas that he and fellow Democrats have put forth recently, as well as a few new ones. The 70% tax bracket for income over $10 million a year is in there, the wealth tax is included, and taxing financial institutions is also thrown in. Sanders has also come up with some new ideas, such as getting rid of tax breaks on capital gains, throwing out special rules for self-employed people, repealing corporate tax “gimmicks,” raising the inheritance tax to up to 77%, and more.
In addition to all this, he will be requiring everyone to pay 4% extra on their taxes, and their employer to kick in an extra 7.5% on behalf of employees, which really cashes out to an extra 11.5% tax on everyone, since employers don’t just pick this extra money off of trees and this gets passed on as a limitation on employee compensation.
There is a lot wrong with all this, starting with the fact that a lot of people will object to all this extra tax, even though a good chunk of it is hidden from their view. The other ideas will collectively serve to both chase away the wealthy and blunt investment even by the most modest investors. Placing greater tax burdens on financial institutions might be the most damaging ideal of all, when we consider how this extra tax burden would be multiplied, and the resulting restrictions on lending may constrict the money supply in a way that even all the Fed’s men may not be able to save us from.
We may actually end up reducing overall tax revenue collected with these ideas, rather than increasing them. Our economy would shrink though, without a doubt, and by an amount that will be painful. In a real sense the real cost of Sanders’ dream would be to seriously impact our economy and put the run to the wealthy, those who hold such a high percentage of our wealth.
If the top 1% control 90% of the wealth, and they leave, we’re left to get by with 90% less. Not all would leave if they had to surrender all this extra tax, but a great many would, especially those whose tax obligation rises by many millions of dollars and even by billions in some cases. It just won’t make sense economically to continue to live in the United States under these harsh tax conditions, and the tax revenue from this demographic may go down by a lot as a result.
Taxing capital gains like earned income would punish the rich well enough, but also punish a lot of people of very modest means by having them to pay a lot more in taxes on the money they saved for retirement. We’re in such terrible shape already and this would place an even bigger strain on the amounts that people of very ordinary means have saved up.
How we would migrate from the existing system to Medicare for all isn’t really discussed, but at a minimum, this would represent a serious and even dangerous shock to the economy if not implemented over time, which is presumably not what Sanders has in mind. We need to worry about all those people who would lose their jobs from something like this, in addition to all the other costs involved with this transition.
Sanders’ plan contains so many radical elements in it that it really does have no chance of passing, whether he becomes president or not, at least not until American politics becomes on the whole as radical as he is. It would require that we change too many things, and while the idea may be a good one in principle, we also need a realistic and palatable way to pay for this and implement it, which Sanders’ plan abundantly lacks.