The total number of uninsured people rose by 1 million for the second consecutive year.
Healthcare spending in the U.S. grew by 4.6% in 2018, totaling $3.6 trillion, according to data released Thursday by the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary.
Healthcare, as a share of the overall economy, slipped to 17.7% of gross domestic product (GDP) in 2018, down slightly from 17.9% in 2017.
The statistics, published in Health Affairs, show that healthcare spending averaged $11,172 per person in 2018, while the total personal healthcare spending growth rate held steady at 4.1%.
National healthcare spending increased faster in 2018 than it did in 2017, but it equaled the rate seen in 2016. CMS attributed the recent increase to acceleration in health insurance costs, which grew by 4.3% in 2017 and 13.2% in 2018. Another contributing factor was the reinstatement of the health insurance tax after a one-year moratorium.
For the second consecutive year, the total number of uninsured people rose by 1 million.
“Healthcare spending growth picked up across all major payers in 2018 as medical prices grew faster, due in part to the reinstatement of the health insurance tax on all health insurance providers,” Micah Hartman, a statistician in the CMS Office of the Actuary, said in a statement. “However, economic growth outpaced healthcare spending and the share of the economy devoted to health care fell.”
Rising medical prices accounted for an uptick in per capita healthcare spending last year. Hospital spending—which accounted for 33% of overall healthcare spending in 2018—led the way among goods and services spending growth, at 4.5%.
Growth in expenditures slipped slightly to 4.5%, though hospital prices rose from 1.7% in 2017 to 2.4% in 2018. Additionally, growth in total inpatient days slid from 1.7% in 2017 to 0.7% in 2018.
Physician and clinical services spending slowed to 4.1% in 2018, down from 4.7% in 2017, while retail prescription drug spending rose from 1.4% in 2017 to 2.5% in 2018.
CMS released projections in February for average healthcare spending growth rates of 5.5% annually between 2018 to 2027, totaling nearly $6 trillion.
The study projected an acceleration in hospital spending from 4.4% in 2018 to 5.1% in 2019, thanks to faster than expected growth in Medicare and Medicaid.
The study also attributed the growth in overall healthcare spending to more baby boomers entering Medicare and a 2.5% increase in medical goods and services through 2027.
On the payer side, private health insurance spending totaled $1.2 trillion, growing by 5.8% in 2018 compared to 4.9% in 2017.
Meanwhile, both Medicare and Medicaid experienced spending growth increases of 6.4% and 3%, respectively.
The federal government’s healthcare spending rose by 5.6% in 2018, doubling the rate from 2017, as growth in Medicare and Medicaid expenditures increased significantly.
The largest of portions of healthcare spending went to the federal government and households, each with 28%, private businesses at 20%, state and local governments at 17%, and “other private revenues” at 7%.
Bad debt, a proxy for unpaid bills, rose in 2018 for nonprofit hospitals after falling for several years since 2014, when some states decided to expand Medicaid, Moody’s Investors Services said in a recent report.
Rising deductibles are fueling the trend, as patients are on the hook for an increasing share of care costs. The growth of bad debt may at times outpace net patient revenue, the ratings agency said.
At the same time, deductibles and premiums are increasing faster than wage growth, another ominous signal for hospitals.
More Americans have high deductible plans than ever before, according to the Kaiser Family Foundation.
“More than a quarter (28%) of all covered workers, including nearly half (45%) of those at small employers with fewer than 200 employees, are now in plans with a deductible of at least $2,000, almost four times the share who faced such deductibles in 2009,” KFF said in a recent report.
But when patients with high deductibles seek care, hospitals typically have to collect from the patient first. And as more Americans struggle to afford treatment, it’s harder to collect from patients right away.
“The longer the delay between providing service and collecting payment, the less likely a hospital is to collect payment,” Moody’s said.
Many patients don’t have enough saved to cover the cost of their deductible, according to a survey from accounting firm PwC. At least a third of those with employer-based coverage and HDHPs don’t have enough on hand to pay for their deductible, the company reported.
It will be difficult for hospitals to reduce bad debt, according to Moody’s, which characterized it as an “uphill battle.” Collecting on unpaid bills requires “constant vigilance,” the ratings agency said.
