Socialized Medicine Goes by Many Names: Budget Buster is But One

Devon Herrick
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Posted: May 26, 2017 10:35 AM
Socialized Medicine Goes by Many Names: Budget Buster is But One

Members of Congress -- both Democrats and Republicans -- are being asked if various health care proposals they support provide so-called “universal coverage.” Socialized medicine goes by many names: Universal Coverage, Coverage-for-All, Medicare-for-All, Medicaid Expansion and Single-Payer are ones you’ve probably heard of. Perhaps you don’t really understand what all these altruistic-sounding phrases imply. Here’s a dirty little secret: you’re not supposed to know: the average American with good employee health insurance already pays for coverage (albeit indirectly) in addition to a Social Security payroll tax surpassing 15 percent. Most Americans would balk once they discovered the ugly truth: universal coverage requires a near doubling of payroll taxes. A case in point is California, New York State, Vermont and Colorado.

A bill to establish a government-run universal coverage recently passed the Senate Health Committee in the People’s Republic of California. Although it’s unlikely to be signed into law, the proposal would insure everyone living in California, including illegal immigrants. As always, the main obstacle is how to pay for such a costly entitlement. An analysis released earlier this week found California’s universal coverage initiative would cost about $400 billion annually.

What is even more ludicrous is the analysis assumes the state would continue to have at its disposal about $200 billion in federal, state and local funds currently used for public health care. California officials also assume they could retain the $100 to $150 billion employers already spend on employee coverage. This suggests the state would still have to raise taxes to come up with an additional $50 billion to $100 billion (and probably a whole lot more). Stated another way, the California proposal would more than double California’s state health care budget. California taxes are already among the highest in the country and the state is already in financial peril from too much spending.

New York State also is also exploring a universal coverage proposal. According to a recent estimate, the Empire State universal coverage would cost $91 billion a year, about 14 percent more than the entire New York State budget. New York State’s taxes are also high, suggesting residents would be in line for a doubling of their tax burden.  

These liberal states should know better. Every other initiative has crashed on the hard rocks of financial reality. In 2011, the Vermont legislature passed a bill to create a single-payer universal health insurer. The Green Mountain Care plan was abandoned several years later by Vermont’s Democrat governor when it became clear it was too costly. Green Mountain Care was going to require an 11.5 percent payroll tax and an additional sliding-scale income tax that topped out at 9.5 percent. Despite the heavy tax burden, a single-payer system in Vermont was projected to go bankrupt by 2019.    

A failed ballot initiative in Colorado was also intended to create a taxpayer-funded single-payer health insurer. ColoradoCare would have replaced most forms of private health insurance and covered nearly all state residents, including Medicaid enrollees. Funding was to come from a 10 percent tax on both wage and nonwage income.

ColoradoCare was projected to operate in the red the very first year of operation, with increasing deficits in the following years. An analysis by the Colorado Health Institute found the supposed “savings” from lower overhead, less administrative costs, lower hospital fees would about equal the new expenses. The new expenses would come from covering the uninsured and higher utilization by people whose taxpayer-funded care would be nearly free at the point of service. In other words, the advantages from a single-payer program in Colorado were estimated to be a big, fat, goose egg. Voters ultimately rejected ColoradoCare in 2016 due to its high cost.

Most Americans who claim to favor universal health coverage do not really understand how these programs work. Scarce resources must always be paid for and rationed in some manner.  Taxes have to rise and access to care fall in order to save enough money to expand coverage at taxpayers’ expense. Economic constraints requires provider fees to be set low -- causing that a number of providers to exit the market. This creates a shortage of service providers resulting in a type of rationing by waiting. Some services or treatments may take months to receive.

Don’t forget the Golden Rule: he who has the gold makes the rules. It should not surprise anyone that universal coverage systems are bureaucratic and use rationing. The bottom line is most Americans (including Medicare enrollees) would not support a system of universal coverage if it means higher taxes and longer waits for services. Absent any of these preconditions, a universal coverage healthcare system would cost far more than the current system.