Proponents of single-payer healthcare in the United States point out that the idea isn’t new here: President Harry Truman briefly made a compulsory national health program a plank of his Fair Deal, before withdrawing it amid robust bipartisan opposition.
But there’s another, even more important sense in which “Medicare for all” isn’t new: several states have tried to go down that path. All of them stopped once the full cost and necessary tax hikes became clear.
According to new analysis from the Mercatus Center at George Mason University, the “Medicare for all” plan championed by Sen. Bernie Sanders, I-Vt., would increase government healthcare spending by $32.6 trillion over ten years. Even doubling current individual and corporate income tax revenues would prove insufficient to fund such a program.
Several states ran into similar problems. With growing interest at the federal level, the pitfalls states encountered are now especially instructive.
Sanders, one of the most vocal supporters of single-payer healthcare on Capitol Hill, had a front-row seat for the demise of a similar plan in one of the wealthiest and most progressive states in the nation. In 2011, Vermont came closer to implementing a single-payer system than any other state. The legislature passed the bill. Gov. Peter Shumlin, D-Vt., who had campaigned on the idea, happily signed Green Mountain Care into law.
Then the invoice arrived.
Vermont made the mistake of adopting an extraordinarily costly overhaul of the entire healthcare system without waiting for a fiscal estimate or establishing exactly how the state would pay for it. When the estimates came in, they were stratospheric. In a wealthy state with the second-lowest uninsured rate in the country (3.7 percent, compared to a national average of 8.8 percent), the state’s own estimates concluded that single-payer would require a near-doubling of the state’s budget.
Vermont hoped to use federal funding for half of this cost, but to cover its share, taxes would have to go up — a lot. Payroll taxes would have had to rise by 11.5 percentage points. Individual income tax rates could go up by as much as 9 percentage points. Shumlin scrapped the plan, concluding that it would be “unwise and untenable.”
Voters in Colorado arrived at much the same conclusion when single-payer healthcare went on the ballot in 2016. The price tag (which was arguably low-balled) was enough to tax income at rates as high as 14.63 percent, more than triple the state’s current flat income tax rate.
The electorate balked at the costs. They may have been concerned about the details, too, as it vested authority to adjust benefits and even change tax rates with a board of largely unaccountable trustees. No one operates under the illusion that private insurance is a panacea in this regard, but at least people have options and avenues of appeal. Single-payer strips that away; the government provides what it chooses to provide. In Colorado, that proved a potent concern.
On Election Day, the constitutional amendment establishing ColoradoCare met a crushing defeat, rejected by an astonishing 79 percent of voters.
Finally, consider the case of California, a state with a Democratic governor, Democratic supermajorities in both legislative chambers, and an electorate predisposed to embrace the “Medicare for all” concept. In 2017, single-payer legislation dubbed Healthy California passed the Senate, but was then pulled by House leadership, with the speaker expressing concern that the proposal was too expensive, lacked appropriate funding mechanisms, and wasn’t ready for prime time.
He was right about how expensive it was. The state’s estimates pegged the cost at $400 billion per year, twice the state’s budget. An outside report commissioned by an advocacy group rejected the estimates of the nonpartisan legislative office, concluding that the plan would cost a mere $331 billion.
California’s current budget is $201 billion.
If states are the laboratories of democracy, single-payer still hasn’t made it out of the test tube. And these states had an advantage that the federal government doesn’t, as they believed they could offload about half of their costs on the federal government. At the federal level, there’s nowhere to go — except to the taxpayers.
If wealthy, progressive states like Vermont and California found the costs intolerable, and if voters in the swing state of Colorado defeated universal health care by a 4-to-1 vote, their experiences do not bode well for a national program. Sooner or later, the enticing language of “Medicare for all” runs up against some very real and very daunting costs.
Jared Walczak (@JaredWalczak) is a senior policy analyst at the Tax Foundation in Washington, D.C.