In 2014, bad debt clocked in at roughly 5.6% of net patient revenue for nonprofit health systems, and then fell below 4.5% in 2016 and 2017. But in 2018, bad debt climbed again above 4.5%, Moody’s said.
California’s governor discovered that single-payer is a better political slogan than policy prescription, but he may have found a path to help Democrats get there anyway.
A year and a half ago, Gavin Newsom was in the same place as Elizabeth Warren and Bernie Sanders, running in a tough Democratic primary and vowing “it’s about time” for a single-payer health care system while dismissing his critics as “can’t-do Democrats” who refuse to think big.
Now he’s in a different place.
The sleek businessman with the wavy pompadour has changed his rhetoric and slowed his pace. “These things take time,” he acknowledged after his primary victory.
As governor, Newsom’s health care program has been more incremental than promised, annoying some allies in the single-payer movement while winning some unexpected praise from industry groups. But he also may have found something larger than his own agenda: A health care path that builds on past successes, enacts fresh reforms and may eventually lead to a single-payer system — without the political earthquake that so many predict under Sanders’ bill or Warren’s financing plan.
Newsom’s is by far the most relevant — and revelatory — experiential test of the Democratic health care ideas that will be so hotly debated on the Atlanta debate stage Wednesday night. And it offers something for everyone in the race to chew on: A testament to the power that a promise of a single-payer system can have in galvanizing the party’s base; the unforgiving realities that make a quick conversion to single-payer practically, and probably politically, impossible; and a way for a leader to win broader support for incremental steps that — if pursued diligently enough — could lead to universal coverage.
“This is the signature issue of the progressive left, and it’s absolutely driven by what’s happening in California,” said Doug Herman, a Democratic strategist based in Los Angeles, who attests to the appeal of single-payer as an issue. “‘Medicare for All’ could help Bernie and Elizabeth in the Democratic primary the same way it helped Gavin Newsom win the primary in California. But the deeper you go, the harder it is to explain how you’re going to pay for it.”
Newsom’s alternative steps include a return of the individual mandate requiring people to buy insurance or pay a tax penalty; stricter coverage requirements on mental health parity; expanded subsidies to help low- and middle-income people purchase coverage; more Medicaid spending to cover undocumented immigrants; and the creation of a much larger state-operated group-purchasing plan to drive down prescription drug costs.
These will be followed, if Newsom sticks to his intentions, by additional reforms generated by a 2020 commission of stakeholders that could lead to a much more highly regulated system. And that, some health experts believe, can put him on the doorstep of the Democrats’ Holy Grail: a universal, single-payer system.
“The governor continues to insist that we move forward towards a system that will cover everyone, that will be more affordable and that will be high quality. Single-payer is one point on the horizon to help to get us there,” top Newsom adviser Daniel Zingale told POLITICO. “Folks who are die-hard proponents of single-payer should not despair — that continues to be a guiding beacon for where we’re trying to go.”
* * *
Speaking to a home state crowd of more than 4,000 liberal activists in San Diego in early 2018, Newsom, the dynamic former San Francisco mayor who had spent eight years as lieutenant governor waiting for his chance at the top job, took a shot at his chief primary opponent, former Los Angeles Mayor Antonio Villaraigosa, who was on a crusade to convince voters that single-payer was too expensive and impossible to achieve in California.
“My opponents, they call it snake oil. I call it single-payer,” Newsom said, borrowing a phrase Villaraigosa had employed to criticize Newsom’s lack of specifics in his health care agenda.
“It’s about access, it’s about affordability — it’s about time, Democrats,” Newsom said, buoyed by an electric, cheering crowd a few months before the primary election. “If these can’t-do Democrats were in charge, we would have never had Medicare and Social Security.”
Newsom’s early embrace, both of Sanders’ Medicare for All proposal and a $400 billion single-payer health care bill propped up in the state Legislature by the influential California Nurses Association, earned Newsom highly coveted backing from Sanders supporters and other skeptics on the left who worried he was too moderate.
He has long cultivated an image as a political risk-taker willing to battle his own party, in earlier eras pushing gay marriage and legalization of marijuana to the forefront of the Democratic agenda in California.
Newsom said his single-payer message was about “more than a political campaign,” it was about “Democrats acting like Democrats” in a battle for the soul of America against “a president that doesn’t have one.”
