Sanders' Medicare-for-all plan to boost health, but may wallop economic growth: Analysis
GDP could shrink by as much as 24%, depending on how the plan is financed
Independent Vermont Sen. Bernie Sanders’ Medicare-for-all plan would improve the health of Americans – but could seriously injure the U.S. economy depending on how it is paid for.
That’s according to a new analysis from the University of Pennsylvania’s Wharton Budget Model, which projected that – under Sanders’ proposal – everyone in the country would be insured, as intended. Under current law, projections are that more than one-quarter of Americans will be uninsured by 2060.
By 2060, the proposal would reduce the percentage of the population considered seriously ill to 13 percent from 14.5 percent, raise life expectancy by two years, increase the population by 3 percent and increase worker productivity.
The issues come in when it comes to financing the proposal.
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“Medicare-for-All creates an immediate boost to wages and a broadening of the federal income tax base, resulting in higher federal tax revenues,” the report stated. “In the long run, however, this effect can be overtaken by economic effects of different financing options.”
A plan that “lacks a financing mechanism” implies deficit financing.
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“Under deficit financing, we project that the Medicare-for-All Act would reduce GDP by 24 percent by 2060, despite large efficiency gains from lower overhead and reimbursement costs,” researchers wrote. That effect is due to large increases in federal debt, which falls on current and future workers.
Sanders’ presidential campaign has said he would raise taxes to pay for the plan, though he told CNBC in October that he didn’t need to come up with an exact plan yet.
Researchers looked at two different methods of financing – payroll financing (via a new payroll tax proportional to worker income) and premium financing (premium independent of worker income).
Under premium financing, GDP would increase slightly by 0.2 percent by 2060.
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Sanders unveiled his updated Medicare-for-all bill in April, which would expand coverage of the government-run program to all Americans, not just those over the age of 65. He pushed a similar proposal in 2017.
According to one estimate, Medicare-for-all could cost more than $32 trillion over the course of a decade. Another estimate puts the cost at $34 trillion over the same time period.
Medicare-for-all has become a divisive issue within the Democratic Party as lawmakers and 2020 contenders squabble over the best way to expand coverage to more people. Massachusetts Sen. Elizabeth Warren is for the proposal, but others, including Minnesota Sen. Amy Klobuchar, raised reservations about Sanders’ plan and instead support legislation that would allow people to keep their employer-based plan if they wished to do so.
In the run-up to the Iowa caucuses next week, Sanders’ opponents have ramped up criticism of his failure to have a defined plan to pay for the proposal.