Medicare for All and a Tax Cut Too

This is how we can get Medicare for all. We can solve the healthcare crisis in America and save money and cut taxes at the same time.Healthcare is taking center stage once again as the political arena heats up. This will not be a political treatise, however. Instead, we will focus on the long-term problems in the U.S. healthcare system and potential solution to be found using the tax code.

Medicare for all is something that always appealed to me. When the politics are stripped away there is a lot to like in the idea of expanding Medicare coverage to everyone. 

Currently about half the people get some form of Medicare benefit. The old, very young and poor qualify for the Medicare or Medicaid programs. Unfortunately, the Medicare system is set up backwards. The people who pay for it are not the people receiving benefits and the people receiving benefits don’t pay for it (with the exception of people age 65 and older).

Even the elderly who pay a Medicare premium for some parts of the program are still subsidized by those earning a wage or salary, the very people who don’t qualify for benefits. 

The inefficiency of the U.S medical system has created the most expensive healthcare system in the world by far with sub-par results. For most illnesses it is better to travel to another country for treatment if you want better odds at living. 

Solutions have been hard to come by and the Affordable Care Act hasn’t delivered on it’s promise while costing taxpayers plenty. Medicare for all is a solution more people are clinging to with good reason. But it must be done right to work! 

Medicare for all will fail if simply enacted as another government entitlement to add to the budget. I propose there is a solution that increases American business’s competitiveness, covers all Americans with Medicare coverage and reduces taxes even more on all businesses.

 

Identifying the Problems

Small businesses struggle to afford healthcare for employees if they offer it at all and large employers are at a competitive disadvantage when competing against foreign firms that don’t spend major resources providing healthcare to their employees.

More and more small businesses have either stopped offering medical insurance as a fringe benefit or have seriously curtailed the benefit. Large businesses constantly deal with the large cost of medical insurance. If wages are the biggest expense for most corporations, then employee benefits—of which medical insurance is almost always the largest—are certainly the second largest expense or close to it.

We can solve the healthcare crisis in America with Medicare for all. And enjoy lower taxes and higher wages, too. Medicine should not be painful.Small businesses and large corporations alike get a tax deduction for providing medical insurance to employees. However, a deduction is worth less when there are fewer profits due to the added burden. (Corporations pay 100% of the benefit expense only to receive a faction of the expense back in tax savings.)

There is also a worry about turning over the vast majority of medical insurance over to the government. People say they don’t want the government involved with their medical decisions. They want their medical care choices to be between them and the doctor.

Except it doesn’t work that way! When you reach 65 you are on Medicare. If it is so bad we should maybe eliminate Medicare completely. (For the record, I am NOT recommending this and neither are the naysayers!)

The argument also falls flat when you realize your employer now makes those decisions for you! If your employer needs to downsize you are on your own medically. And God forbid you have a preexisting condition.

It isn’t often that we can have our cake and eat it to, but this could be one time when it could happen. If we got your employer out of the medical business (unless they are a doctor or medical facility) and let them do what they’re best at (providing the goods and services they are in business for in the first place) and could cover everyone with basic medical care at a cheaper cost we might be on to something.

 

Left and Right

The left generally pushes the idea of Medicare for all, but the right likes the idea too; President George W. Bush signed into law the largest expansion of Medicare since its inception with Part D.

The left is currently pushing the Medicare for all agenda. They love the idea since it covers everyone, eliminates waste (hopefully) and helps the uninsured, unemployed and those with preexisting conditions. It is easier to change jobs if medical insurance isn’t an issue. Early retirement is easier, too.

The right hates the idea because it promises massive new levels of government spending. There is something to be said about these concerns.

But nothing happens in a vacuum. Just tossing out Medicare for all would be a disaster! Yes, it would cover everyone with a minimal level of health care, but it could easily bankrupt the government or force taxes seriously higher. This is a major problem that must be resolved before we can grant every American basic healthcare and remain solvent.

