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This may be basic math, but I'd like to check my understanding of Bernie Sanders's medicare for all financing options document, which is found here.

  • $3.2 trillion is what the U.S. spends on health care yearly
  • $0.613 trillion is what the government would save on health care if Medicare for All was implemented, according to Sanders
  • $2.0 trillion is what the federal government currently spends on health care

So to figure out what additional revenue we need, we subtract:

3.2 - 2 - .613 = .587

That document also includes suggestions for additional revenue which add up to about $1.6 trillion a year.

And since $1.6 trillion is greater than $587 billion he's got it covered.

I understand there will be disagreement about whether these numbers are true/accurate, and certainly about whether his proposal is politically possible. But do I understand his math, more or less?

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    I don't know where you're getting the revenue numbers from. It is clear that his plan will require more tax just by looking at what he is proposing. First example is the 7.5% tax. He claims businesses will pay $3750 instead of $12,865 and save them $9000. Somebody needs to pay the $9000, and it would be the government. Therefore that would actually increase what the federal government spends on health care and not contribute to the shortfall at all. You don't magically pay less for healthcare by declaring you are going to pay less in premiums... – Matthew Liu Apr 16 '19 at 21:42
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    @MatthewLiu Except single payer systems do, when compared to US spending. As a simple example, they impose a certain price for drugs. The drug companies can take it or leave it, and some money is better than no money. – Caleth Apr 17 '19 at 7:18
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    @Caleth Price controls don’t work like magic; they are well understood to cause shortages compared to what would happen under normal prices, both because of artificially increased demand (people buying more) and decreased supply (drug companies “leaving it”). – Joe Apr 17 '19 at 10:44
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    @Joe look at any of the single payer healthcare systems. Price controls for healthcare do work. – Caleth Apr 17 '19 at 11:51
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    @Caleth I didn’t say they don’t work. I said they don’t work like magic. It’s beyond the scope of the question asked, but the assumption that you can flip a switch and expect the provision of healthcare to remain unchanged except the price will be lower is not true at all. – Joe Apr 17 '19 at 12:21
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Currently, the United States spends $3.2 T/yr on healthcare, of which $2 T/yr is spent by the government and $1.2 T/yr is spent by individuals and businesses.

Under Medicare for All, all of that spending would be moved to the Federal Government. The proposal, however, suggests that reduced administration costs and negotiated discounts on pharmaceuticals would reduce total healthcare costs by $0.613 T/yr

So, based on this estimate, under Medicare for All, the Federal Government would have to spend $2.6 trillion/yr on healthcare:

  $3.2   T/yr : Total Healthcare Spending (mix of govt + individual)
- $0.500 T/yr : Reduction in administrative costs with M4A
- $0.113 T/yr : Reduction in pharmaceutical drug costs with M4A
  -----------
= $2.587 T/yr : Total Healthcare Spending on M4A (all govt)

Since the Government already spends $2 T/yr on "publicly financed health care programs such as Medicare, Medicaid, and other programs", the government would only have to spend an additional $600 billion/yr:

  $2.587 T/yr : Total Spending on Healthcare with M4A
- $2.0   T/yr : Current Government Spending on Healthcare
  -----------
= $0.587 T/yr : Additional Government Spending needed

That's a total increase in government healthcare spending of $587 Billion/year for moving from the current system to Medicare for All.


So, if we accept these assumptions, a tax increase of $587 billion/yr would be all that is needed for Medicare for All to be deficit neutral.

If all the tax modifications described in the linked document were implemented, then they would raise $1.62 T/yr in additional revinue, resulting in $1.03 T/yr of deficit reduction.

  $1.619 T/yr : Added revenue from tax increases/modifications
- $0.587 T/yr : Additional government spending required for M4A
  -----------
= $1.032 T/yr : Deficit Reduction under Sander's Plan
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  • An 2010 IOM research has shown that around $210 billions "unnecessary services" are among $750 billions excess medical spending. So without a "profit driven" mentality, a universal healthcare will cut at least half or $375 billion from excess medical spending. – mootmoot Jun 4 '19 at 8:13
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No

The implicit assumption you have made with your math (which may or may not be Sanders’ math) is that the $1.2 trillion/year in private healthcare spending can undergo a sort of instantaneous transubstantiation and become federal government healthcare spending. That is not the case.

That $1.2 trillion belongs to millions of different Americans. Some of it is the money of individuals who pay for their own health insurance, but can’t get ACA subsidies. Some of it is the money of employers who provide health insurance. Some of it is non-federally funded government benefits. Some of it belongs to billionaires who are so rich they just pay with gold bars every time they go see the doctor and don’t care what it costs.

Given that, the $613 billion/year in savings is not going to go to the federal government in one convenient sum for re-appropriation, but will be dispersed across everyone in the United States, in the form of money that hasn’t yet left their wallet. If Bernie wants that $613 billion/year for Medicare for All, he has to create new taxes to raise that amount as federal money before the federal government can spend it on healthcare.

