Funding 'Medicare-for-all' with taxes on the rich 'impossible,' study says

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A bipartisan budget watchdog released a report Monday detailing options for how the federal government could pay for "Medicare-for-all," the health care plan popular with 2020 Democratic presidential contenders — and its findings show there would be no way to fund the expanded health program by simply raising taxes on the rich.

The report, published by the Committee for a Responsible Federal Budget, examines a variety of potential ways to raise the estimated $30 trillion over 10 years necessary to fund "Medicare-for-all," including a 32 percent payroll tax, a 25 percent income surtax and a 42 percent value-added tax. These methods could all raise $30 trillion, the report says, but there is no way for the federal government to bring in that much money simply by taxing rich people.

"There is not enough annual income available among higher earners to finance the full cost of 'Medicare-for-All,'" it says. "On a static basis, even increasing the top two income tax rates (applying to individuals making over $204,000 per year and couples making over $408,000 per year) to 100 percent would not raise $30 trillion over a decade."

An accompanying chart lists the tax-the-rich funding option as "IMPOSSIBLE."

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The role of middle-class taxes in funding "Medicare-for-all" has become a point of contention in the Democratic primary, and it showed at the most recent debate in Ohio. Massachusetts Sen. Elizabeth Warren tiptoed around questions from the moderators about whether or not middle-class taxes would increase under her "Medicare-for-all" health care plan. Warren chose to focus on net costs instead.

"I will not sign a bill into law that does not cut costs for middle-class families," she said.

South Bend, Ind., Mayor Pete Buttigieg, who endorses a public option plan rather than Warren's single-payer "Medicare-for-all," accused her of being evasive.

"Your signature, senator, is to have a plan for everything — except for this," he said. "No plan has been laid out to explain how a multitrillion-dollar hole in this Medicare-for-all plan that Senator Warren is putting forward is supposed to get filled in.”

Sen. Bernie Sanders, I-Vt., who is fond of reminding Democratic contenders endorsing "Medicare-for-all" that he "wrote the damn bill," was more open than Warren about his plans to finance the $30 trillion health care plan.

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"It is appropriate to acknowledge that taxes will go up," he said, “for virtually everybody, the tax increase they pay will be substantially less than what they were paying for premiums and out-of-pocket expenses.”

A 32 percent payroll tax increase would bring the rate to 47 percent on most wage income, according to the CRFB report. A 25 percent income surtax would force the lowest federal income tax rates to 35 percent and compel the top earners to pay 62 percent of their income.

The options for financing "Medicare-for-all" without increasing taxes are similarly immoderate. The CRFB says the federal government would need to cut "non-health federal spending by 80 percent" in order to pay for "Medicare-for-all" without increasing taxes. This would require cutting Social Security benefits from approximately $18,000 to about $3,600 each year and cutting troop numbers from 1.3 million to 270,000.

If a Warren or a Sanders administration decided to finance "Medicare-for-all" simply on debt, consequences could be dire, according to the report.

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"Deficit-financing 'Medicare-for-All' would be far more damaging to the economy," the report says. "Assuming that such a massive increase in the debt would not roil financial markets or lead to high inflation, we estimate that a 108 percent of GDP increase in the federal debt would shrink the size of the economy by roughly 5 percent in 2030 – the equivalent of a $4,500 reduction in per-person income – and far more in the following years."

The CFRB report also points out lawmakers could combine several of the above-listed options to reduce the impact any one option might have. As an example for one way a bill could get to $30 trillion in revenue over 10 years, the report suggests, "a 16 percent employer-side payroll tax with a public premium averaging $8,000 per household ($3,000 per person), $5 trillion of taxes on high earners and corporations, and $1 trillion of spending cuts."

The report also acknowledges the best way to finance "Medicare-for-all" might be to make the plan less ambitious than progressive leaders like Sanders and Warren have proposed.

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"While the financing options above are quite large in magnitude, they could be reduced significantly by reducing the cost of 'Medicare-for-All' itself," the report says. "These cost reductions could be achieved in part by reforming or reducing provider payments, improving care coordination, and identifying policies to reduce excessive utilization of care."

Fox News' Paul Steinhauser contributed to this report.