 

 Facts and Circumstances

Medicare for all can be coupled with massive tax cuts for businesses, increasing American competitiveness around the world and keeping the government solvent. Tariffs and other strong arm measures might force a temporary trade imbalance reduction, but until U.S. businesses increase their competitiveness the problem will not go away.

To see how this intractable problem can be resolved we need to review some facts.

The median American household income is just north of $60,000. In 2019 U.S. employers will fork over nearly $15,000 for medical insurance benefits per employee.

This means about 20% of the cost of an employee is in the form of just one benefit: medical insurance. (I know I took some license here. Household income doesn’t equal what each employee makes, but it does skew the data against my thesis so no one can accuse me of fudging the numbers to prove a point.) Yes, American businesses cough up around $1.2 trillion per year providing healthcare benefits to their employees and their families, about the same amount Medicare and Medicaid spends combined each year. 

Call it what you want, but this is nothing more than a huge hidden tax! 

Let’s put this into perspective. Corporation paid $341.7 billion in income taxes in 2015. The cost of healthcare is nearly four times what corporations pay in taxes!

When you consider how American businesses need to compete in a global environment it is easy to see why foreign corporations have competitive advantages. Not only do American corporations pay $341.7 billion in income taxes, they also pay $1.2 trillion in healthcare expenses. 

You see, we already have nationalized healthcare! It is costly and inefficient with everyone trying their hand at dealing with the issues. In the U.S. we have corporations do what the national government does in most other nations.

We can fix this.

 

Tax Code to the Rescue

We have identified most of the major issues surrounding healthcare in America. It is a huge tax on businesses and is inefficient. 

If all we do is add Medicare for all we still have a massive mess. Employers would still fork over for benefits above and beyond Medicare benefits.

The solution requires a tax bill as draconian as the Tax Cuts and Jobs Act of 2017. Only the focus would be on a single issue: solving the American healthcare crisis.

First, we have to stop draining corporate coffers of $1.2 trillion every year, a cost that is growing at a rate many times the rate of inflation. 

For Medicare to offer universal coverage at current rates we would need to change the tax code. Medical insurance and all employee benefits related to medical can no longer be deductible. In fact, we would need to make medical coverage by an employer illegal so corporations could not shift the deductible expense to a nondeductible expense. 

This would save businesses $1.2 trillion this year alone which equates to a massive tax cut. Corporations would have a real cost reduction, opening the door to real wage growth going forward.

To pay for Medicare for all is straight forward. If businesses have $1.2 trillion less in expenses they will pay more in tax because they are more profitable. Even Wall Street would love such a plan as the stock market would climb smartly on such earnings growth.

Corporations would not be allowed to keep all of the $1.2 trillion tax cut, however. A 2% or so additional Medicare payroll tax would need to be instituted, paid by the employer only. (The current Medicare payroll tax is 2.9%, half paid by the employer and half by the employee. I propose the additional payroll tax be levied against the employer only since the employer just saved $1.2 trillion by getting out of the healthcare business.)

 

Winners and Losers

There would be lots of winners under my plan with only one real loser: insurance companies. 

Medicare returns around 98% of premiums in benefits while medical insurance companies return somewhere in the low 80s. The increased efficiency of a centrally managed healthcare system would be tremendous, saving the American economy (that is you and me, kind readers) massive resources better utilized elsewhere. The savings alone could dwarf the trade deficit!

Affordable healthcare shouldn't make you sick. Learn how Medicare for all is a solution that works.Businesses and employees are easy winners under my plan. A recession doesn’t bring the added risk of lost medical coverage for employees either.

Medical treatment centers would not have to deal with untold numbers of payment providers. 

Business owners would not squander valuable resources anymore trying to make medical decisions when they are not in the medical business. The added focus alone would increase American business effectiveness which should add to economic growth and competitiveness.

Insurance companies are not complete losers either. Medicare is basic medical coverage. Insurance companies can still play a crucial role in benefit administration. They can also provide supplemental insurance as they do now to the elderly.

