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Medicare for All Would Reduce Household Income by 11 Percent, Study Finds

December 30, 2019

Most Americans will pay much higher taxes and earn less income if Medicare for All becomes law, a new study by The Heritage Foundation states.

“How ‘Medicare for All’ Harms Working Americans” found 73.5 percent of Americans would shoulder financial hardships under the proposed universal health care system.

Most workers would pay 21.2 percent more in federal payroll taxes, bringing the rate to 36.5 percent for most workers. Average annual disposable income for U.S. households would decrease by an average of $5,671.

In addition to income taxes, most American workers pay 15.3 percent in payroll tax, 12.4 percentage points of which funds Social Security and 2.9 percentage points goes to Medicare. The new payroll tax of 36.5 percent would apply to every dollar earned, from the lowest-paid worker to the highest, the study states.

People who receive health insurance from their employer would be hit with an even bigger decrease in household income. Their disposable income loss would be $10,554 because they would lose the tax advantages from their employer insurance, which is currently untaxed. The study, released on November 19, finds 87.2 percent of households with employer-sponsored health insurance would be financially worse off.

All Income Groups Lose

Proponents of Medicare for All argue a government-run system will benefit consumers by costing less than what they have been paying for private insurance or health care services paid for out of pocket. That assumption is false, the study states.

“Our analysis finds that in order to fund such a program, it would be necessary for the federal government to impose substantial, broad-based taxes equal to 21.2 percent of all wage and salary income,” study authors Edmund Haislmaier and Jamie Hall write.

The 21.2 percent tax on workers would be necessary to fund a program that not only replaces employer-paid insurance but also insurance for workers with no health plans and the “additional spending that would result from the program stimulating increased use of medical care.”

In addition, the Medicare for All proposals offered by contenders for the Democrat presidential nomination would cover many services currently not covered by Medicare, such as long-term care, the study states.

Lower-income working families that currently get their health care through Medicaid or the Children’s Health Insurance Program would also lose, because they too would be subjected to higher taxes, the study finds. Haislmaier and Hall calculate these families’ average household income would decrease by $5,592 a year.

The authors used data from the 2016 Medical Expenditure Panel Survey of 12,704 households in making their calculations.

 

Ashley Bateman (bateman.ae@googlemail.comwrites from Alexandria, Virginia.

 

Internet Info:

Edmund Haislmaier and Jamie Hall, “How ‘Medicare for All’ Harms Working Americans,” The Heritage Foundation, November 19, 2019: https://www.heartland.org/publications-resources/publications/how-medicare-for-all-harms-working-americans

Author
Ashley Bateman writes from Alexandria, Virginia.
bateman.ae@googlemail.com