Warren’s Plan to Pay for Medicare For All Falls $16 Trillion Short.

Zachary Mason
Nov 1 · 11 min read

I want to start out by saying that I really like Elizabeth Warren. I think she’s one of the finest public servants in our country today, I thoroughly appreciate her usually wonky, technical bills and policy papers, and I hope she would make a fine President – which is why it’s so difficult for me to write this piece.

Senator Warren has made an enormous error by signing onto Bernie Sanders’ fantastical Medicare For All legislation as the centerpiece of her campaign platform. If Warren is the Democratic candidate, Medicare For All will cause her to lose and give Trump a second term on a silver platter. Period. Full stop. And now that, after months of hemming and hawing, Warren’s finally released her long-anticipated “Plan to Pay For Her Medicare For All Plan”, I fear that she’s made it even worse – because it implicitly admits that she can’t.

To anyone who actually bothered to read the text of the Medicare For All bill, the shortcoming was obvious: it promises multiple trillions of dollars a year in additional government spending but does not include tax provisions to come up with any amount in revenues. It would be like an architect’s plan for a skyscraper that omitted a foundation, or an engineer’s design for an airplane that omitted any diagrams for an engine – it looks great, but it only lacks the part that would make it work. Watching Warren bob and weave in the Democratic debates trying to defend this fatally flawed bill was painful. Amy Klobuchar and Pete Buttigieg raked her over the coals for her evasiveness and lack of candor, and rightly so.

So after the Democratic debate, when Warren vowed to respond to her critics and address the obvious, gaping hole in her health care plan, I thought she would finally publish an honest policy proposal. I would have expected something along the lines of a detailed table of income tax, payroll tax, and corporate tax rates for varying brackets as exists in the present Internal Revenue Code, so that a voter could take out a calculator and make an educated guess as to how much “Medicare For All” would actually affect their household finances – and presumably, they could see with their own back-of-the-napkin arithmetic how the Democratic platform would bring them out ahead. And I would have expected the total projected additional revenues would add up to something along the lines of at least $3 trillion/year, a reasonable estimate of the costs of providing health insurance for 330 million Americans.

Sadly, Warren’s “Plan to Pay for Her Medicare For All Plan” published this morning does not do any of that. Not even close. Over the course of 20 pages, Warren presents a word salad of fiscal terms and figures and fractions, and it is completely understandable how a well-read English Lit major can read this and come away thinking “Gee golly, Warren Has a Plan For That!™”

… But if a serious budget analyst or economist, or any lay person with a calculator, were to actually crunch these numbers, it’s clear that Warren’s supposed “Plan to Pay for Her Medicare For All Plan” is woefully inadequate. It’s like that episode in The Office where the new accountant asks Oscar what the strange symbol in the Dunder Mifflin books means, and Oscar informs her that it’s a “keleven” – the placeholder that the preceding accountant Kevin Malone would use to gloss over his gross accounting errors; A mistake plus keleven gets you home by seven!”

Let’s start with the total cost. Warren’s Plan™ acknowledges that economists disagree over how much it would actually cost to ensure 330 million Americans through some sort of Medicare-like program – estimates range from $13.5 trillion to $34 trillion over 10 years. This author would suggest that the lower figures are wildly irresponsible, and a more cautious policymaker should err on the higher end, somewhere along $3 trillion, $3.2 trillion, or $3.4 trillion/year. But Warren for some reason decides to split the baby and claim, without any basis, that Medicare For All would cost exactly $20.5 trillion/10 years, and spends the rest of the paper listing further policies that could add up to $20.5 trillion in revenue. This should be a red flag.

How, one must wonder, can Warren honestly acknowledge that her health care proposal could very easily cost more than $34 trillion/10 years – and simply lop off more than 1/3 of the possible (probable) costs without any justification? In the text of her Plan™ she admits that Medicare For All could very reasonably cost $14 trillion more than the total number her revenue streams add up to – and that even by the most optimistic of her own projections, she could still wind up $14 trillion short. By assuming such a lowball figure, she’s implicitly admitting that the rest of her Plan™ is sorely inadequate. “Irresponsible” might be too polite a word.

