The High Cost of Warren and Sanders’s Single-Payer Plan
Whatever alternative Warren or Sanders select, a single-payer plan would require increasing federal revenue at a rate not seen in 70-odd years, both Burman and Holtz-Eakin told me. Measured as a share of the economy, total federal receipts tripled during World War II, rising from almost 7 percent to nearly 21 percent of the gross domestic product from 1940 to 1945, according to federal figures. Since then, federal revenue, compared to the broader economy, has generally oscillated within a fairly narrow range. The most it’s increased in a single decade is about 10 percent, during the 1950s, 1960s, 1990s, and in the past decade. (Revenue has increased despite the massive Trump tax cuts because the Great Recession vastly reduced federal revenues and created an unusually low starting point.)
Though federal revenue today still starts at a low level by historic standards (16.6 percent), providing more potential flexibility to raise taxes, the cost of a single-payer plan would swamp any such advantage. By 2029, with the added cost of single payer factored in, federal revenue would increase to close to 30 percent of the total economy. That would mean federal revenue would increase as a share of the economy by about three-fourths over a decade, vastly more rapidly than in any other 10-year period since World War II. It would also mean that federal revenue would considerably exceed the share of the economy it consumed even in World War II, when it reached 20.5 percent in 1944, a level unmatched since.
The central response from Warren and Sanders to concerns about their health plans’ cost has been to tout the overall savings for Americans, and the Urban Institute analysis suggests that for lower- and middle-income families that’s possible. The study projects that households will save nearly $887 billion in annual costs and employers another $955 billion, some of which could revert to workers in the form of higher wages.
Though that’s much less than the new taxes required for the plan, the organization says that lower- and middle-income families might still come out ahead: “Higher-income people will likely face the greatest increases in taxes, meaning their new tax burdens would likely exceed their savings; the reverse is likely true for lower-income populations,” the report concludes. (Among other dissenters, that conclusion is disputed by Kenneth Thorpe, a leading health economist at Emory University and a former assistant secretary in Clinton’s Health and Human Services department. In a study Biden cited at last night’s debate, Thorpe calculated that, under single payer, 71 percent of households with private insurance today—almost 70 million households in all—“would pay more in new taxes than they would save through the elimination of premiums and cost sharing.”)