I also propose, under my plan, that Medicare benefits be handled as they are now for those 65 and older. Certain benefits are free to all American while some benefits have a small premium (Part B, C and D, for example) based on income level. Insurance companies would still play a role in this arena also as they do now for older Americans.

 

Putting it Together

Here are the simultaneous steps to institute my program to provide all Americans with basic medical coverage:

  1. Medical insurance benefits no longer deductible for employers.
  2. It would be illegal for employers to provide medical insurance, even if nondeductible, unless they are a medical facility.
  3. Businesses would save over $1 trillion in costs this year alone. Part of these saving would be paid into Medicare to pay for Medicare for all.
  4. Medicare Part A would cover all Americans while a small premium would be required for Part B, C and D based on income. 

 

How You Can Fix Healthcare in America

This is my back-of-the-envelope plan to fix the healthcare crisis in America. It isn’t a perfect plan and I’m certainly open to adjustments, improvements and suggestions. 

Do you like my plan? How would you modify what I offered above?  

And most of all, send this to your Congressman or Congresswoman and Senator. They need to know it is time to fix the healthcare mess once and for all while we still have our health.

I think this is something we can all agree would make America great in a global economy.

And nobody has to get sick over it.

 

 

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29 Comments

  1. Matt on March 3, 2019 at 10:33 pm

    Hey Keith, love the blog. So 2% of the $6trl in US wage (quick google search) would be $120bil. Would that be enough to cover all of the US medical costs? If the INS companies are 80% efficient and are costing 1.2trl, wouldn’t we need to cover $960bil (at 100% efficiency)? Wouldn’t the cost be even higher since it would now cover people who are not working or covered by a health plan?

    • Keith Taxguy on March 4, 2019 at 7:50 am

      Matt, the money comes from 4 places: 1.) lower corporate expenses means more corporate tax receipts for the government, 2.) an additional 2% or so payroll tax paid by employers who just saved $1.2 trillion, 3.) increased efficiency within the healthcare system (Remember, the U.S is twice as expensive as the next most expensive nation on the planet. There is plenty of fat to cut.), and 4.) the premiums paid by recipients similar to what people pay who collect Medicare now.

      My plan does need some work to iron out details. Going down that rabbit hole in a blog post who require 2,000 pages of material, as I’m sure the bill will contain at least that many pages. I was attempting to be more brief than the government.

  2. Dave on March 3, 2019 at 10:45 pm

    I like it. However, it is just sad that it will probably never happen due to the strength of the insurance lobby. I am living the pain of poor ACA healthcare insurance options that are rediculously expensive. Why is it so hard to implement common sense solutions? Washington lets ideological divisions rule them instead of implementing solutions that will really be beneficial to the citizens.

    • Keith Taxguy on March 4, 2019 at 7:53 am

      Dave, I think it is more possible than you think. The insurance lobby has power, but when Amazon, Warren Buffett and Jamie Diamond team up to build their own solution you know the time is ripe for a solution the insurance companies were unwilling to explore. And the people are ready for it. The ideas from politicians have not worked at all; it actually made it a lot worse. Stay tuned. The madness could end soon.

      • Mr. Hobo Millionaire on March 4, 2019 at 11:05 am

        >>Amazon, Warren Buffett and Jamie Diamond

        Agree this is a big deal. If those three entities are interested in it, that means they see a way to make billions from fixing it. A win-win for everyone. I, too, look forward to seeing what they propose.

        • Katie Camel on March 5, 2019 at 12:12 pm

          I’m also curious to see what they could propose, but I’m also in agreement with Dave about lobbyists, and not just insurance lobbyists but physician lobbyists too — they’ll want to ensure continued high wages.

          However, I think the US needs to create a comprehensive, nationwide plan to reduce overall health care expenditures by promoting healthier lifestyles, which, in essence, translates to cultural change. It also means getting some food lobbyists out of the way too. Unless we come up with a strategic plan to reduce the number of people with multiple chronic diseases, we will continue to jeopardize our economy and military strength. More control actually lies in the hands of Americans than people realize or are willing to address.

