Elizabeth Warren’s Most Anticipated Plan Of All Has Arrived

Warren’s plan to pay for “Medicare for All” would fund health care without raising taxes on the middle class. It didn't satisfy her 2020 Democratic rivals.

Massachusetts Sen. Elizabeth Warren on Friday unveiled a plan to pay for “Medicare for All” that, at least on paper, fulfills the 2020 Democratic presidential candidate’s ambition of financing the program with no new taxes on the middle class.

The plan, modeled on the bill from rival 2020 Democratic candidate Sen. Bernie Sanders, envisions wiping away most existing insurance arrangements, private and public, in order to enroll nearly all Americans into a new government-run program that would cover all necessary medical expenses. It is designed both to cover those who don’t have insurance and to make health care more affordable for those who already do.

The 9,000-word, 21-page plan is sprawling ― including everything from an expansion of Warren’s signature wealth tax to incentives for unionization to a pathway to citizenship for undocumented immigrants ― and contains aggressive measures to contain the spiraling cost of health care almost certain to generate opposition from doctors, drugmakers and hospitals. It would be funded using heavy tax increases on the wealthy and a new per-employee tax meant to replace what business previously spent on health insurance.

“Health care is a human right, and we need a system that reflects our values,” Warren writes in the introduction to her proposal. “That system is Medicare for All. Let’s be clear: America’s medical professionals are among the best in the world. Health care in America is world-class. Medicare for All isn’t about changing any of that. It’s about fixing what is broken – how we pay for that care.”

A big question hanging over Medicare for All ― and, increasingly, Warren’s candidacy ― has been how to finance this massive new program, as the burden of paying for medical care shifts from businesses and individuals to the federal government.

Warren, like Sanders and other Medicare for All advocates, has always said that all but the richest Americans would come out ahead financially, taking into account both the costs of the new system and the savings, compared to the old one. The proposal she released Friday explains exactly how she envisions that happening, and in so doing fills in some blanks that the Sanders bill had left.

The decision to do so comes with no small amount of political risk: The more detailed a health care proposal, the bigger the target for the health care industry, outside experts, and her political rivals to poke holes in the plan and question its math.

But Warren’s aides determined it was necessary, both to fulfill her campaign’s implicit promise to have detailed plan for seemingly every important policy, and to fend off increasingly feisty attacks from her more moderate rivals for the 2020 Democratic nomination.

The complicated plan, like any version of Medicare For All, is unlikely to become law, even if Democrats manage to win the presidency and both chambers of Congress in 2020, due to the unified opposition of Republicans and significant dissension within the Democratic ranks. But it could serve as an aggressive opening bid from a theoretical Warren administration on a proposal to expand health coverage and bring down the cost of care.

Under Medicare for All, individuals wouldn’t have to pay premiums or out-of-pocket costs, and employers wouldn’t have to pay for their workers’ insurance, because the federal government would be paying for basically all medical bills.

Aggressive Price Controls, Optimistic Assumptions

A key question about such a transition has been exactly how much new money the federal government would need to pull off this dramatic shift and, then, where the government could find those dollars.

On the cost of a new plan, estimates have varied. One of the more widely cited has come from the Urban Institute, a well-respected think tank whose researchers have estimated that moving to Medicare for All would require about $34 trillion in new spending over the next decade.

Warren’s plan uses the Urban Institute estimate as a benchmark, but anticipates creating a program that would require a lot less new money: Medicare for All would need only $20 trillion in new money over the next decade, according to the Warren campaign.

What accounts for the difference? A big chunk, about $6 trillion, would come from asking states to contribute the money they already spend on Medicaid and other health programs they run. The rest, roughly $8 trillion, would be through additional savings in health care relative to what the Urban Institute’s projection assumed.

Some of these savings would be in the form of more aggressive price controls, like paying hospitals at 110% of Medicare rates rather than 115%, as Urban Institute used in its estimates. The Warren campaign is also assuming greater savings on prescription drugs, on the theory that her proposal (which would effectively break patents when drugmakers won’t accept lower reimbursements) would be more effective at reducing prices than the scheme the Urban Institute considered.

Some of the additional savings reflect more optimistic assumptions about the benefits of simplicity; Warren’s campaign is assuming more than twice as much savings from reduced billing and overhead than Urban Institute researchers did. Some of the additional savings come from a belief that changing the way hospitals get paid (for example, by moving to “bundled payments” that give hospitals more incentive to be efficient) would generate big savings.

Over the coming days and weeks, experts will get a closer look at these details and, inevitably, challenge assumptions that the Warren campaign has made ― or point out tradeoffs that aren’t so obvious at first blush.

