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May 17 2017

The Real Cost of Single-Payer

by Charlotte Hays

 

As a column in The American Interest notes, some are speculating that the next Democratic presidential candidate run on a promise of a single-payer health care system.  

This idea loses popularity instantly when the 'mammoth tax bills" that would be required to support it are known to the public. An article in Reason ponders the tax ramifications of the single-payer system proposed in New York state:   

The single-payer health care plan that cleared the lower chamber of New York's state legislature on Tuesday would require massive tax increases to double—or possibly even quadruple—the state's current annual revenue levels.

. . .

New York collected about $71 billion in tax revenue last year. In 2019, when the single-payer plan would be enacted, the state expects to vacuum up about $82 billion. To pay for health care for all New Yorkers, though, the state would need to find another $91 billion annually.

And that's the optimistic view. In reality, the program is likely to cost more—a lot more.

Gerald Friedman, a University of Massachusetts economist and single-payer advocate, has ideas on how to finance the system:

To pay for the single-payer system, Friedman suggested that New York create a new tax on dividends, interest, and capital gains that would range from 9 percent to 16 percent, depending on how much investment income an individual reports, and a new payroll tax that would similarly range from 9 percent to 16 percent depending on an individual's income.

It was a similar prescription for massive tax hikes that sank Vermont's experiment with single-payer health care in 2014. Funding it would have required an extra $2.5 billion annually, almost double the state's current budget, and would have required an 11.5 percent payroll tax increase and a 9 percent income tax increase. Voters in Colorado rejected a proposed single-payer health care system when they found out how much it would raise their taxes, and efforts to pass a single-payer plan in California (being championed by U.S. Sen. Bernie Sanders, the Vermont progressive) are facing similar financial troubles.

Back in New York, a second analysis of the single-payer health care plan, suggests that Friedman's projections significantly underestimate the cost of single-payer in New York (while overstating the savings).

The American Interest points out that, whether single-payer or something else, one of the root problems of our health system is simply that medical services cost too much. The column comments:

Yes, our policy should be oriented around expanding access to coverage in the near-term where possible. But in the long-term, our policy must be oriented around making healthcare cheaper--through new research programs, de-regulation, tort reform, intelligent immigration policy, and efforts to “push competencies down” so that medical professionals can do the same work with less training.

Ballooning healthcare costs are a menace to the middle-class and to public budgets. This is true now, and it would be true under single-payer. Our debate should be less focused on changing who pays for healthcare, and more focused on making it cost less in the first place.

 

 

 

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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