“Democrats do not succeed by playing it safe,” Newsom said in the campaign. He went on to defeat Villaraigosa by more than 20 points, and barely flinched at the general election challenge from Republican real estate investor John Cox.
“It was an ideological purity test, and Newsom won it,” said Mike Madrid, a Sacramento-based Republican strategist who led Villaraigosa’s campaign. “Health care is something that has defined the Democratic Party since at least the 1970s, but this was new. I was shocked to see the desire Democratic primary voters had to be lied to.”
After the primary, Newsom largely ignored his Republican opponent, instead pouring time and resources into helping down-ticket Democratic candidates beat Republicans in House and state legislative districts. Democrats ended up unseating six Republicans in the Legislature, solidifying its Democratic supermajority, and flipping seven Republican-held battleground seats in the U.S. House.
Andrew Acosta, a Sacramento-based political consultant, said disdain for President Donald Trump fueled those races, but that Newsom did help fire up the Democratic base in traditional Republican strongholds, including in the Central Valley and Orange County.
“I don’t think he was ever in any trouble with Cox, so he was able to do other things,” Acosta told POLITICO.
Newsom’s fiercest allies, meanwhile, were focused on keeping him committed to single-payer. The California Nurses Association and others on the left were growing increasingly anxious that he’d moved too far to the middle, even as they pumped money into a campaign bus with the slogan: “Nurses trust Newsom.”
“He did not run on being an incrementalist governor,” said Stephanie Roberson, chief lobbyist for the California Nurses Association in Sacramento. “If he bit off more than he can chew, he should say that.”
She referenced a series of single-payer campaign promises Newsom had made in seeking their support early in his campaign. “I’m a Californian. I don’t like waiting,” Newsom said early on. “When I’m governor, I will not wait for federal action. … I’m tired of politicians saying they support single-payer but that it’s too soon, too expensive or someone else’s problem.”
Newsom later began to shift his message away from single-payer, instead brandishing his reputation as the former two-term San Francisco mayor who took on the city’s business elite, passing a universal health care program for city residents regardless of their immigration status or ability to pay, funded in part by fees on employers.
Newsom remained firm on his goal of adopting a universal-care system for California. But single-payer would take much, much longer, if it was even possible. Weeks before the 2018 election, he argued that it was “lazy” for supporters to interpret his single-payer campaign pledge as a promise that was “achievable overnight.”
“It was always about universal health care. That’s the goal,” Newsom said. “I’ve always believed that single-payer financing is the most effective, efficient way to achieve it.”
But, he said, he’d “deeply discovered” that “single-payer financing means a million different things to a million different people.”
Democratic and Republican strategists told POLITICO that the way single-payer played out in the Newsom-Villaraigosa contest is exactly how they see the fight between the liberal presidential candidates touting Medicare for All and the moderates vowing to improve Obamacare: First, promise Medicare for All. Win the primary. Then move to the middle to pick up more middle-of-the-road voters, and start explaining how you were misunderstood all along.
“In this Trump era and a time of immense tribalism, once you start to question numbers and math, you become a heretic,” said Madrid, the Republican strategist. “We saw that in the 2018 California Democratic primary, and that’s what’s on full display in the 2020 presidential fight with Bernie Sanders and Elizabeth Warren.”
“People didn’t want a centrist,” he said, recalling the Newsom-Villaraigosa fight. “They wanted an ideological warrior.”
* * *
They may have gotten a warrior, but some of the ideology got left behind.
Industry groups worried about Newsom coming into office. Now, they see a governor growing more moderate, one who has come around to their side and with his actions decided that building a universal health care system using the current network of payers and providers is much more realistic and politically palatable.
“The reality … and the governor knows this, is that the federal roadblocks and the state roadblocks to single-payer are real,” said Charles Bacchi, president and CEO of the California Association of Health Plans, which represents major health insurers across the state.
The first day Newsom took office, he staked out major health care priorities on the wish list of industry groups, including insurers, hospitals and doctors: Bringing back the individual health insurance mandate after a Republican-led legal fight had gutted it nationally. Higher provider reimbursement rates. An expansion of Medicaid to cover undocumented immigrants up to age 26, alleviating pressure on public hospitals and emergency rooms saddled with millions of dollars each year in uncompensated care.