  3. Josh on March 4, 2019 at 1:11 am

    Keith, the percent of age 65 and older who are eligible for Medicare today is about 15% of the population. That coverage currently costs 2.9% of payroll nationwide, and they have had to dip well into the trust fund already to cover the fact that they are not covering their costs with current cash flow. They will run out very shortly, and need to boost taxes to replenish the trust. So I cannot see how simply charging companies an extra 2% of payroll (and drop the medical insurance deduction) would even approach covering the rest of the population. I know that Medicade is also a large expenditure that is part of this and so we are talking about maybe 20% of the population covered (Medicaid is paid from the general fund now though).

    Some structural problems will persist:
    1 – Medicare is a fee for service scheme and incentivizes more services (rather than better outcomes).
    2 – Medicare pays less than private pay, and is essentially subsidized by private insurance. Providers will heavily discount their service if you pay in cash. This goes to show that it is not privatization that is the problem, it is the insurance model that pays for everything (third and fourth party layers in each transaction.
    3 – The medical industry will continue to consolidate and less small businesses will start up in the medical field, as has already been happening, although at a heightened pace due to lower revenues and slower moving systems (gov will never be more efficient or allocate resources better than a profitable company).

    I highly recommend the research on this topic by Ed Dolan at the Niskanen center:
    https://dolanecon.blogspot.com/2018/11/whats-wrong-with-employer-sponsored.html?m=1

    https://niskanencenter.org/blog/could-we-afford-universal-catastrophic-health-coverage/

    Ed is a really thoughtful economist on many topics but caught my eye initially on health care. He is also very easily emailed if you have any questions or want to provide feedback.

    His focus is that we should use the federal government’s ability to levy tax and cut checks, to provide everyone with universal catastrophic medical coverage. Everyone pays their own way out of pocket up to 10% of their annual pay, and any costs above that line of affordability are covered 100% by the government. You make $50k then your “deductible” is $5k. You make $400k, your deductible is $40k. This would be paid for by the same revenue source currently provided for Medicare, Medicaid, CHIP, VA, Indian Health, and the Federal workers plan. We would wipe out all of those programs in favor of this simple coverage. There is much more to this than I’ve written here. I encourage considering the details (coverage for low income, disabled, and other outlier individuals, as well as how prices are determined, etc).

    This type of plan would put the market back into medicine, while also covering everyone, since individuals would pay for the lion’s share of day to day medical needs. Most people won’t need insurance unless something costs enough that would ruin them financially. The rest is paid for like everything else in life: with the fruit of one’s own labor.

    • Keith Taxguy on March 4, 2019 at 7:57 am

      Josh, see my response to Matt. It is possible because the 2% or so payroll tax increase isn’t the only source of revenue. Nothing happens in a vacuum! There are actually 4 sources of revenue under my plan. Of course, tweaks will be needed because even a wealthy accountant has to take license in how much will be saved. The inefficiency savings could dwarf the entire cost of the program if things go right. No more Pharma Bro buying an old drug and jacking the price 5,000%, screwing everyone with insurance or paying on their own. That opportunity will be gone as it only happens in the U.S. under our current inefficient system.

    • Cindy on March 4, 2019 at 10:30 am

      Josh, I like the plan you identified. I’ve stated for a long time the question of why we can’t just pay for what we use? Get rid of the middle man and the cost should come down for all. Get rid of the government and we will have a free market system.
      I’m in favor of eliminating the insurance companies all-together as they are now the ones that seem to control our level of health care. One example comes to mind, colonoscopies, if it’s a routine procedure and nothing is found to be a health issue, most insurance companies will pay the full cost of the procedure. However, if it’s a “diagnostic” coded procedure, the insured person pays a healthy sum for the procedure. Same exact procedure, two different costs. So, by their logic, if they expect to find nothing, i.e. routine, mostly based on being over age 50, the insurance will pay fully. However, if the insurance has reason to believe you have an issue (or if an issue is detected during the ‘routine’ procedure) you will pay handsomely.
      I don’t begin to understand how America got to this point in relation to health care, but something has to change. Will doctors want to be doctors under a government managed health care system. As it is, they are already heavily regulated with the threat of losing their license if they fill out a form incorrectly.
      And, how to stop abuse of the system?
      I’m very thankful I have a good job with health benefits, but they aren’t free, I pay $43.00/week for those benefits (and happy to do so), my employer pays much more.

