screen-shot-2019-02-24-at-5-13-58-pm-273x300-7656328Sen. 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.

 

About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

You may also like

Here’s Why Coronavirus Infection Rates Are Rising as ‘Positivity’ Stays Stable

A growing disconnect between two coronavirus benchmarks – the positivity rate and the infection rate – is stirring confusion about New York's pandemic outlook. Read More

‘Clusters’ Drive a Widespread Surge in New York’s Coronavirus Infection Rates

New York's coronavirus infection rates have surged to their highest levels since May, pushing 10 counties – including Brooklyn, Rockland and Orange – above a threshold that the Cuomo administration uses to justify travel restrictions on other states. Read More

A Federal Emergency Rule Is Inflating New York’s Medicaid Enrollment

Strings attached to federal coronavirus relief funding appear to be inflating New York's Medicaid enrollment – and costs – at a time when the state faces unprecedented deficits. Read More

The CDC’s Nursing Home Death Count Is Even Less Complete Than New York’s

The result is that a major public health disaster affecting New York's nursing home residents is not being accurately documented by either of the agencies responsible for protecting them – because state officials are refusing to share the true numbers, and federal officials haven't yet asked for them. Read More

The DOJ’s Probe of Coronavirus in Nursing Homes Appears to Leave Out Most Victims

The U.S. Justice Department's newly announced inquiry into coronavirus in New York's nursing homes comes with a crucial caveat: It will look only at government-operated facilities, which represent a small fraction of the state's nursing-home industry. Read More

State’s Per-Recipient Medicaid Spending Rises to 3rd Highest in the U.S.

New York's per-recipient Medicaid spending has soared to the nation's third highest rate, a sign of fiscal trouble for one of the state's most important programs. Read More

New York Medicaid Spending Is Projected to Jump 6% in Fiscal Year 2021 (UPDATED)

Despite a round of cost-cutting this spring, New York's Medicaid spending is on track to jump by 6 percent this year thanks to a massive influx of federal aid. Read More

New York Has Widened Its Lead in Per-Capita Spending on Medicaid

New York's per-capita Medicaid spending soared to more than double the nationwide rate in 2018, widening its gap with the other 49 states. Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130
E-Mail: info@empirecenter.org

About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.