Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
As the recent debates among the Democratic presidential candidates emphasized, the idea of government-managed health care is gaining popularity. "Medicare for all" or some form of "free" universal health care is certainly an appealing idea. Who among us wouldn’t appreciate someone else paying our medical bills?
I certainly would. My family's personal health care costs, including premiums and out-of-pocket expenses, run just over $3,000 a month. If my health care were free, I could find a lot of uses for the savings.
But my skeptical side, and probably yours as well, knows that there is no such thing as a free medical procedure. Someone, by some means, has to pay for insurance coverage, doctor visits, hospitalizations, and other medical costs.
The tax tab for providing Medicare for all, as envisioned by Sen. Bernie Sanders, is $3 trillion a year, according to several analysts. The cost for Medicare is about one-sixth that amount, or $583 billion a year.
Sanders and other presidential candidates tell us the wealthy will pay this tab. The reality is that when we look at other countries that have similar universal health care plans, it isn’t just the wealthy that are paying for it.
Raising the more than $3 trillion needed annually to fund Medicare for all would require doubling all personal and corporate income taxes or tripling payroll taxes. This analysis comes from Marc Goldwein, a senior vice president at the non-partisan Committee for a Responsible Federal Budget. He was cited in a May 9, 2019, Bloomberg article by Laura Davison, "Tax hikes on wealthy alone can’t pay for Medicare for all plan." "There is a lot of money out there, but there isn’t $30 trillion [over 10 years] sitting around from high earners," Goldwein said. "It just doesn’t exist."
I researched the tax rates of European countries that have universal healthcare and found Goldwein’s statement to be true. For example, Denmark taxes income over $7,000, with rates starting at 40%. The US rate starts at 10%. This would indicate a doubling or tripling of income taxes, or payroll taxes, on the lowest earners is not a politically-skewed scare tactic, but an economic reality.