      • Josh on March 4, 2019 at 11:28 am

        This UCC plan actually relies somewhat on insurance companies staying in the game. Many people (especially high earners) will not save enough to cover their deductibles out of pocket, and will need or want gap coverage. I see private insurance offering coverage for the deductible gap at affordable rates (since their liability is capped). It may be beneficial to wealthier people to get gap insurance to keep their liquid cash in income producing assets instead of cash waiting to be spent on colonoscopies. They will pocket the spread. Lower income people that owe the first $4k may not have that cash and want to rather spend say $50/month to cover the $4k claims that may come. Insuring a cheap $4k car only costs about that in collision/comprehensive.

        In other words this will create a real insurance industry rather than what we have now which is really something else entirely.

        Also I bet we will see health providers offering much more in the way of concierge medicine, tailored experiences, and even surgery centers. Since most procedures will be paid in cash directly at point of sale, this will lead to more investment and risk taking, as cash flow issues are abated.

    • Mr. Hobo Millionaire on March 4, 2019 at 11:15 am

      >>Everyone pays their own way out of pocket up to 10% of their annual pay

      I like this idea of catastrophic coverage. Paying 10% of your yearly pay puts some responsibility back on the user, and that’s always a good thing. You should always feel some pain for financial expenditures (that’s why I’m also in favor of a flat tax above poverty incomes). And of course if you’re not using/needing medical care, then your costs plummet. I don’t like that generally healthy people making healthy living choices must pay/cover costs of people who make poor choices… again, back to some personal responsibility in finances.

      • Josh on March 4, 2019 at 11:38 am

        Healthy people will still pay the lions share of costs going to others. The nature of insurance and especially a UCC is that everyone pays a similar portion of income but only a few make claims on that each year. The young pay for the old, and healthy pay the sick. The infinity costs above 10% of your income that are paid by the government (HHS) would still be a very large national tax bill, shares by individuals and companies.

        I think this approach is way way better than expanding Medicare, as it achieves similar ends while creating more private cash pay in the system (which is more efficient than Medicare claims processing and time). The first party payments also will lead patients to shop around and providers to be price conscious.

    • Kevin on March 4, 2019 at 1:22 pm

      Keith, love the site. Long time reader and listener too (podcasts ChooseFI). Wife is a CPA and I’m an anesthesiologist.

      I have to say I’m not a fan of government controlled healthcare. Like Josh said Medicare and Medicaid only work because private insurance subsidizes them. Anesthesiology has the largest discrepancy between private insurance and Medicare. Medicare pays around 30% compared to say a blue cross(anthem). If my practice went to all Medicare, using back of the envelope math, it would equate to 40-50% of my current compensation. I think most young enough will retool into a different profession, most are very capable too. Also the government loves to burden the medical community with oversight and countless hoops to jump through: CMS PQRS reporting so our pay isn’t cut, electronic medical recorders so they can track and data mine take away from the patient physician interaction/relationship, Board Certification recertification requirement, they are constantly moving the goal posts and it becomes harder and harder to comply with all the rules and regulations, state and local requirements too. For example, I have to spend two hours every other year on prescription opioid safety. Sounds great given the opioid crisis, however, I have written zero prescriptions in the last 10 years.

      Physician burn-out is at and all time high. I could see this sort of thing being the proverbial straw. I have told many pre-med students to look into dentristy. Dentistry equals good hours, cash business, not much government involvement. There is a Facebook group I have joined called physician side gigs, it has over 30,000 physician members. So many of us are looking to get out of medicine and into alternative career.

