Presidential candidate Bernie Sanders plans to pay for far-reaching programs, such as Medicare for all, with savings achieved by reducing waste, fraud, and bureaucracy, but the lion's share of the cost will be borne by wealthy and high-income Americans. Can Sanders promise of healthcare for all overcome pushback from taxpayers? Read on to learn more about Sanders' tax plan and what it may mean for you.
First, a bit of background
Sanders' most expensive proposal is to replace the Affordable Care Act with an expanded version of Medicare, the healthcare safety net provided to American seniors.
Sanders is quick to applaud Obamacare's reducing of the uninsured rate in the U.S. by 17 million Americans, but he's also quick to point out that Obamacare hasn't curbed healthcare costs and that coverage provided by Obamacare plans often falls short, particularly when it comes to paying for oral health, vision, and long-term care.
Specifically, Sanders thinks that rising healthcare plan deductibles and co-pays are putting too much financial pressure on low- and moderate-income Americans, and he may be right.
In 2016, the average combined prescription and healthcare services deductible for a bronze-level plan is $5,765, up 8% from $5.328 last year, and 47% of bronze metal plans have combined deductibles that are above $6,000, according to the Kaiser Family Foundation.
That's a lot of money to pay before insurance really kicks in.
Additionally, Americans also pay a growing share of the cost of prescription drug medicine. Runaway price increases for prescription drugs have insurers increasingly using drug formularies with varying patient cost-sharing tiers. These formularies often place high-cost medicine in tiers requiring the biggest patient co-pays and coinsurance. As a result, formularies can lead to life-threatening choices, including the delay of treatment. Despite Obamacare's promise, 31% of Americans still report they're putting off getting medical because of its cost, according to Gallup.
Because of these shortcomings, Sanders advocates replacing private health insurance altogether with an expanded Medicare that covers everyone, soup to nuts.
However, free healthcare for all won't come cheap. U.S. spending on healthcare eclipses $3 trillion annually, and Sanders projects that the annual price tag of his Medicare all plan will be $1.38 trillion.
Footing the bill
Eliminating programs that duplicate healthcare services, such as Medicaid, will provide some savings, but taxes will pick up the bulk of the tab.
Sanders' tax plans include:
- A 6.2% income-based healthcare premium paid by employers.
- A 2.2% income-based premium paid by households.
- Progressive income tax rates ranging from 37% to 52% for high income earners making more than $250,000 per year.
- Taxing capital gains and dividends at income tax rates.
- Limiting tax deductions on people earning over $250,000.
- Boosting estate taxes on large estates above $3.5 million.
Most Americans will only be subject to the 2.2% premium tax, and because of that, Sanders estimates that a family of four earning $50,000 would pay just $466 per year into the single-payer program. If so, that could represent a significant savings given that -- even with subsidies -- most Obamacare enrollees still pay $100 per month for their insurance, plus co-pays and deductibles every year.
Instead, high-income earners will feel the pinch. Sanders' progressive income tax plan will tax Americans' earnings between $250,000 and $500,000 at 37%, and people earning more than $10 million will pay 52%. Currently, married couples filing jointly with income between $413,351 and $466,950 pay a 35% income tax rate, and the highest income tax rate is 39.6%.
Tying it together
Sanders estimates that his various tax proposals would "raise" nearly $1.1 trillion of the cost of healthcare for all, but taxpayers know that money won't be created in a vacuum -- it will come out of their income. The soaring cost of healthcare could make that money well spent because the odds are that we're likely to suffer illness or injury requiring costly treatment as we get older, but only time will tell if Sanders' cost and tax revenue projections hold up. If they don't, then more tax increases may be necessary.