Instead of cutting insurance companies out, Newsom has helped bolster their business by restoring a state-based health coverage mandate and expanding taxpayer-financed insurance subsidies for middle-class Californians — even higher than those allowed under Obamacare.
He argues such measures will further stabilize the insurance market and help more people struggling to afford coverage.
He suggested to POLITICO earlier this year that he may go even further next year by covering undocumented seniors. And he is also developing incentives, including higher provider pay, for doctors who do a better job of keeping people healthy by reducing chronic disease and improving care for mothers and babies.
He’s spearheading a massive overhaul of public-private drug purchasing, leading initiatives to drive down soaring pharmaceutical costs, he hopes, by creating a single state bulk purchasing system to negotiate deeper discounts with drugmakers. Four major counties have joined, including Los Angeles, San Francisco, Alameda and Santa Clara.
And his administration is beginning a major transformation of the state’s Medicaid program to better serve the 13 million low-income Californians who depend on it.
These initiatives could provide a workable template for a Democratic health reform agenda that presidential candidates backing single-payer should study and learn from, health policy experts say.
“You can’t just wipe out the existing system and start over,” said Joe Kutzin, who leads the health care financing team at the World Health Organization, working on establishing universal systems of care around the globe.
In most developed countries — even those held up as ideal single-payer systems — large-scale change happens more incrementally, given what Kutzin described as immense political difficulty implementing “big-bang reform.”
“Winning the argument about universal coverage first, I think, is really important,” he said. “Is there agreement that no one should become poor or die because they don’t have health coverage? The United States political system doesn’t have agreement on that basic principle, and that can get derailed by discussions about wiping out the insurance industry.”
Kutzin said the Affordable Care Act advanced the national conversation about whether health care should be a basic right — a belief that every major Democratic presidential contender says they’re for — but health care is still ingrained in the United States as an earned benefit attached to employment. And, 14 Republican-controlled states still haven’t expanded Medicaid to childless adults, while others are making it more difficult for poor people to qualify.
Like faithful single-payer advocates, Kutzin believes a uniform financing system can achieve universal coverage, and deliver it cheaper. But that ignores political realities.
“Getting to single-payer from where you are now, I’m afraid, generates a lot of resistance that risks losing the objective of universal care,” he said. “The reality, and I think the difficulty, is the system is so messy right now that almost any path to those goals are extremely painful. But standing still is really painful too.”
Tsung-Mei Cheng, a health policy researcher at Princeton who studies single-payer systems around the world, said policies Newsom has advanced can eventually lead to single-payer.
“Fix Obamacare — California is doing this,” she said. “Going from private health insurance to single-payer is a tall order. It would be different if people living in Alabama and Tennessee and all these Republican states agreed that health care is a right, but in our country, we are split.”
She said steps Newsom has taken are in line with pragmatic measures she and her late husband, Princeton economist Uwe Reinhardt, believed states could do under Obamacare. Reinhardt helped craft Taiwan’s single-payer system and broadened America’s understanding of why the United States spends more money on health care than any other industrialized country yet has worse health outcomes, in his study on uncontrolled prices.
Cheng said if California can eventually achieve universal coverage, and pass tight cost control mechanisms to reduce overall health care spending, it can serve as a model for other states and possibly, provide a state and national template for single-payer.
“You’re almost there,” she said. “The one big downside of California and Obamacare is there really isn’t any cost control mechanism, and that is necessary. If you can manage to get universal care and costs under control, then you’re there.”
But, she said, the piecemeal steps California is taking “can be a morale booster for the whole country” as Democrats and Republicans fight over the right approach.
The state has already cut its uninsured rate to about 7 percent, down 10 percentage points from the early days of Obamacare. Measures taken this year are expected to further expand coverage and access.
It could be the best any state could hope for in the immediate future. Going to all-out war with the health care industry over single-payer would be political suicide, Cheng suggested.
“Our political system allows itself to be influenced by these interest groups, and they’re very powerful,” Cheng said. “We in the United States have this congenital defect, and we’re stuck with it.”
She said regulating the market by paying all health care providers the same, regardless of coverage, and creating a public insurance option are good ideas for California to build on what the state has already done.
California is already considering those options under a single-payer health care commission established by Newsom and the state Legislature this year. Experts have said models in place in other countries can drive a more equitable, efficient delivery system for less money.