      If you want to decrease costs you need to add competition and let patients decide how much they will pay for services. Healthcare costs are up because of the payer system. Look at the costs of Lasix surgery, Botox, plastic surgery, dental implants, or any other cash based service. Those costs are down compared to inflation because of competition! Josh’s idea will make all services cash based and competition will win the day. There is a cash based surgery center in Oklahoma City I’ve read about that hasn’t increased their fees in over 10 years! Cash = competition = decreased costs.

      Thanks for all the great content.

      Kevin

      • Katy on March 6, 2019 at 10:53 am

        The first step to competition is cost transparency. We made a poor effort toward cash competition with HDHP BUT if I can’t get a “bid” prior to services then it doesn’t do any good. My insurer has some baseline estimates and rough comparisons. My kid and I use the same insurance but different clinics, for his walk in appointment it was $80 OOP, for me (the main difference being that I got a prescription and he didn’t) was $140 OOP plus the cost of the prescriptions (which apparently can differ just as widely depending on what meds you get from where). But of course I didn’t find out anything about the cost of this until 30 days later.

    • Joe S. on March 8, 2019 at 1:21 pm

      I have always understood that insurance is supposed to spread potentially ruinous costs over a wide population of users to prevent financial ruin. In that case I like what is here. However, there needs to be incentives for healthy living (wellness checks) and for people with chronic issues. It isn’t fair as a society to financially penalize those people that are chronically ill. For instance, a Type 1 diabetic would pay 10% of their income forever, unless they made over $100,000. Does that seem fair to penalize people, possibly to the point of those people never being able to save for retirement, buy a house, etc., because of something beyond their control? This plan would create a lower class of sick people.

      I don’t know the answer, but there has to be something more here than just, “Pay 10% of your income.”

      • Josb on March 8, 2019 at 11:23 pm

        Joe S,
        I appreciate the question, as you bring up two good points.

        The most difficult question is that of affordability beyond a simple payroll tax. This can prove onerous for someone with a chronic condition or acute need. They will effectively pay out 10% of their incomes every year. Since under this type of plan, they would have no premiums to pay, then it is likely less than they pay now once factoring in premiums as well as out of pocket. Also, insurance companies would offer gap insurance to cover the deductible, and they can pay over time rather than being billed all at once. If you read the UCC plan, it actually calls for a basic income that is not subject to the deductible basis. I think the plan offer something like the first $12,000 earned would not be counted. This creates some minor welfare, as the government is effectively paying this portion of your deductible (worth $1,200/year).

        Some people will pay more though. That is a fact of life. I think it is far more humane to offer unlimited coverage above an affordable limit than to subject these people to a marketplace that has no financial interest in insuring the chronically sick. A free market for health care would not cover those people to begin with. If we simply mandate insurance companies to do so, they will not only charge a fortune for high deductible coverage, but will also charge the healthy because it disrupts the cash float model that they rely on to earn a profit. Insurers need consistent cash from premiums to invest in treasuries and other things. Then they need to claims to come in evenly. So they pocket the spread over time. Insuring someone who constantly has claims is bad for business. This is where a market failure can and does exist.

        So I don’t have a great answer to those who will exhaust their deductible. I have an imperfect answer that there will always be unfortunate people with those issues. I don’t think we want to use government to level outcomes (only the inputs/opportunities). Once you start making exceptions and carve outs, you have lost the game of good governance.

        As to wellness (checks?), I am not in the camp that believes in social nudging. Rather than fight this battle against the choices of individuals to have lifestyles that may not be all that healthy, we should accept the fact that people will never be perfect. It’s unreasonable to base a system on collective buy-in on social norms. Those phenomena only come about spontaneously, not because they are forced by policy. People will feel guilty, or feel social pressure, and change behavior. I have little confidence that any government will be better than the social forces that already exist. It’s also naive to assume that the collective knows best and has the authority to push it on individuals.

