Under “Medicare for All,” three quarters of Americans would be worse off financially, according to new research from The Heritage Foundation.
Here’s the bottom line: Most Americans, even many of those not making much right now, would pay more in new taxes than they would save from no longer paying for private health care.
That is the reality—but it’s not the story Medicare for All advocates are telling. Sen. Bernie Sanders promises most people will be better off with Medicare for All, and that’s why it’s worth it to make such a massive change to our health care system. The plan would abolish private coverage and force everyone onto a government-run plan.
“Are people going to pay more in taxes?” Sanders asked at a Fox News town hall in April. “Yes. But at the end of the day, the overwhelming majority of people are going to end up paying less for health care because they aren’t paying premiums, co-payments, or deductibles.”
Heritage Foundation scholars Ed Haislmaier and one of us, Jamie Hall, took a hard look at this claim, and found that the politicians are promising more than they can deliver.
In fact, it turns out Medicare for All would cost some working families more than their budget for electricity; others, their gasoline budget; and others, even more than their food budget.
As a result, 73.5% of Americans will have less money in their pockets under Medicare for All. The cost of the new taxes they have to pay will be more than what they save on health care costs.
Households that receive employer-sponsored coverage would be particularly hard hit. Their income after taxes would shrink by an average of $10,554, and 87% of them would be financially worse off.
Even lower-income working families, which currently get health care through government programs like Medicaid and the Children’s Health Insurance Program, would be worse off. Their average household income after taxes would decline by $5,592 per year.
That’s because fully paying for these programs requires taxes to go up—a lot.
Those pushing for Medicare for All have left out some essential details. No legislative sponsor of this plan has offered a way to fully pay for its promises. Instead, Sanders and Sen. Elizabeth Warren, D-Mass., have put out plans that don’t fully pay for what they’ve promised to provide, and they dramatically overestimate the revenue that new taxes on the rich could raise.
Our study uses the same means to pay for government health care as basically every other developed country uses: payroll taxes.
We ran the numbers and found that Medicare for All would require an additional tax of 21.2 cents on every dollar that every American earns. (Right now, most workers and their employers pay 15.3 cents on the dollar in payroll taxes.)
Adding that on top of other existing taxes would mean the average American would see almost half their income taken by the government.
In real life, we know that if Americans faced that kind of tax increase, some would cut back on work hours or quit working altogether. But we decided not to include that speculation in our study.
Instead, we assumed that all Americans would continue to work just as much as beforehand, while their employers convert current health insurance spending into additional taxable wages.
Under these conditions, here’s how several sample families would fare with Medicare for All.
Olivia Williams: an unmarried mother of two earning $31,000 a year. She would be worse off by $1,547.
Under Medicare for All, Olivia would lose almost exactly the amount she spends on electricity every year.
Today, she gets her health coverage through her job, and her children get their coverage through the Child Health Insurance Program. Under Medicare for All, her current health costs go away—but she’ll still lose $1,547, or 5.3%, of her disposable income.
The Suarezes: a median-income married couple earning about $98,000, with two kids and employer health benefits. They would be worse off by $9,201.
Today, the Suarezes get their health coverage from dad’s employer. Under Medicare for All, their health costs go away, but they’d still lose $9,021, or 13.3%, of their disposable income—about as much as they spend on food today.
The Joneses: a lower-middle-income married couple earning nearly $50,000, with two kids and employer health benefits. They would be $1,619 worse off.
Today, the Joneses get health coverage through mom’s job. Under Medicare for All, their health costs would go away, but they would still lose $1,619, or 4.4%, in disposable income. That’s about as much as they spend today on gasoline.
John Johnson: a median-income unmarried man without dependents. He would be $3,542 worse off.
Today, John earns about $41,000 and gets health coverage through his job. Under Medicare for All, his health costs would go away, but he’ll still lose $3,542, or 13%, of his disposable income. That’s about as much as he spends today on car insurance and maintenance.
Less Money for Most People
Medicare for All would make most Americans worse off financially, not better.
What’s more, Americans would be getting a lower quality product, based on what we’ve seen in other countries with government-run health care. For example, wait times to receive care in Canada are longer than those in the U.S., and in Britain, morale among doctors is often low, since they face bureaucratic hurdles and larger workloads.
However, the status quo in America is not the solution, either. Costs here are too high and choices are too few—and too many Americans feel that special interests and big government benefit from the current system, rather than them.
Congress should work toward real solutions that address these concerns at their root causes. But Medicare for All won’t accomplish that, no matter what its advocates say. It needs to come off the table.