Single payer is back in the political landscape (though, as even its supporters acknowledge, it has 0 chance of getting anywhere this cycle). Let’s run the numbers.
First: the US spends about $10,000 per person per year on health care. If you follow the link, you’ll see that the actual value is different…but this is a math blog, so I’ll take it as a teachable moment of how to use estimates.
Second: No one really knows how much MediCare for all would cost, but the most repeated estimate is around $1.5 trillion dollars. Again, the link gives a slightly different number…
Third: The US population is about 300 million.
So divide one by the other, and you’ll find the MediCare for all would cost $5000 per person per year. So one good argument in favor of such a plan is that most people, who buy their own insurance or who get insurance through their employer, pay more than this amount for their insurance, and when you add in the amount their employer chips in, you’re talking about an incredibly rare situation: a government policy that benefits both employees (who take home more money) and their employers (who spend less on employee benefits).
Now here’s where the numbers get tricky. If I’m a single person, then I win. But what if I’m the sole wage earner supporting a family of four? At $5000 per person, I’m now on the line for $20,000 in health insurance costs, which is far more than I would have paid. Under these conditions, MediCare for all is a losing proposition for me.
Here’s where things get complicated. We’ll take an example from another context to see why: If I’m a single person, then I spend about 10% of my income on food. But if I’m the sole wage earner supporting a family of four, the amount I spend on food will not be 40%. Instead:
- If my single income can support a family of 4 in the same lifestyle that it supports a single person, then my food outlay is still going to be around 10%.
- On the other hand, if my single income can only support one person, then that food budget will expand significantly.
A better way to look at it is through the federal budget (since it will, sooner or later, be paid for by taxes). Currently, MediCare runs around $500 billion, so MediCare for all would add $1 trillion to the federal budget. The federal budget itself is around $4 trillion, so we’re talking a 25% increase in the federal budget.
There’s many ways to pay for this, but the simplest is an across-the-board increase in taxes by 25%. (Sanders plan incorporates a variety of methods to reduce the “average” pain, but that would complicate the analysis below…I’m not a policy wonk)
Now before you reach for your phone (email, pen and paper) to write your Congresscritter, let’s put this 25% increase in perspective. Remember that MediCare for all would replace what you’ve spent on health insurance. So the key equation is
If your current health insurance is more than a 25% tax increase would be, you’ve won. Otherwise, you lose. To determine this, multiply by four:
This gives you a gauge of whether you win or lose under MediCare for all:
- Take the amount you spend on health insurance. Multiply it by 4. If the amount is greater than your taxes, then you win.
- Otherwise, you lose.
If you’re making $100,000 a year, you’re probably paying about $20,000 in federal taxes (unless you have a really, really bad accountant…or a really, really good one). This means that if you’re paying more than $5000 a year in health insurance, you win under MediCare for all.