Moving along, let’s assume Warren’s $20.5 trillion/10 years figure is in fact the correct cost. The rest of her proposals … they really don’t add up to $20.5 trillion. Not by a long shot.

A big chunk of Warren’s Plan™ works on the fact that American employers are projected to spend approximately $9 trillion over the next 10 years on health benefits for their employers. So she proposes that employers could simply transfer that $900 billion a year they would have otherwise spent on BlueCross or United premiums and instead just transfer that money to the U.S. Treasury. For some odd reason, Warren doesn’t call this a tax, she prefers the euphemism “Employer Medicare Contribution”. She makes this seem very simple.

But Warren is more than glib when she represents that this $900 billion/year transfer she proposes would simply be a matter of American employers shifting funds from one pocket to another, with no additional cost – when her proposal would be an enormous new cost on American businesses. One of the reasons that so many employers like General Motors and Starbucks provide their employees with health insurance is that employee health benefits are 100% deductible as ordinary business expenses. But under the Warren’s Plan™, General Motors and Starbucks would trade this enormous tax deduction for an enormous tax bill. Chew on that for a minute. Warren is proposing a gargantuan economic shock to American employers.

But if Warren’s discussion of “Employee Medicare Contributions” is glib, what she proposes next is rank dishonesty, perhaps a Trumpian level of mendacity. She claims, without any basis, that employers are going to save so much money on employee health benefits that they are now going to surely take all of that “savings” and give it back to their employees in the form of a raise! (Never mind the fact that, as explained above, literally the opposite is true) And not only are America’s employers going to give their employees so much in raises (five trillion dollars? six trillion dollars?) but the employees additional income taxes on those raises is going to generate $1.15 trillion in additional tax revenue!

There is a technical term for what Warren is doing here: she is making shit up. Warren. Has. No. Valid. Reason. To. Assume. Firms. Would. Raise. Wages. And. Salaries. By. Trillions. Of. Dollars. Warren has no reason to assume that shifting $900 billion/year in tax-deductible health benefits to $900 billion/year in additional taxes would not result in literally the opposite! Think about this for a minute. If every American business suddenly had to pay a total of $900 billion/year in additional taxes, wouldn’t it be much more logical to assume that many employers would downsize, eliminate entire offices, shut down production lines? And that as a consequence, the income tax revenues from such workers would decrease – by a lot? Warren’s logic of micreoeconomics and firm behavior here seems to be topsy-turvy.

What’s more, Warren is completely overlooking the fact that, by her own admission, her own plan is going to put a lot of major American companies out of business and eliminate a lot of jobs in the health care sector. She describes her plan as cutting hundreds of billions of dollars of “waste” from the U.S. health insurance market. On one side of the ledger, yes, the ranks of medical billers, claims specialists, insurance sales reps, secretaries, and everyone else who works at offices in the insurance and health care industries can be considered “unnecessary” in a Single Payer economy. But on the other side of the ledger, 50,000 people work for Aetna, another 60,000 work for Anthem, from the custodian making minimum wage to the CEO making nine figures. And if you eliminate an entire industry from the U.S. economy, it is going to reduce the American workforce by about 2 million jobs (for context, 2.6 million jobs were shed at the height of the Great Recession in 2008). The economy of Hartford, Connecticut would quickly resemble Flint, Michigan or Lordstown, Ohio. It would reduce the U.S. Treasury’s budget forecasts by a seismic shock in income tax, payroll tax, and corporate tax shortfalls.

Sure, maybe this economic contraction would not be as bad as Great Recession-level shortfalls, perhaps just a medium-sized, regular recession-level shortfall — but Warren cannot pretend to do a budget analysis of her Medicare For All legislation and pretend this away! If Warren were more honest in her economic projections, she would factor in the reduction of income taxes, payroll taxes, and corporate taxes by something along the lines of $700 billion to $900 billion. But she doesn’t. By not even acknowledging that some larger fraction of U.S. tax revenues are derived from the health care and insurance industries and that those income tax, payroll tax, and corporate tax revenues would be lost, it really diminishes Warren’s credibility in her cost-benefit analysis here.