        To reiterate, everyone is subject to 10%. Some will pay that, most will pay much less. All will pay a tax. Basic incomes are exempt. Some will be unfortunate, some will be lucky. Some will buy gap plans to spread costs. Some will pay radically less. All will be safe from financial ruin.

  4. ScottyD on March 4, 2019 at 8:12 am

    ” The increased efficiency of a centrally managed healthcare system would be tremendous, saving the American economy (that is you and me, kind readers) massive resources better utilized elsewhere. The savings alone could dwarf the trade deficit!”

    Keith, I like the idea, I really do, however I think it looks better on paper than in practice. I expect you are familiar with Activity Based Costing. Please speak to a sampling of different medical practices and ask them how much time it takes to obtain a certification and/or reimbursement from medicare versus private insurance. In my experience, the required time commitment for medicare has been tremendously longer. Increased time equals increased costs, specifically ABC and accrual accounting. I am not confident that reimbursement caps imposed by the government would accurately compensate for increased costs, especially if it is being advertised as a cost reducer.

    Food for thought. I would love to hear your thoughts on this.

    • Keith Taxguy on March 4, 2019 at 10:01 am

      Oh, I’m sure there will be unintended consequences; there always are. I just think my proposal offers a better option than the one we have now. We don’t have to match the efficiency of other nations to see vast improvement. When as much is spent as in the U.S. there is certainly low hanging fruit we should be reaching for.

  5. Zac on March 4, 2019 at 10:02 am

    Isn’t this sorta double-talk? You talk about reducing the financial burdens of US companies to make us more competitive, then by the end of the article, you’re taking a (large?) chunk of it back in taxes. You can’t have it both ways!

    • Keith Taxguy on March 4, 2019 at 10:09 am

      No double talk, Zac. If you don’t tax some of the savings from corporations it would be like a massive negative tax for the rich which would not go over well. If corporations save $1.2 trillion and only pay half of that into the medical system (a $600 billion windfall for corporations) they still save more than they paid in all income taxes by almost double. The real screaming with come from people thinking businesses should pay at least some tax since my example effectively eliminates their income tax due to the benefit reduction.

      And as I said before, I only laid out a framework; there would be much work to do in the details, even things I have not foreseen.

  6. Mr. Hobo Millionaire on March 4, 2019 at 11:02 am

    >>This means about 20% of the cost of an employee is in the form of just one benefit: medical insurance.

    I am SURE overall you are better at math than me, Keith, but just wanted to point out that 15K is 25% of 60K (not 20%)… unless I’m missing something.

    Assuming the general numbers are correct (1.2T), what you laid out is very interesting. 1.2T is a massive amount of money (that’s an understatement). That amount of money can substantially impact our economy (and the world’s economy for that matter).

    • Keith Taxguy on March 4, 2019 at 11:09 am

      Sorry for the confusion. The total cost to the employer is $60,000 in wages and $15,000 in medical benefits, for a total of $75,000 in cost to the employer. The $15,000 represents 20% of the total cost of the compensation package assuming there are no additional benefits or costs, which we know there are.

  7. K on March 4, 2019 at 11:40 am

    Immigration must be comprehensively addressed in order for this plan to work. Legal residency, citizens and illegal immigration have to be strictly defined and laws enforced as to who is covered. For those who do not qualify, they would still be covered under EMTALA unless the law is amended and care received at emergency rooms and is among the most expensive. People who do qualify and continue to seek non emergent care at emergency rooms will also have to be addressed. Compensation for providers will also be affected and is a whole other can of worms. Payroll tax revenue will vary from year to year as employees are laid off during recessions or due to automation or outsourcing. I think you have thoughtful ideas as to how cover the payment issues, which desperately need reformation, but, as always, the devil is in the details. I don’t want the perfect to be the enemy of the good. I would like for insurance and medical care to be separate from the government so that healthcare is not always subject to the whims of corrupt politicians and political winds.

    • Keith Taxguy on March 4, 2019 at 1:21 pm

      K, I think we are muddying the water by mixing immigration with tax law and healthcare reform. Of course you would need a valid SSN (or medical card similar to your current insurance card) for treatment.

