How the Bernie Sanders Healthcare Plan Would Bankrupt America

One big reason for Bernie Sanders' resounding victory in New Hampshire is his generous and optimistic healthcare plan. Sanders beat Hillary Clinton in the New Hampshire primary yesterday (Tuesday) by winning 60% of the vote to her 38.2%.

But the amazing deal promised by the Bernie Sanders healthcare plan - everybody gets everything covered while saving thousands of dollars a year - is a classic pie-in-the-sky campaign promise. It's tantalizing, but utterly unrealistic and far beyond the nation's means.

According to several experts, the Bernie Sanders healthcare plan, which he's dubbed "Medicare for All," will cost far more than the Vermont senator says it will. And the array of new taxes Sanders has proposed won't even come close to paying for it.

Bernie Sanders healthcare planEstimates of the deficit that the Bernie Sanders healthcare plan would ring up over the first decade of its existence range from $3.1 trillion to $14 trillion. That shortfall would get tacked on the America's existing national debt, currently $19 trillion.

Sanders' proposals are coming under increasing scrutiny as his campaign continues its surprising challenge to Clinton for the Democratic presidential nomination. The appeal of his proposal - a single-payer system that would put the government fully in charge of the nation's healthcare - becomes obvious when you look at how he describes it...

Bernie Sanders' Medicare for All Is a Healthcare Utopia

According to the Sanders campaign website, everyone would be covered, and there would be no deductibles or co-pays - including for prescription drugs. And we're talking everything, including mental health services, substance abuse services, and long-term care.

"Bernie's plan will cover the entire continuum of healthcare," the Sanders campaign website declares.

Meanwhile, Sanders says his plan will cost the average middle-class American family with an annual income of $50,000 just $466 a year. That's 92.5% reduction in what such a family currently pays - a whopping annual savings of $5,807.

Sanders proposes a series of taxes to pay for Medicare for All, including a 2.2% tax on workers, a 6.2% tax on employers, several tax increases on the wealthy, and a plan to tax capital gains as ordinary income.

Sanders is also counting on hundreds of billions in savings from the shift away from private insurance: reductions in overhead, lower hospital and doctors' fees, and lower prescription drug prices.

But several experts have stepped forward over the past few weeks - most of whom are liberal or progressive thinkers - to say that the Bernie Sanders healthcare plan makes too many unlikely assumptions.

Not only would Medicare for All end up costing trillions more than Sanders suggests, they say, but his single-payer system would require a lot of trade-offs sure to anger many Americans. Take a look...

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Why America Can't Afford the Bernie Sanders Healthcare Plan

When the nonpartisan Committee for a Responsible Federal Budget (CRFB) analyzed the Bernie Sanders healthcare plan, it concluded there would be a 25% shortfall, or $3.1 trillion, over 10 years.

"A number of the revenue estimates provided by the campaign, in particular, appear to be much higher than what an official score would suggest," the CRFB report says. Using Congressional Budget Office methods, the CRFB calculated that revenue from the two payroll taxes, for example, would come up $100 billion short of the Sanders estimates.

The Tax Foundation did a similar analysis, concluding that the revenue-generators in the Bernie Sanders healthcare plan would produce just $9.8 trillion over 10 years, not the $13.8 trillion required. That's a $4 trillion deficit.

Much of the reason for the difference comes from the impact of Sanders' steep tax increases on the economy. The Tax Foundation model projected that those tax hikes would reduce U.S. gross domestic product (GDP) by 9.5%, capital investment by 18.6%, wages by 4.3%, and cost the nation 6 million full-time jobs.

The most alarming analysis, however, came from Kenneth Thorpe of Emory University. In 2006 Thorpe was hired by the legislature of Vermont - the state Sanders represents in the Senate - to create a model for a statewide single-payer system.

Thorpe believes that in addition to revenue shortages, Medicare for All will cost far more than the Sanders campaign has estimated.

"The plan is underfinanced by an average of $1.1 trillion a year," Thorpe says. That adds up to $14 trillion over 10 years, which would send the U.S. national debt soaring to more than 140% of GDP by 2026. That's just about where Greece's debt-to-GDP ratio stood at the outset of that nation's ongoing debt crisis.

It's not hard to imagine costs ballooning. In 1965 actuaries estimated the Medicare program would cost $9 billion in 1990. Medicare's actual cost in 1990 was $67 billion. Even accounting for inflation, the estimate was off by 165%.

So when Thorpe says Medicare for All will cost more than Sanders thinks, history backs him up.

To prevent the system from collapsing, Thorpe says the 2.2% payroll tax would need to be increased to 5.7%, and the 6.2% employer tax to 14.3%. In that scenario, he says, 70% of households that now have private insurance would end up paying more despite the lack of monthly healthcare premiums.

Of course, a big raise in the payroll taxes isn't a given. But the math doesn't add up. Something would have to give.

You'll Either Pay More or Get Less

"Behind Sanders' calculations, for both how much his plan will cost and how much Americans will benefit, lurk extremely optimistic promises about how much money single-payer will save," writes liberal pundit Ezra Klein in Vox. "And those promises can only come true if the government starts saying no quite a lot - in ways that will make people very, very angry."

Klein points out that the only way to save money on the massive scale required by the Bernie Sanders healthcare plan is for the government to put limits on care and "cut reimbursements to doctors, hospitals, drug companies, and device companies."

The single-payer systems in the countries Sanders praises in his stump speeches have made those trade-offs, but for Americans who have enjoyed private insurance, such limits will be hard to accept.

Other implications need to be considered as well. Lower payments to pharmaceutical companies would curb investment in research for new drugs. Reduced wages for medical professionals would discourage people from entering those careers. Some hospitals could become insolvent. And all that could lead to shortages of doctors and healthcare facilities.

So for Medicare for All to work, either the federal government needs to do unprecedented deficit spending, middle-class Americans need to pay much higher taxes, or people need to get accustomed to inferior levels of healthcare. Those options don't sell so well on the campaign trail.

Of course, even if Sanders somehow gets elected president, his healthcare plan has almost no chance of approval in today's polarized political climate. Even many Democrats would resist, given the pushback from constituents. And one can only imagine the ferocious lobbying efforts to kill Medicare for All from a profit-threatened healthcare industry.

In the end, the net impact of the Bernie Sanders healthcare plan is to reinforce the stereotype of liberal Democrats - something that may wind up helping the Republicans in this election year.

"This is what Republicans fear liberals truly believe: that they can deliver expansive, unlimited benefits to the vast majority of Americans by stacking increasingly implausible, and economically harmful, taxes on the rich," Klein said. "Sanders is proving them right."

The Bottom Line: The Bernie Sanders healthcare plan is long on promises and short on realistic solutions. Experts say the new taxes for his Medicare for All program would fall short, while the program's costs would skyrocket. That translates to a multitrillion-dollar shortfall, something a deeply indebted America can ill-afford.

Follow me on Twitter @DavidGZeiler or like Money Morning on Facebook.

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About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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