Elizabeth Warren is an unabashed believer in wealth redistribution, so it was predictable that her Medicare for All plan would hit high-income individuals and large corporations with trillions in tax hikes. More surprising are the two other targets she chooses to soak: states that spend most heavily on Medicaid, and employers that offer the costliest health benefits.
A central feature of Warren’s plan requires both groups to keep paying all or most of what they already pay for health care. This locks in disparities of the status quo — and effectively penalizes states and companies for the sin of having been generous with coverage in the past.
Even if Medicare for All were a good solution for the U.S. health-care system (which it is not), and even if her math added up (which it does not), her financing plan would also fail on fairness grounds.
Under Warren’s proposal, state and local governments would be required to send Washington the entire amount of their current Medicaid funding, plus what they spend on health benefits for their own employees. This would add $6.1 trillion over 10 years to the federal treasury.
Similarly, employers would owe a new tax — Warren calls it a “contribution” — pegged at 98% of what they already spend per employee on health premiums. That’s about $8.8 trillion over 10 years.
Both groups’ payments would increase annually at rates determined by Washington. Together, they would account for more than half of the additional revenue Warren says she needs to finance single-payer.
Although she’s known as a policy maven, her rationale for this tax structure is pure political expediency: She wanted to maximize revenue from two deep pockets while still claiming, dubiously, not to be increasing their costs.
This strategy precisely mirrors the status quo — at least to start — but it still creates winners and losers.
New York’s Medicaid program offers an extreme example. Thanks to broad eligibility, expansive benefits and large helpings of waste, New York’s version of the nationwide health plan for the poor will cost the state, New York City and county governments $31.7 billion this year. That works out to almost $1,600 per capita — well over double the national average.
Utah, at the other end of the spectrum, spends about $250 per capita on Medicaid, less than a sixth of New York’s rate.
Today, that gap is a matter of local choice. Under Warren’s plan, it would become a permanent feature of the U.S. tax code.
Employers would face a similar inequity on a smaller scale. Those that offer health benefits pay wildly different amounts, depending largely on the comprehensiveness of coverage and the degree of cost-shifting to workers. If Warren gets her way, the most generous companies would be compelled to continue paying top dollar, even as employees of their stingier competition get the same government-provided benefits.
In a dirigiste twist, Warren would allow hard-hit employers to petition for relief, but only if they pass the savings along to employees through collective-bargaining contracts. Workers who prefer not to unionize would be stiffed.
Employer health costs also vary considerably by region, with New York again at the high end. The average employer contribution for family coverage in New York is almost $17,000, 19% higher than the national average. That gap, too, would be arbitrarily baked into law.
Plenty of other states would be on the losing end of Warren’s plan, including her home base of Massachusetts. Like the recently enacted cap on the federal tax deductibility of state and local taxes, her plan would generally shift resources from blue states to red.
Warren may have a tough time justifying that cost shift to the Democratic voters she’s courting in the presidential primary. In the event Democrats retake the Senate next fall, it’s hard to imagine newly installed Majority Leader Chuck Schumer going along with a scheme that so thoroughly shafts his own constituents.
Ultimately, Warren’s plan turns out not to be as clever as she seems to think — because its politics are just as bad as its policy.