The commission is expected to begin its work in 2020, with its charge to consider a path forward on single-payer and tight cost control mechanisms, including a global budgeting system that establishes a fixed amount of health care spending for the state.
* * *
In unscripted moments last year during campaign bus tours through Los Angeles and California’s Central Valley — communities that are home to California’s largest uninsured population — Newsom alluded to reasons why he envisioned a slower path forward on single-payer.
He said he was eyeing different health care models used throughout the world, all of which included a major role for government as primary payer for health care. The so-called Bismarck model, used by Germany, Switzerland and Japan,was the most appealing for California, he said.
In general, it finances health coverage through a joint employer-employee payroll deduction, and retains a role for private doctors and hospitals. Some countries use a single government payer, while others have multiple insurers, but it provides no profits for health insurance companies and everyone is covered. A key feature is tight cost-control mechanisms on overall health care spending.
“Bismarck has more interesting tenets to what we do in California,” Newsom said last year.
He was also analyzing other systems, including a socialized medicine model under which the government owns hospitals, employs doctors and pays for health care as it does education and public safety. And he’d been studying traditional single-payer systems, like those in place in Canada and Taiwan.
Each model, he said, is better than the existing system. A key feature of any future initiative must include tight cost controls, Newsom says.
“There’s pieces of all three systems … that are easily categorized as versions of single-payer financing,” Newsom said. “Aspects of all three — that’s what we’re looking at for California.
In office, he has insisted that he remains committed to the idea of single-payer.
“I committed to this, and I want folks to know that I was serious about it,” the governor said on Inauguration Day.
Single-payer supporters and industry groups who reject the idea, meanwhile, are jockeying for inclusion in those discussions.
That could present political challenges for Newsom as he eyes larger changes ahead. His allies with the nurses union have already begun to publicly attack him, telling POLITICO earlier this year that its relationship with the governor is “on shaky ground.”
“The time is now, and I think he’s missing a moment to actually lead,” said Bonnie Castillo, executive director of the National Nurses United, which recently endorsed Sanders for president.
A California congressman with whom Newsom has had deep single-payer discussions suggested in an interview with POLITICO recently that the governor is dragging his feet.
“Our state of California should deliver on single-payer,” said Democratic Rep. Ro Khanna, who represents a vast swath of the ritzy Silicon Valley. “If California, where you have the biggest political support for the single-payer movement, isn’t going to lead, then where are we going to do it?”
Deep-pocketed industry groups such as the California Medical Association — major financial donors to Newsom during his campaign — say the governor hasn’t pleased them on everything, and they remain somewhat concerned about the longer-term prospect of single-payer, but generally they’re happy with steps he’s taken.
“When many people say single-payer, they’re really talking about a payment system that may ultimately reimburse at government-set levels that pay less than cost — that will be a challenge for hospitals,” said Carmela Coyle, president and CEO of the California Hospital Association, in an interview.
She said hospitals have “serious concerns” about politicians advancing single-payer at both the state and federal level.
“California’s hospitals will be involved and engaged,” Coyle said. “We have a tremendous opportunity to look at the issue of affordability that does not necessarily put at risk the care we’re able to provide to the population today.”
Bacchi, the president and CEO of the California Association of Health Plans, said the plans would fight back against any single-payer effort.
“What California’s health plans believe about transforming our health care system is that we should focus on building and improving the health care that’s working for millions of Californians, not starting from scratch and putting at risk the care that so many Californians rely on,” he told POLITICO. “Obviously, we’re concerned that single-payer might distract from all the other work we may need to do.”
Sara Flocks, chief lobbyist for the California Labor Federation, which backs single-payer, characterized Newsom as “untested” on health industry fights. Although he has gone after the pharmaceutical industry and soaring drug prices, that is a more politically popular stance than going after insurers, doctors and hospitals, she said.
But ultimately, if Newsom wants to control rising health care costs and expand the system in a sustainable way, that’s what he may have to do. The rough political terrain ahead could rival California’s bruising 2017 health care battle, during which the leader of the state Assembly denied a contentious single-payer bill a hearing that prevented it from advancing.
That fight, brought by the nurses, set the stage for Newsom’s forceful stance on the issue, and will continue shaping the future debate, Flocks said.