The optimistic projections of health new efficiencies are likely to meet a skeptical reception from other experts who will say they are not realistic, as either policy or politics. The calls to limit spending on doctors, hospitals and drugmakers are likely to spark a debate over whether such controls would undermine quality or timeliness of treatment, even as they eliminate financial barriers to care. The Warren campaign cites evidence backing all its claims, but that doesn’t mean the evidence is persuasive.

“A big part of the financing for Warren’s plan comes from more aggressively containing health care costs,” Larry Levitt, executive vice president at the Henry J. Kaiser Family Foundation, told HuffPost after reviewing the plan. “On the one hand, it would be quite disruptive to the health care system to constrain prices this much. On the other hand, every other developed country in the world provides universal coverage at a much lower cost than we spend now, which makes Warren’s plan look pretty reasonable and achievable. We would still be by far the most expensive health care system in the world, but somewhat less expensive than we are now.”

New Taxes On Corporations And The Wealthy

And how would Warren pay for that $20 trillion in new government spending? The bulk of the money ― about $8.8 trillion ― would come from a health insurance tax levied on businesses, essentially taking the money they now send to private companies for health care and redirecting it to the government. Warren aims to make the tax equal to roughly 98% of what companies pay now.

Another $1.4 trillion would come from taxing the additional income Americans would earn instead of the deductions that come out of their paychecks.

A collection of taxes on financial firms, wealthy Americans and corporations ― including the repeal of the Trump tax cuts, a financial transactions tax, a tax that would force American corporations to pay 35% on income they’ve earned anywhere in the world, and an increase of Warren’s proposed tax on fortunes over $1 billion to 5% ― would bring in an $6.8 trillion. Another $2.3 trillion would come from “improvements in tax enforcement,” with a final $1.2 trillion coming from additional revenue from immigration reform and from ending the overseas contingency operations fund.

Each of the campaign’s tax proposals would generate significant opposition on their own. Immigration reform alone, for example, would amount to a titanic political fight.

The Warren campaign has enlisted a number of boldface names in health care and economics to affirm the plan’s technical feasibility. Simon Johnson, a former chief economist at the International Monetary Fund, and former Institute for Health Improvement president Donald Berwick vouched for the campaign’s cost estimates. Johnson, Moody’s Analytics chief economist Mark Zandi and University of Michigan professor Betsey Stevenson vouched for the revenue proposals.

Both Berwick and Stevenson served in the Obama administration ― Berwick as administrator of Medicare and Medicaid, Stevenson as a member of the Council of Economic Advisers.

Battling with other Democrats

Pressure on Warren to release such a plan increased after the October Democratic debate, when a number of candidates ― including former Vice President Joe Biden, South Bend Mayor Pete Buttigieg and Minnesota Sen. Amy Klobuchar ― amplified existing criticisms of Warren’s lack of specifics on health care,― the top issue for voters in both the general election and the primary.

The release of Warren’s plan on Friday was never likely to satiate her primary rivals, and it didn’t.

“For months, Elizabeth Warren has refused to say if her health care plan would raise taxes on the middle class, and now we know why: because it does. Senator Warren would place a new tax of nearly $9 trillion that will fall on American workers,” Biden deputy campaign manager Kate Bedingfield said in a statement, referring to the plan’s tax on employers. “The mathematical gymnastics in this plan are all geared towards hiding a simple truth from voters: it’s impossible to pay for Medicare for All without middle class tax increases.”

But Warren plans to use the heavy amount of details in her plan to begin knocking other candidates, especially Biden and Buttigieg, for the lack of detail in their own health plans, and for their plans’ failure to cover all Americans.

“Every candidate who opposes my long-term goal of Medicare for All should explain why the ‘choice’ of private insurance plans is more important than being able to choose the doctor that’s best for you without worrying about whether they are in-network or not,” Warren writes in the Medium post outlining her plan. “Why it’s more important than being able to choose the right prescription drug for you without worrying about massive differences in copays. Why it’s more important than being able to choose to start a small business or choose the job you want without worrying about where your health care coverage will be coming from and how much it will cost.”

Overcoming Union Opposition

A significant part of Democratic opposition to Medicare-for-All has come from organized labor, whose members fear giving up often generous health benefits they have negotiated for. Warren’s plan aims to overcome that worry by promising a tax break to companies willing to take the savings from no longer having to pay for health care and turn them into additional wages or pensions.

“That way, my plan helps unions that have bargained for good health care already, and creates a significant new incentive for unionization generally by making collective bargaining appealing for both workers and employers as a way of potentially reducing the employer’s Employer Medicare Contributions,” Warren writes.

CORRECTION: This article previously misstated some specific figures of Warren’s plan as being in the billions of dollars, rather than trillions. Also, Donald Berwick, administrator of Medicare and Medicaid, was misidentified as acting administrator.

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