Why a single payer health care system wouldn't cost a penny more

The Kaiser Family Foundation released its annual report on health care costs in the US.  The results are striking.  The average family premium for health care rose above $20,000 per year for the first time.  Single premiums rose to over $7000.  The average out of pocket cost rose above $10,000 per year - this is for people who have insurance.  Employers paid 71% of the cost of these plans, and, obviously, employees paid the rest.  Costs have been going up by an average of 5+% a year.  Despite the fact that fewer claims were filed last year, prices went up 17%.  The current health care system isn’t broken, it’s lying smashed on the rocks at the bottom of a cliff.

 

One note: I will use the term taxes to mean “money out” of my paycheck.  Thus, the amount I pay in premiums (and that my employer does) are “taxes” in my mind.  An enormous one.  In fact, this “tax” is one of the worst, most regressive taxes out there.  A topic for a different essay.

 

You may already know all this.  I have been paying attention to the various health care plans being put forward by the current Democratic nominees and maybe they are afraid to put the math on their sites, but I have a nagging question: What happens to the 71% of the premiums that employers are currently paying for 165 million people if we enact a single payer system?  Or, what happens to approximately $1.2 trillion that employers would no longer have to pay in premiums?  

 

(I like math, and I hope you do to, but I’ll place the math at the end in case you want to get right to the question this essay is exploring. 1)  

 

I simply can’t find any answers.  

 

So here is one proposal.  Immediately require that all employers raise the salaries (or hourly wages) or their employees equal to the amount the employer was spending for their total health/eye/dental package.  For me, personally, that would mean a raise of about $22,000 as I have a good, relatively expensive plan.  Once that calculation is done, raise the minimum wage to the point of $10-15 dollars per hour plus the saved cost of health care, which would be about $10 an hour more.

 

Let’s not kid ourselves that our official taxes will go up, for everyone essentially, under any single payer system.  However, remember that we are already paying an enormous tax in premiums and out of pocket expenses.  Therefore, for low and middle income people, this would result in a pay raise. 

 

In fact, the redistribution of wealth under this plan would be immense.  While every employee would receive on average a $20,000 raise, that raise would be the same for the CEO and the counter clerk.  While the CEO would likely end up paying more than this $20,000 once taxes go up, this will be a real boon for low wage employees who will see a considerable increase in take home pay.

 

The benefits are pretty self explanatory.  We all get health care and wealth gets redistributed to enhance social justice.  This doesn’t cost employers a single thing - their bottom line remains the same.  In fact, because they are no longer in the health insurance business, they can focus their resources on real Human Relations.

 

I do see a potential downside.  Current employees become quickly expensive and risk being replaced by potentially cheaper employees.  The $38,000 employee suddenly becomes a $58,000 employee.  But this is a different problem for a different essay about the never ending race to the bottom that capitalism has become.

 

Here is another proposal:  Enacting a payroll tax increase equal to the number of employees multiplied by the average cost of health care benefits.  This would net north of $1.2 trillion (1).  You wouldn’t need to raise taxes anywhere else substantially as this looks about the cost to insure the whole population when you add in current medicare and medicaid, not to mention the costs of the uninsured who do still get the most expensive care at the ER. (Again, math included at the end. 2)

 

The benefits are that you would not need to raise taxes on individuals, and the new payroll tax would not affect the bottom line of the companies that are currently paying for health care.  Again, there are downsides.  This could have a negative affect on job creation as it is a hefty tax hike for business (at least on the surface).  Also, I wonder about small businesses that don’t currently offer health insurance, and the negative affect that might have on both the starting and maintaining of a small business.  Again, the potential drag on employment is a topic for a different essay.

 

While I lean toward the first proposal, this is not meant as an argument per se, but as an essay exploring the question above: What happens to the 71% of the premiums that employers are currently paying for 165 million people if we enact a single payer system?

 

If you have any of the data that I am missing, please make a comment and citation.  Please also add to this conversation.

 

1. It’s hard to find the exact number of family plans versus plans for couples or singles, or the exact number of policies, so I had to make some educated guesses (try searching for total money spent by employers for health insurance).  165 million are insured by employer plans.   I estimated 100 million plans at $12K per plan, thus $1.2 trillion.  Regardless of the exact number, I think I’m in the ballpark.  I will keep trying to find the exact figure)
2. In total, those costs are north of $1.1 trillion from the federal government and over $600 billion from the states.  Thus, you end up with 2.9 trillion in revenue which is about what all estimates say a single payer system would cost per year.