“Senate Bill 562 was a watershed moment for California,” said Flocks, an appointed member of the single-payer commission. “It opened a lot of doors to get to where we are today. What’s at stake is how we shape the national conversation.”
Newsom, faced with charges about backtracking on his single-payer promise, said last year “I haven’t lost my idealism.”
“But it’s one thing to campaign,” he added. “It’s another thing to govern.”
A new report from the Georgetown University Health Policy Institute says the number of uninsured children in the U.S. increased by more than 400,000 between 2016 and 2018.
Some key findings from the report:
The number of uninsured children rose above 4 million by the end of 2018.
Insurance coverage losses are concentrated in 15 states — Alabama, Arizona, Florida, Georgia,
Idaho, Illinois, Indiana, Missouri, Montana, North Carolina, Ohio, Tennessee, Texas, Utah, West Virginia.
States that have not expanded Medicaid, as allowed by the Affordable Care Act, have seen much larger increases in uninsured rates.
Children in non-expansion states are nearly twice as likely to be uninsured compared to states that have expanded Medicaid.
White and Latino children saw the largest increases in the uninsured rate.
Households with low to moderate income – $29,000 to $53,000 per year for a family of three – were the hardest hit.
The report’s authors said it’s no coincidence that the increases in the number of uninsured children have occurred since President Trump took office in 2017.
“This serious erosion of child health coverage is likely due in large part to the Trump Administration’s actions that have made health coverage harder to access and have deterred families from enrolling their eligible children in Medicaid and CHIP,” they wrote in their conclusion. “These actions include attempting to repeal the ACA and deeply cut Medicaid, cutting outreach and advertising funds, encouraging states to put up more red tape barriers that make it harder for families to enroll or renew their eligible children in Medicaid or CHIP (or ignoring it when they do), eliminating the ACA’s individual mandate penalty, and creating a pervasive climate of fear and confusion for immigrant families.”
Elizabeth Warren on Friday detailed how she intends to pay for Medicare for All without raising costs for middle-class households. The senator from Massachusetts said her plan will cover everyone in the country without raising overall spending, “while putting $11 trillion back in the pockets of the American people by eliminating premiums and virtually eliminating out-of-pocket costs.”
Warren’s plan relies in large part on redirecting existing spending toward a universal, federal health care system, while adding new revenues from taxes on the wealthy, the financial sector and large corporations. “We can generate almost half of what we need to cover Medicare for All just by asking employers to pay slightly less than what they are projected to pay today, and through existing taxes,” Warren said.
Some key details from the Warren plan:
Much lower cost estimate: Warren starts with the Urban Institute’s estimate that the federal government would need $34 trillion more over 10 years to pay for Medicare for All, but she slices that number dramatically — down to $20.5 trillion — by using existing federal and state spending on programs including Medicaid to fund a portion of her proposal, along with larger assumed savings produced by a streamlined system paying lower rates to hospitals, doctors and other health care providers.
Total health care spending stays about the same: Warren projects about $52 trillion in national health care spending over 10 years, close to estimates for the existing system, despite covering more people and offering more generous benefits, including long-term care, audio, vision and dental benefits. Applying Medicare payment levels across the health care system is projected to produce substantial savings that would be used to finance the expanded size and scope of the plan.
Heavy reliance on employer funding: The employer contribution to Medicare for All is pegged at $8.8 trillion, with employers required to contribute to the federal government 98% of what they would pay in employee premiums. Businesses with fewer than 50 employees would be exempt.
Public spending continues: State and local governments would be still on the hook for the $6 trillion they currently spend on Medicaid, the Children’s Health Insurance Program and public employee premiums.
New taxes on the wealthy: Warren proposes a new 3% tax on household wealth over $1 billion — and that’s on top of her proposed wealth tax, which calls for a separate 3% tax on wealth over $1 billion (and a 2% tax on wealth between $50 million and $1 billion). Combined with an annual capital gains tax on the top 1% of households, her proposal projects that the new health-care-focused wealth taxes would produce $3 trillion.
Taxes on business and finance: Warren says she can raise $3.8 trillion through “targeted” taxes on big business and financial transactions, including a financial transaction tax of .01% on the sale of stocks, bonds and derivatives.
