Medicare for All, Budget Reconciliation, and a “Get One Reform Free” Coupon

Medicare for All Launch (Photo via Public Citizen)

Senator Bernie Sanders released the latest version of his Medicare for All bill Wednesday. But this time he has 16 Democratic co-sponsors, including many Senators with their eyes on running for President in 2020. There’s been a lot written already about the bill, both on its political and policy frameworks.

The Medicare for All discussion Sanders unleashed is currently focused on aspirational goal-setting and overall politics, about how this lets Democrats demonstrate what they stand for while laying out markers for reform. Harold Meyerson describes the plan as “aspirational — setting a long-term goal that will both motivate Democratic and progressive activists and clarify the Democrats’ purpose to an electorate” and as something that people can “support it in piecemeal fashion.” More telling is conservative writer Ben Shapiro, who tweeted Single-Payer in the debate means “now, ‘corrections’ to Obamacare look moderate.”

Given the goal-setting, it seems in poor form to discuss tactics here. But there’s an element that I think is important as it all unfolds. I want to examine Medicare for All in light of budget reconciliation, and potential lessons we can learn from the recent effort by Republicans to repeal the ACA through that process. There are two types of Medicare for All in discussion, and one will be significantly easier to pass through reconciliation as a backup, while also providing a free bonus at the same time. It’ll be important to develop both.

Two Types of Medicare for All

The policy for Medicare for All has formed along two approaches. The first would be to allow everyone, including businesses, to buy into Medicare. Medicare has better prices and networks due to its size and scale, and that pricing power and scale would be more attractive for many people and employers. We could call this approach Medicare for More perhaps, but I’ll call it AmeriCare here, named after the pre-ACA approach Rep. Pete Stark proposed, which Dylan Matthews describes at length here. Several proposals along these lines have been floated recently, including from health care analysts Jon Walker and Timothy Faust, as well as Senator Chris Murphy.

The second approach would be to move all people directly onto a universal, Medicare-like plan legislatively over a short transition period. Let’s call this Single Payer here. This is what Bernie Sanders’s new bill would do over a four-year timeline.

It’s easy to list out the pros and cons of each approach. The first relies on competition to move people to public insurance; it’s easy to imagine years out many people will still have employer insurance, even if that insurance is cheaper and covers more to compete with Medicare. The disruption is voluntary and slow compared to Single Payer. Though Sanders’s plan would involve less spending on health care overall, moving that much private spending to the public payrolls would involve large tax increases. How those taxes are structured matters politically, as well as whether those with employer coverage would be able to secure raises as a result of businesses no longer carrying those health care costs. These are good debates to have; Josh Barro gives one such overview here.

I want to add one element to the debate: how budget reconciliation plays out. Picture it is 2025, and Democrats finally control all branches of government again. However their control of Senate seats is in the mid-50s. The operational way to pass Medicare for All will be through reconciliation, the budgetary procedure that allows the Senate to avoid the 60-vote threshold for filibuster. (Even if the filibuster is removed between now and then, this analysis will still matter even if it isn’t strictly binding.)

Reconciliation allows changes if they are budgetary and not regulatory, as long as the budgets match up. There was some debate about how much the ACA could have passed through reconciliation in 2010. The ACA passed with 60 votes in the Senate and was cleaned up with an additional reconciliation bill shortly afterwards. The GOP took control this year assuming their whole agenda on health care, financial reform and taxes would pass through reconciliation, so it wouldn’t need a single Democratic vote in the Senate. This has expanded how much you can push reconciliation to do policy work, and it is a one-way ratchet. When Democrats take power they’ll also need to use this process to enact their agenda, as the GOP is currently doing.

Get One Free

If AmeriCare comes up for a vote under reconciliation, the political problem will be how to spend all the savings. The CBO will analyze the proposal and basically say “Congratulations, you have $16 billion a year from your savings to spend, for free. What would you like to spend it on?” The CBO has scored an aggressive public option as savings money and done so consistently, on the order of $158 billion over ten years. It does this by lowering premiums overall, which means the ACA spends less on subsidies. But it also means more employers take advantage of it and pay people less through tax-free benefits, which increases the amount taxes collected. Combine it with some other easy budgetary reforms to pass through reconciliation, like having Medicare negotiate lower drug prices, which alone would save about $11 billion a year, and we can picture an overall savings of $30 billion a year.

What could you spend $30 billion dollars a year on? According to the Century Foundation, you could give every child under six a $2,500 child allowance, lifting 3.2 million children out of poverty, for less than that. $30 billion is about the cost of the FAMILY Act, which gives every worker 12 weeks of annual paid family and medical leave at 66 percent of their monthly wages. You could probably get a really good start on universal child-care with $30 billion a year. It’s like a “get one free” coupon, but instead of cheap pizza you get a reform that helps build a more secure and just society. If you must, you could use it to reduce taxes or the debt to secure center-right votes. (But you really shouldn’t.) This money would be for free, a magic pony but very real, with no taxes necessary to justify what it is used for.

This was exactly the Republican’s logic with trying to repeal the Affordable Care Act. By cutting Medicaid and subsidies so aggressively, they could in turn cut taxes on rich people “for free” as a happy base-supporting side product of taking away health care. The cuts in taxes were so aggressive it wasn’t clear which came first, taking away health care or cutting taxes. Spending this free money on tax cuts served an overarching tactical political goal, of reducing the revenue baseline to do even more tax cuts later. Cutting taxes on the rich is politically unpopular, even to the point that Fox host Tucker Carlson was calling it out on air. Providing an additional, needed public good will not be unpopular.

Single Payer Reconciliation Fights

If Sanders’s Single Payer comes up for a vote under reconciliation, the political problem would be exactly reversed: How do you raise taxes enough? Dean Baker just gave a quick estimate that we need $1.8 trillion a year to fill the gap; let’s run with that. CBO will analyze Single Payer and say, “You need to raise $1.8 trillion a year to pass this through reconciliation. How will you raise taxes to cover this?” Then the battle becomes what kind of taxes, and at what rate, will be able to cover that spending.

Another lesson from the GOP failure is that reconciliation makes the costs very salient. When the CBO estimated that 15 to 20 million people would lose their health care it was both clear what the stakes were and it mobilized people quickly. As Congress bounces back and forth with the CBO on what kind of higher taxes are necessary to support this new level of spending, awareness of tax increases will become very high among voters.

Will it matter? I don’t think we know. We saw in Colorado and Vermont Single Payer efforts fail in part because of the sticker shock for a new health care system. When people say they are willing to pay more to get health care, polling shows they usually aren’t thinking in the scale that Single Payer would require.

Speed will also be another consideration. There will be, as there always is, a backlog of reforms needing addressing. Reconciliation itself will likely need to address other reforms as well. An effort that has the institutional budgetary wind at its back, where the problem is how much money Congress gets to spend for free, will work faster and quicker than the institutional problem of how to juggle a large new tax.

It is necessary that Democrats run on Medicare for All, both to demonstrate what they stand for and make clear how they will concretely benefit the lives of potential voters. The movement should, as well, develop plans on both tracks of that slogan. If the effort to make Single Payer happen flounders on tax hikes, having an aggressive Medicare for More public option plan worked out, one that will be easy to pass using budgetary process and open up space for an additional reform, will be critical as a back-up option.

(Thanks to Stan Collender for discussing the reconciliation process and health care with me.)