Plan boosts health and productivity, but long-run economic impact varies by as much as a quarter of all GDP, depending on how plan is financed
PHILADELPHIA, January 30, 2020 — Health care ranks as one of the most important issues to voters in the Democratic primary. The Medicare for All Act of 2019 backed by Senator Bernie Sanders would create a single federal insurance program to cover all U.S. residents.
Penn Wharton Budget Model (PWBM) has produced the first integrated analysis of the Medicare for All Act of 2019, capturing health and demographic effects, interactions with other government programs, and macroeconomic changes. PWBM projects:
- Under current law, the percent of the population without medical insurance will grow from around 10 percent today to over 27 percent by 2060. Under Sanders’ Medicare for All, the uninsured rate would essentially fall to zero by design.
- Sanders’ Medicare for All would improve population health by 2060, reduce the share of the population that is seriously ill from 15 percent to 13 percent, increase life expectancy by two years, grow the population three percent, and increase worker productivity.
- Taken literally, Sanders’ Medicare for All Act lacks a financing mechanism, which by long-standing Congressional Budget Office and PWBM convention implies deficit financing. Under deficit financing, the plan would reduce GDP by 24 percent by 2060, despite large efficiency gains from lower overhead and reimbursement costs.
- As a presidential candidate, however, Senator Sanders has stated his intent to raise taxes, although without details. We analyze two alternative financing mechanisms. With premium financing, where most workers pay the same insurance premium (subsidized for lower-income workers), GDP increases by 0.2 percent in 2060. With payroll tax financing, where workers with higher wages pay more, GDP falls by 15 percent.
- We also present alternative scenarios. Without expanding benefits to include long-term care or dental—but still eliminating most deductibles while covering all workers—GDP increases by 12 percent with premium financing. These results indicate that Medicare for All can be designed in a way that boosts economic growth.
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About the Penn Wharton Budget Model
PWBM is a nonpartisan, independent applied research organization housed at the Wharton School of the University of Pennsylvania. PWBM works directly with policymakers and staff, serving as an honest broker by providing accurate, accessible and transparent economic analysis of the fiscal and economic impact of public policy without advocacy. PWBM’s estimates are regularly referenced by policymakers and top news outlets. For more information, visit https://budgetmodel.wharton.upenn.edu/
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