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Bernie Sanders predicts his $10K tax hike for Medicare for All will save money, but watch the fine print

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Senator Bernie Sanders says most people in America will have to pay more in taxes to pay for his Medicare-for-All plan. But he insists that’s a good deal — and will save people money overall by lowering health costs.

For many Americans, though, that would not be true. Households that spend a lot on health care already would be most likely to see the benefit. But for many, higher taxes would exceed any savings.

Sanders, a top contender for the 2020 Democratic presidential nomination, says the savings would come from eliminating insurance premiums, co-pays and out-of-pocket expenses, he said in an interview with National Public Radio on Monday.

Under his Medicare For All plan, Sanders says Americans could erase $20,000 of annual private health care expenses for $10,000 in additional taxes.

“Is that a good deal? I think that’s a pretty good deal,” Sanders said.

Yet the 181 million taxpayers with employer-sponsored coverage could miss out on the benefits of the Sanders plan, and even those receiving Medicaid could pay more, according to health-care policy experts on both sides of the political spectrum.

Medicare For All is a central piece of Sanders’s argument to expand access to health care and he made his pitch during the first Democratic presidential debates last week in Miami.

That $10,000 per capita number in new taxes is an estimate of the more than $30 trillion cost for Medicare-for-All over a decade spread across the 330 million people living in the U.S. And it’s unlikely that $10,000 cost would be spread evenly, said Cynthia Cox, a vice president at the Kaiser Family Foundation. Corporations and the wealthy would pay more than lower-income people, she said.

A family of four with two incomes that total $100,000 who buys insurance on their own and has at least one member in poor health spends about $30,400 on health costs annually, according to estimates from the Kaiser Family Foundation. An identical family that has employer-sponsored health care spends $15,000 annually.

Under Sanders’s plan, the family who buys insurance on their own could pay $20,000 in additional taxes but come out ahead. If they had insurance provided through their jobs, that’s a $5,000 net loss.

Sanders’s Senate office did not immediately respond to a request for comment. He has introduced a Medicare-for-All bill in Congress that has also been embraced by Senator Elizabeth Warren, one of his rivals.

Sanders has proposed a wealth tax, a bank levy and premiums paid by employers and employees. But that only raises about half of what is needed, meaning that payroll taxes and income tax increases would necessarily have to be part of the plan.

“There are likely to be a lot more losers than winners, ” said Brian Riedl, a senior fellow at the right-leaning Manhattan Institute. “It’s hard to do the tax shift without making most families losers.”

Large families with lots of children and older, sicker people with large out-of-pocket costs are likely to fare well under a Medicare-for-All plan, said Marc Goldwein, a senior vice president at the Committee for a Responsible Federal Budget, a think tank.

Many of the 181 million taxpayers with employer-sponsored coverage are likely to see their taxes go higher than their current health care spending, because about 56 percent of their medical costs are covered by their company, according to the Milliman Medical Index, which tracks annual health care spending.

For example, a person making $50,000 with employer-sponsored coverage spends about $5,250 annually on health care, meaning that under Sanders’s plan, her or his taxes would be nearly double the person’s current health care costs. If that person bought her or his own insurance, it would cost about $10,000, equalizing the $10,000 tax increase.

Those on Medicaid, the government-sponsored insurance program for the poor, are likely to see their tax burdens rise far beyond their current health spending, Riedl said. A family of four earning $30,000 spends about $1,200 annually on health costs, according to the Kaiser Family Foundation estimates.

Sanders’ plan also assumes that health providers will be reimbursed at Medicare rates, about 40 percent below what they receive from private insurers. Health care experts question whether a cut this large is feasible, meaning that the cost for Medicare for All could be even higher.

“The overarching question is whether it could reduce spending by paying doctors and hospitals less,” Cox said.

Sanders was defensive during last week’s debate when asked if the middle class would pay higher taxes to fund Medicare-for-All. “Yes, they will pay more in taxes, but less in health care for what they get,’’ he replied.

But higher taxes, even for more services, isn’t an easy sell politically. Sixty percent of people oppose Medicare-for-All when told that it could require more in taxes, according to Kaiser Family Foundation polling. But that flips — with about 71% of respondents in favor — when people are told that it would guarantee health insurance.

“Of course some people are going to pay more in taxes,” Sanders told NPR. “Health care costs money. Of course it does. No one says it is free.”

The details on the cost, however, have continued to be elusive as Democrats seek to build political momentum behind the idea.

“Medicare-for-All, if it’s paid for responsibly, will shift money around. As a society we might pay a little more or a little less,” Goldwein said. “The question is how to spend it and whose pocket it comes from.”

Bloomberg News
Tax planning Obamacare Medicare Bernie Sanders Elizabeth Warren