  8. Joel on March 4, 2019 at 1:13 pm

    Great article! The only change I would recommend is making the Medicare tax an employer expense only. The current 1.45% paid by the employee would also be paid by the employer. So the total Medicare tax for employers would be 4.9% and employees get a tax cut!!!

    What are your thoughts on funding Medicare4All through a VAT?

    • Keith Taxguy on March 4, 2019 at 1:19 pm

      I think I mentioned in the article that the additional payroll tax would apply to the employer only.

      I’m not a big fan of the VAT as it becomes very easy for the government to raise taxes at any time without the general public feeling it. However, this is only a personal preference.

  9. Cathleen Cooks Stuff on March 4, 2019 at 2:47 pm

    Have a very separate thought over the universal single payer healthcare vs. individual healthcare (I know some Canadians that absolutely HATE their system due to the government prioritizing different treatments as the best because its the most economical rather than the best for the patient).
    Maybe a tie-in with a physician on the current ridiculous financial and legal constraints put on medical professionals to help explain the costs of medical care would illuminate the differences between a “free market” and a “single payer” system.
    Further (and my real intention for this comment, but I got sidetracked)—health insurance companies, like most companies, float the money from premiums into investments that throw off money. This premium money doesn’t have to be spent until a subscriber actually makes a claim. (learned this reading the older letters to Berskshire Hathaway shareholders from Warren Buffet). This make the company the most money—and the less % they have to pay out, the more they can keep. In contrast with other insurance companies’ (home, car, indemnity, and re-insurance), health insurance currently keeps the most % of their money- as you have said above. So saying “poor insurance companies!” its actually not that poor. They make money no matter what.

  10. Social Capitalist on March 9, 2019 at 9:54 am

    Keith, another great and provocative article. Your plan is sound though it does need to be mixed with Josh’s (the 2000 page details).
    What is mind boggling is how many commentators here do not see that this is a working plan in many countries around the world, many poorer than us. Either we give some form of UH or we assign the poor and elderly to premature death; and make many poorer. And, as you note American business is at competitive disadvantage.
    Doctors could still earn a decent living, insurance cos. could be smaller, and we could be better off.
    But America, sadly, has decided that Cain was correct and that we should stand in the face of God and question being our brother’s keeper.

  11. P on April 4, 2019 at 3:11 pm

    As the wealthiest country in the world, the US is also the only post-industrial country that does not have some form of universal healthcare for all of its citizens. That lack of coverage most certainly has not resulted in cost savings (we have the most expensive healthcare in the world) or improved outcomes (life expectancy is now declining and cancer survival rates are not as high as other countries). I don’t buy the argument that companies would raise wages if they didn’t have to pay health insurance costs. Most people now have high deductible health plans that are dirt cheap (for employers and employees) and cover virtually nothing and yet wages have not shown any sort of increase. Corporate profits are at or near all-time highs, and corporate taxes are near all-time lows. The only master big companies have is to Wall Street, and Wall Street demands higher profits so there is little or nothing leftover to share with employees.

    Layers of bureaucracy should be eliminated from the medical care supply chain between provider and patient. Eliminate insurance companies and their hundreds and hundreds of plans that only serve to increase costs, reduce access to care, and create immense confusion among everyone. Medicare does this significantly more efficiently than Blue Cross et al, and does it without the profit motive. On the prescription drug side, eliminate the pharmacy benefit managers and reduce the supply chain to manufacturer -> wholesaler -> pharmacy/hospital. Period. Get rid of direct-to-consumer marketing of drugs. Pharma companies spend more on advertising than they do on R&D.

    “I don’t want government making healthcare decisions for me.” That is exactly what employers and insurance companies already do, and the insurance companies do everything in their power to not pay for covered services. Other countries provide quality care at much more reasonable costs and the US could do the same if there was the political will to make it happen. The money is already there in different forms (insurance premiums, copays, etc) and would just need to be reallocated.

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