screen-shot-2019-02-24-at-5-13-58-pm-273x300-7656328Sen. Kirsten Gillibrand has apparently doubled the price tag of her Medicare buy-in proposal, from 4 percent of income to 8 percent – but the math still does not add up.

In a profile of her presidential campaign in The Nation magazine, Gillibrand pitched an optional buy-in as a transitional step toward a single-payer health system.

I’d let people choose [Medicare] for a certain amount of time—maybe a four-year buy-in at 4 percent of income, and your employer then matches it at 4 percent. That’s 8 percent of income in America. That is enough; it will pay for itself.

In previous interviews and speeches, and in a campaign video, Gillibrand had said her buy-in would cost 4 percent of income without mentioning that it would have to be matched by employers.

Even at 8 percent, however, it’s not clear how her plan would work.

For a Medicare buy-in to truly “pay for itself,” its average per-enrollee charges would have to equal its average per-enrollee costs.

Applied to the typical U.S. household – which has an average of 2.5 members and median income of $58,000 – an 8 percent tax would raise about $1,900 per person.

That’s less than a third of the average premium for employer-sponsored insurance, which is $6,400 nationwide and $7,300 in New York. It’s also substantially less than the $3,300 that Medicaid – with its low fees and limited provider networks – spends on the average non-disabled adult.

Thus the buy-in plan would stand to lose thousands on every low- and median-income family who signs up. Meanwhile, most higher-income people would probably keep the employer-sponsored insurance they already have, especially if it costs less than 4 percent of their wages.

If enrollment were mandatory for Americans of any income –- as under a Medicare for All plan that Gillibrand sees as the ultimate goal – 8 percent income tax would still raise only a fraction of the necessary revenue.

The Urban Institute has estimated that such a plan would require an additional $2.5 trillion per year in federal revenue – which equates to 25 percent of the nation’s total adjusted gross income as of 2016. Sanders himself estimates a cost of about $1.4 trillion per year, which equates to 14 percent of adjusted gross income.

The challenge of raising that much money through income taxes is illustrated in the accompanying chart. The blue and gray bars show the adjusted gross income and tax payments of different income groups in 2016, and the red bar shows the projected cost of single payer. Each box equates to $250 billion.

financing-medicare-for-all-9089869
Source: IRS data. *Cost of the Sanders Medicare for All bill estimated by the Urban Institute. (Click to enlarge)

 

Financing Medicare for All through income taxes would entail collecting 10 blue boxes’ worth of revenue from the bars at left.

As seen in the chart, the wealthiest group (with incomes in excess of $11 million a year) could contribute at most a fraction of one box. Doubling tax collections on the wealthiest 10 percent would generate about four boxes, leaving six more to be extracted from middle- and lower-income Americans.

How Gillibrand arrived at her 8 percent estimate is hard to say. It’s not included in any legislation, or is there an explanation on her campaign website.

The transitional buy-in system included in Bernie Sanders’ Medicare for All bill – which Gillibrand says she helped to write – specifies that premiums would be based on a projection of per-person claims, not a percentage of income.

Sanders has developed a list of revenue-raising ideas to finance Medicare for All, including a 4 percent tax on income and a 7.5 percent payroll tax on employers. But those are just two of 10 items on the list, and account for only about half of the total revenue his proposals would generate.

 

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

Even With Federal Cuts, New York’s Health Funding Would Remain High

New York's health-care industry stands to lose billions of dollars in federal funding under the major budget bill being debated in Washington – a rare and jarring turn of events for a sector accustomed to steadily increas Read More

As Albany’s Session Ends, Watch for Rising Health Costs

Every session of the state Legislature brings a fresh crop of proposals that would drive up health-care costs, and 2025 is no exception. Here is a sampling of pending bills that, if Read More

House Budget Would Burst New York’s Essential Plan Bubble

The extraordinary cash bonanza associated with New York's Essential Plan – which has generated billions more than state officials were able to spend – would come to a crashing end under the budget bill advancing in Cong Read More

The House GOP’s Shrinking Budget Plan Could Still Cost New York Billions

The likely impact of federal health-care cutbacks has diminished in recent days as House Republican leaders backed away from some of their bigger-ticket proposals, reducing the estimated savings to $625 billion from previous figures of $715 billion and $8 Read More

Highlights of Albany’s Bloated and Belated Budget

The state Legislature approved the last of nine budget bills Thursday evening, 38 days after the start of the fiscal year. Here are some highlights of the fiscal impact of final spending plan: Top lines Read More

How Medicaid ‘Expansion’ Changes Could Affect New York

As House Republicans consider cutbacks to federal Medicaid funding, their focus has turned to the so-called expansion population. Although the details of remain undetermined, the s Read More

New York’s Home Health Workforce Jumps by Another 10 Percent

New York's home health employment is continuing to soar, growing by 57,000 jobs or 10 percent from 2023 to 2024, according to newly released data from the U.S. Bureau of Labor Statistics. Read More

Immigrant Enrollment in ‘Emergency Medicaid’ Surges to 480,000

One of the biggest drivers of New York's Medicaid enrollment growth over the past decade has been "emergency Medicaid" for undocumented immigrants, newly released state records show. Read More