Reduced tax evasion: Cracking down on tax evasion is projected to bring in $2.3 trillion. “The federal government has a nearly 15% ‘tax gap’ between what it collects in taxes what is actually owed because of systematic under-enforcement of our tax laws, tax evasion, and fraud,” Warren said. “By investing in stronger enforcement and adopting best practices on tax reporting, withholding, and filing, experts predict that we can close the tax gap by a third.”
Revenue increase from higher take-home pay: Employees would no longer pay premiums for health insurance, providing a pay hike and higher tax revenues, estimated to total $1.4 trillion.
Abolishing the Overseas Contingency Operations fund: Warren is calling for reduced military spending, with a focus on what some call the “slush fund” that covers the cost of overseas military operations. Eliminating this off-budget spending is projected to save $800 billion.
Immigration reform: Expanded legal immigration would bring in $400 billion in revenue as more incomes are subject to taxes, Warren says.
A record tax cut? Once the new revenues and cost savings are added up, Warren says her plan will deliver what amounts to an historic tax cut. “No middle class tax increases. $11 trillion in household expenses back in the pockets of American families. That’s substantially larger than the largest tax cut in American history.”
Warren won plaudits from some analysts and policy wonks for releasing a plan, but the details she laid out are also being picked apart by critics and rivals, with some experts already expressing doubts about her assumptions and numbers. Here’s some of the reaction:
Congratulations from a conservative: “Kudos to Senator Warren for actually releasing a plan,” said Scott Greenberg, formerly an analyst with the right-leaning Tax Foundation. “There are a lot of things in here that will draw attacks from the left and from the right, and it might have been politically easier not to release it at all. But Warren has stuck by her commitment to explain her proposals.”
Criticism from a key rival: “The mathematical gymnastics in this plan are all geared towards hiding a simple truth from voters: it’s impossible to pay for Medicare for All without middle class tax increases,” said Kate Bedingfield, deputy campaign manager for Joe Biden. Bedingfield argued that employees would end up paying the tax on employers.
Dire warnings from the White House: “It is the middle class who would have to pay the extra $100 billion or more to finance this kind of socialist government takeover of health care,” said Larry Kudlow, President Trump’s top economic adviser. “It would have a catastrophic effect on the economy and all these numbers that we’re seeing, all these numbers, on incomes per household, on wage increases, on jobs, all these numbers would literally evaporate and by the by, so would the stock market.”
Tax vs. premium: Warren’s plan will likely kick off a debate about the difference between taxes and health care premiums, and whether that difference matters, says William Gale of the Brookings Institution. “Does [the Warren plan] raise ‘taxes’ on the middle class?,” Gale asked Friday. “Short answer — it does not raise ‘burdens’ on the middle class.”
Cost reduction is crucial: “The key to Warren’s plan for financing Medicare for all is aggressively constraining prices paid to hospitals, physicians, and drug companies. We’d still have the most expensive health system in the world, but it would be less expensive than it is now,” said LarryLevitt of the Kaiser Family Foundation. “Warren’s plan to aggressively constrain health care prices under Medicare for all would be quite disruptive. On the other hand, every other developed country has managed to figure it out, so we know it’s possible.”
And the battle is ultimately political: “In laying out the specifics of her Medicare for all plan, Warren’s challenge is more about politics than arithmetic,” Levitt continued. “She is taking on the wealthy, corporations, and pretty much every part of the health care and insurance industries. Those are some powerful enemies.”
So don’t expect major legislation soon: “Experts will argue for months whether [Warren is] being too optimistic — whether her cost estimates are too low and her revenue estimates too high, whether we can really do this without middle-class tax hikes,” said economist Paul Krugman. “You might say that time will tell, but it probably won’t: Even if Warren becomes president, and Dems take the Senate too, it’s very unlikely that Medicare for all will happen any time soon.”
For now, the Department of Health and Human Services is touting a second consecutive year of positive-sounding numbers. An additional 20 insurers will participate for 2020, expanding consumer choice in many states, officials said. Nearly 70 percent of customers will have three or more insurers from which to pick a plan.
About 10 million people are covered through the health law’s insurance markets, which offer taxpayer-subsidized private plans for people who aren’t covered on the job. Former President Barack Obama’s namesake law will be 10 years old next year.
Premiums for a hypothetical 27-year-old choosing a standard plan will decline 4% on average in 2020 for states served by the federal HealthCare.gov website, the Trump administration said. About a dozen states run their own sign-up websites, but most rely on HealthCare.gov.
