The Magical Thinking Behind Warrens Medicare for All Plan

Sen. Elizabeth Warren Friday fulfilled her pledge to propose a specific plan to finance Medicare-For-All. She deserves enormous credit for abandoning her earlier dismissals of the $30 trillion financing question and producing a plan that spells out the required new taxes. However, promising to shield middle-class families from new taxes forces Warren to propose an unrealistic level of health-care savings, as well as new taxes on businesses and investors that are nearly unprecedented in the modern economy. A more realistic accounting of this plan would likely leave a substantial funding hole even before the questions about how the economy would respond to this avalanche of taxes.

Before diving into the plan itself, it is worth noting that the current Medicare system already faces a surging annual cash shortfall that is projected to total $44 trillion over the next 30 yearsplus an additional $28 trillion in resulting interest coststhat will need to be financed with general revenues. Warrens standard of paying for Medicare-For-All refers only to financing the additional federal costs of her new proposal. It would not reduce the federal governments current health care deficits that are already driving long-term federal deficits. And in fact, the large Medicare-For-All taxes would leave few remaining options to close this baseline gap. Perhaps candidates should figure out how to pay for the current Medicare system before expanding it.

Lets begin with the big picture. Total national health expenditures are currently projected at $52 trillion over the next decade. In nationalizing all of these costs, the Warren plan first applies the $16 trillion that Washington will already spend on programs like Medicare and Medicaid (which, as stated above, are funded in part by escalating budget deficits), as well as the $6 trillion that state and local governments currently spend on Medicaid, CHIP, and government employee premiums. That leaves a remaining budget hole of $30 trillion.