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The Journal Gazette

  • Schwab

Wednesday, August 07, 2019 1:00 am

Cost savings may offset taxes on Medicare for All proposal

Health cost savings may outweigh added tax burden

Abraham P. Schwab

When I was an undergraduate and graduate student, I rented a fair number of apartments. Some of these were one-bedroom apartments I rented on my own, and others were two- or three-bedroom apartments I shared with roommates. One summer, I even lived in a room about the size of a closet.

While many factors determined which apartment I chose each time, cost was always an overriding consideration. Of the factors that contributed to cost, the question of utilities could be an underappreciated deal-breaker. If rent was $1,200 and it didn't include utilities, I could add an extra hundred or more onto the monthly cost. But if the rent was $1,300 and included utilities, then there was nothing to add.

If I failed to appreciate that costs like utilities factor into the overall cost of an apartment, I might think of the $1,200 apartment as a better choice than the $1,300 apartment. After all, the rent is lower.

It's this failure to appreciate all that goes into the “cost” of something that seems to motivate a certain set of questions being asked about Medicare for All.

For those who have only cursory appreciation of Medicare for All, it's a name that's been given to the various attempts to expand Medicare so that everyone in the United States can use the program for their health insurance. It's the latest recommendation to try and solve the problem of the 80 million-plus people who are uninsured or underinsured in the United States.

When Medicare for All has been discussed recently, one of the questions that has been repeatedly asked is: “Will it raise taxes?” This question was repeatedly asked in one of the recent debates among Democratic primary candidates. It was also repeated in post-debate questioning.

Whether or not it would raise taxes is important, but only as part of a broader question of costs. Let me put it this way: If I pay $3,000 in premiums for my health care plan, and then pay an additional $1,000 as part of my health care deductible, health care costs me $4,000 for the year.

Now, let's say Medicare for All becomes a reality and I no longer have to pay a premium or deductible. But let's say that it also raises my taxes to the tune of $2,000 per year (which would be an incredible tax hike). The transition from my current situation to Medicare for All costs me less.

Yes, my taxes went up, but my overall costs went down. I will have saved $2,000. Failing to appreciate this is like failing to appreciate the difference between $1,200 rent, plus utilities, and $1,300 rent, utilities included.

So when you hear Medicare for All being discussed, and the inevitable question of taxes comes up, remember that taxes are only one part of the cost of health care. For example, if you made $50,000 last year and you paid $5,000 for health care costs (premiums, deductibles, etc.), your taxes would have to go up 10% to equal the amount you're paying out of pocket already.

Look up your total health care costs for 2018 and keep that number in mind when you're prodded to worry about your taxes going up if Medicare for All becomes a reality.

Abraham P. Schwab is professor of philosophy and interim director of graduate studies at Purdue University Fort Wayne.