A low-cost midrange plan for that hypothetical 27-year-old will charge monthly premiums of $374 next year, officials said. The law’s income-based subsidies can drop that to around $50.
However, people who don’t qualify for income-based assistance must pay full price, and that’s before any deductibles and copays. Unsubsidized customers may just decide to go uninsured, particularly if they’re healthy.
A previous Republican Congress repealed the law’s unpopular penalty to get more people signed up — fines for going without coverage.
Six states will see premiums decline by 10% or more, officials said. They are Delaware, Montana, Nebraska, North Dakota, Oklahoma and Utah.
Three states — Indiana, Louisiana and New Jersey — will see premiums increase 10% or more.
Even as it pursues “Obamacare’s” demise in the courts, the Trump administration is trying to take credit for the program’s current stability.
“Until Congress gets around to replacing it, the president will do what he can to fix the problems created by this system for millions of Americans,” HHS Secretary Alex Azar said. “The president who was supposedly trying to sabotage this law has been better at running it than the guy who wrote it.”
Independent experts say it’s more complicated than that.
They credit the Trump administration for working with a dozen states to approve waivers that can bring down premiums by setting up a backstop system to pay bills from the costliest patients.
However, experts say the original design of the law’s subsidies is probably the major stabilizing force. People eligible for financial assistance are insulated from price spikes because they pay only a fixed percentage of their income. Because their own costs didn’t change much, customers with subsidies kept coming back to the market through years of double-digit increases in list-price premiums.
“As long as the subsidies are in place the changes that are happening … are not going to push this market off a cliff,” Standard & Poor’s director and lead analyst Deep Banerjee said.
Experts say yet another factor is that insurers that have stuck with the program have learned over time how to operate profitably.
Although the program is stable, enrollment has been slowly eroding since Trump took office, from 12.2 million in 2017 to 11.4 million this year. The slippage has come mainly in the HealthCare.gov states, where the federal government runs sign-up season. Slashing the ad budget was one of the Trump administration’s early actions.
The nonpartisan Government Accountability Office has recommended that the administration follow standard federal practices by setting sign-up goals and actively managing the program to meet enrollment targets. Seema Verma, head of the Centers for Medicare and Medicaid Services said the administration doesn’t believe such targets are needed and instead her agency has focused on keeping the HealthCare.gov website running smoothly and improving the enrollment experience for customers.
Verma also disclosed that the administration has made some “minor” changes in how it reports data about the program. While those tweaks appear to be in the weeds, they’re likely to get close attention from Democrats who accuse Trump of “sabotage” of the health law.
Sign-up season starts Nov. 1 in most states and runs through Dec. 15. States that run their own open enrollment may have different dates. Coverage starts Jan. 1.
The appeals court in New Orleans could issue its ruling during this time, but Azar said he’s not concerned even if the judges say the whole program should be tossed.
“Our messaging would be to keep calm and carry on,” he said, noting that the case is expected to go to the Supreme Court. “There will be no immediate disruption to anyone.”
Supporters of Medicaid expansion in Oklahoma said they submitted more than enough signatures on Thursday to get the measure on the ballot in 2020.
The “Yes on 802” campaign said it submitted more than 313,000 signatures, far more than the roughly 178,000 it needed, to qualify to get Medicaid expansion on the ballot in Oklahoma next year.
Campaign manager Amber England said in a statement that her group had “a mandate from a record-breaking number of Oklahoma voters who want the chance to bring more than a billion of our tax dollars home from Washington every single year to deliver healthcare to our neighbors, keep our rural hospitals open, and boost our economy.”
Oklahoma is one 14 GOP-controlled states that have not accepted the expansion of Medicaid under ObamaCare. Republicans have traditionally raised concerns about the cost of the program.
More states have been expanding recently, however. Utah, Idaho and Nebraska voters approved ballot measures approving Medicaid expansion in last year’s elections.
The Yes on 802 campaign estimates almost 200,000 people in Oklahoma would gain coverage if expansion were adopted in next year’s election.
The Oklahoma Council of Public Affairs, a conservative think tank in the state, has vowed an opposition effort.
“There will obviously be significant opposition once it gets to the campaign stage,” the group’s president, Jonathan Small, told The Oklahoman earlier this month.