Gillibrand’s 4 percent fantasy

by Bill Hammond |  | NY Torch

Sen. Kirsten Gillibrand is setting herself apart from many “Medicare for All” supporters by offering what sounds like a plan to pay for it. Unfortunately, the revenue source she keeps citing – a 4 percent tax on income – would fall short of what’s needed by at least $1 trillion, and more likely $2 trillion, per year.

The 4 percent tax is coming up a lot in speeches and interviews as Gillibrand campaigns for president, indicating that her use of that implausibly low figure is a strategy, not an accident.

Sometimes she suggests that the tax would finance the entire cost of universal coverage, as in this quote from a campaign video: “I would make ultimately health care an earned benefit that you buy into at 4% of income forever, and it pays for itself.”

Other times, she mentions it as a way of paying for an optional Medicare “buy-in,” which she sees as a first step toward a full single-payer plan.

“So the part of the Senator Sanders bill that I got to write was the transition,” she said on the “Pod Save America” podcast. “It’s a four year transition where anybody can buy in at 4 percent of their income to create competition in the market and let people begin to choose what works for you. … That’s how you get to single payer. That’s how you get to true Medicare for all, because you’re letting people participate in a way that makes sense to them.”

Either way, the math does not work.

According IRS data, the nation’s total adjusted gross income for 2016 was $10.2 trillion. Four percent of that amount would be just over $400 billion.

That would cover just one-sixth of the $2.5 trillion annual cost of Medicare for All, as estimated by Urban Institute, a left-of-center think tank. Using Bernie Sanders’ own projected price tag of $1.38 trillion, Gillibrand’s revenue source would still be 70 percent too low.

Nor would a 4 percent tax be adequate to finance an optional buy-in. As of 2017, Medicare cost more than $12,000 per recipient, a figure that does not include Medigap spending spending and out-of-pocket costs. Even assuming lower spending on younger buy-in recipients – say, $8,000 per year – the cost would exceed 4 percent of income for anyone earning less than $200,000 a year.

Another complication is that the buy-in would be optional. Most people earning more than $200,000 would either have employer-sponsored coverage or could buy it for less in the private market.

Where Gillibrand’s 4 percent figure comes from is unclear.

Contrary to some of her comments, it is not part of the Medicare for All legislation she cosponsors with Vermont Sen. Bernie Sanders, which lacks specific taxes of any kind. The section dealing with transitional buy-in – which she says she authored – calls for premiums based on average projected claims per person. There’s no official estimate of the amount, but it would be almost certainly more than 4 percent of income for most consumers.

A 4 percent income tax does appear in Sanders’ informal listing of “revenue options” for single-payer – but not as the sole financing source. It’s one of 10 taxes listed, accounting for one-fifth of the money to be raised. Other sources including a 7.5 percent “income-based premium” paid by employers (which would indirectly affect employees) and higher marginal income-tax rates for people making more than $250,000.

If Gillibrand considers her 4 percent tax to be one of many that would be necessary to finance Medicare for All, she has not made that clear in the speeches and interviews cited above, nor in others she has given recently.

To the contrary, she describes her plan as “an earned benefit that you buy into at 4% of income forever, and it pays for itself.”

Like many claims from single-payer believers, that’s too good to be true.

 

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