Unfortunately, Warren’s budget math gets even more loopy. She also claims, without any basis in fact, that in addition to the magical additional $1.15 trillion in income tax revenue from raises that employers would award their workers, by not having to pay for premiums, deductibles, copays, out-of-pocket costs, “another $1.4 trillion in funding for Medicare For All is generated automatically through existing taxes on the enormous amount of money that will now be returned to individuals’ pockets.”

Warren claims that the 190 million households who now have private insurance would take all of that money that would otherwise go to premiums, co-pays, and deductibles, and instead spend $10,000 towards a new car, replacing the roof, or a time-share in Hawaii. And so all of that health insurance savings would lead to a multitrillion dollar GDP expansion. And of that multitrillion GDP expansion, the U.S. Treasury would derive $1.4 trillion in additional revenue. Or in other words, she concocts another $1.4 trillion in tax revenue out of thin air! And Warren takes this $1.4 trillion in tax revenue that will spontaneously generate as a result of Medicare For All, from pure magic, and she will use it to pay for her $20.5 trillion/10 years costs of Medicare For All!

This part of Warren’s Plan is, frankly, insane. This is, as George H.W. Bush famously ridiculed Reagan’s patently wrong assertions of how his tax cuts would in fact increase federal budget revenues, “voodoo economics”.

So let’s be clear, no less than $2.55 trillion of Elizabeth Warren’s revenues for her $20.5 billion price tag for Medicare For All, are derived from purely fictional sources. She might as well have said she would pay for it in part by levying taxes on griffins, unicorns, and leprechauns.

Warren then ticks off a laundry list of kind-of normal Democratic legislation: if the Gang of Eight immigration bill were to become law, it could generate another $400 billion in revenues over 10 years, slashing Pentagon spending 11% could save $798 billion, a tax on financial transactions could generate $800 billion, beefing up the IRS’ enforcement arm could generate $2.2 trillion, etc. Most Democratic voters and lawmakers have already supported a lot of these policies for decades. But each one of these bills, standing on its own, would be a monumental achievement on its own right. It’s … really dishonest to just assume that Warren can claim those projected revenues on every item on Democrats’ wish-lists from the 1980s-to-present to pay for Medicare For All. It would be like if Cory Booker put out a $2 trillion education plan and claimed “I’m going to pay for my housing plan with all of the tax revenue from legalized marijuana and trade with Cuba, and by the way, there will be 15% GDP growth per annum during my administration.” He’d be right, technically, but actually dropping a real big whopper.

What’s more, Warren seems to really be double-dipping from her proposed revenue streams. In past Medium posts, Warren has already vowed that she would beef up IRS enforcement on tax cheats and tax Wall Street transactions, and spend those billions and trillions on free college tuition and abolishing student loan debt. There comes a point when an honest observer has to notice Warren can possibly levy a Wall Street transactions tax and raise $800 billion, but she cannot possibly use $800 billion to pay for $1.6 trillion worth of budget expenses. The various planks of Warren’s platform are starting to cancel each other out.

So, even if you assume that Warren actually gets Congress to enact every single one of the multitude of epoch-making legislation that could possibly finance Medicare For All, and even if Warren drops her student loan repayment plan, her climate plan, every single Plan of hers that would compete for funding with her new Medicare For All Plan... At the very best, assuming every single thing in her “Plan to Pay for Her Medicare For All Plan” goes right, and even omitting the contractionary effects of eliminating the entire health insurance industry from the U.S. labor market, she really only has plans here for just under $18 trillion in revenue – $2.5 trillion short of her low-ball estimate. And if you employ the more cautious cost estimates of $32 trillion or $34 trillion over 10 years, Warren’s plan here could be up to $16 trillion short.

Pardon me for being so dour, but it’s really not a good idea for the federal government to be formulating health care policy on multi-trillion dollar assumptions, voodoo economics, and in some places, deus ex machina. One should expect better from a Democratic candidate for President of the United States, especially one who has invested so much of her campaign on being the one with a detailed, well-thought-out plan for that™.

If Elizabeth Warren wants to be the Democratic standard-bearer next year, she really has to drop this nutty Medicare For All pipe dream, start over from scratch, and come up with a serious health care plan that adults in the party – and swing voters in the general election – can take seriously.

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