So, if Bernie wants Medicare for All that is the same amount of spending as the current private system, the actual math for the amount of additional revenue needed is:

3.2 - 2 = 1.2

It just so happens that this can also be written as

3.2 - 2 = .613 + .587

In other words, there will be $1.2 trillion/year in new taxes no matter what, but the argument is it will only feel like $587 billion/year in new taxes because $613 billion/year will be money we would have payed an insurance company. Your conclusion can therefore be re-written as:

Since $1.6 trillion is greater than $1.2 trillion he’s got it covered.

All of this assumes everything in the document is true and can be taken at face value, which I interpreted to be a simplifying assumption of your question.

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    @Caleth If all other spending is constant, he will reduce the deficit by $0.4T – Joe Apr 17 '19 at 10:22
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    @Joe, thanks for your help. Doesn't this objection assume the switch would happen in the course of one calendar year, which is not what Bernie proposes? – eeeeeean Apr 17 '19 at 12:46
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    Shouldn't the $613B in savings be subtracted from total healthcare spending? So, assuming this data is correct, upon implementing M4A, total healthcare spending (by individuals/government/businesses) would fo down from $3.2T - $0.6T = $2.6T, all of which will now be paid for by the government. Since the government already spends $2T, government spending would increase by $2.6T - $2T = $0.6T – divibisan Apr 17 '19 at 15:24
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    I think we're just arguing over semantics. The situation is more like this: Bob wants to spend $10 on ice cream, but Alice offers to buy Bob that same amount of ice cream. We expect Alice to need $10, but because she knows an ice cream maker, she can get that ice cream for $6. So, while Alice is spending more money than she would have if she let Bob buy his own ice cream, total ice cream spending has been reduced. That is what is meant by savings here. – divibisan Apr 17 '19 at 17:07
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    You don't have to be a billionaire, or even a millionaire, to pay for medical care when and if you need it. I did so for much of my life, and for most of that time I was a LONG way from being a millionaire. – jamesqf Jun 4 '19 at 16:39
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No.

Short answer : You cannot use for-profit health insurance business frame into universal healthcare system, which works in different context.

Longer Answer : The $ 3.2 trillion price tag, is an inflated figures paid to medicare industry. There are profiteering agents here, i.e.

  1. Private healthcare insurance company that attempt to make a cut to stay profitable.
  2. Private hospital try to maximize their profit.
  3. Pharmaceutical that give incentive to hospital that use particular medication, thus cause excessive spending on those branded stuff.

If one study social-economy, they will learn that human tend to gaming the system . So competition does not always let to efficiency, but also lead to exploitation and collusion.

Let's check out each of potential profiting roles of each agents:

  1. Private insurance : attempt to use medical statistic to create medicare plan with premium to guarantee their profit, screening out customer that potentially susceptible to expensive treatments. Selling "placebo healthcare" plan that when it happens, the patient is likely to die in short period.
  2. With "for profit" incentive Private hospital tend to conduct unnecessary diagnostic or treatments. There are even more hidden numbers behind the inefficiency and cause the USA healthcare system spending went into wrong place, e.g. a nurses that follow up on patient is more effective and more efficient to treat the patient than unwanted diagnostic.

    In 2010, the Institute of Medicine (IOM) called attention to the problem, suggesting that “unnecessary services” are the largest contributor to waste in United States (US) health care, accounting for approximately $210 billion of the estimated $750 billion in excess spending each year.

  3. Pharmaceutical attempt to create profitable drugs and conduct Pharmaceutical Kickback. Both with jack up the price of the drugs for treatment. Which in term, such trend create a downward spiral towards profit than better and cheap treatment.

In fact, Universal Medicare is an argument about gaming the system exploitation that ballooning of 3.1 trillions bills, indeed it is possible to achieve with 1 trillions budget. Obamacare is indeed an improvised which, is mean to get Republican support, i.e. let the profiteering agents roles continue.

Another issue of for profit healthcare system is negligence of simple and preventive measurement. It is rather ironic that preventive checkup, good advise and follow up always reduce future expensive medical bill. Such intangible benefit and cost saving is rarely noticed by Joe public even though it is common sense.

Nevertheless, there are too many neo-libearlism benefactor profiteering agents (from Republican, Democrat and some liberaltarian) involved and it is an uphill(perhaps moon landing) battle.

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Yes, assuming Bernie's numbers, it adds up to an average of 1 trillion per year over the 10 year forecast.

The total healthcare spend is projected to go from 3.2 trillion to ~2.6 trillion, and all come out of the federal budget. We can subtract the current federal spend of 2.0 trillion to get the increase.

"medicare for all" increases the federal expenditure by 0.6 trillion.

He then suggests a number of new taxes that are projected to raise 1.6 trillion in extra revenue (tax).

So we end up with a surplus

1.6 - 0.6 = 1
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    To downvoters: Is there anything wrong with how I have described Bernie's numbers, or do you just dislike the idea of any tax increase? – Caleth Apr 17 '19 at 14:15
  • @divibisan I'm not sure how you think the other answer is more clear, given you (and I) disagree with what it calculates – Caleth Apr 17 '19 at 15:34

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