Having been goaded by her democratic opponents for long enough, Democratic candidate Elizabeth Warren has finally released the “math” for her Medicare-for-All health plan. I use quotes here because the plan seems largely a fantasy, unlikely to compute in the end. For the candidate who has been the poll favorite, and who is perhaps best equipped gumption-wise to compete with Trump on the debate stage, this appears to be a mistake. Warren’s plan has provided a wealth of fodder for her competitors to use in picking apart her agenda in the current Democratic race. Her ideas may prove so unanchored in reality that she will lose her top poll position. With this, it seems the Democrats show a lack of clear leadership from a candidate that is firing on all cylinders and is a truly viable Trump opponent, for better or worse. But I’m getting ahead of myself.
Let’s take a peek under the hood of Warren’s plan. With a price tag of $52 trillion over 10 years, this is no small endeavor. While promising not to tax the middle class directly, Warren plans to revert corporate taxes back to 35% from the current 21%. Thinking that this will not make its way into middle class paychecks, effectively taxing the middle class, seems unrealistic and disingenuous. But that’s not where the real fantasy begins. Warren also plans to begin taxing unrealized capital gains on an annual basis for the top 1% of households, along with slapping an annual 2-6% total wealth tax on households with wealth in excess of $50 million. The sheer calculation of this would be nearly impossible, notwithstanding the incentive for household to hide assets and fail to properly mark things to market. A fair amount of this wealth is likely illiquid, making unrealized capital gains and other valuations impractical. At best, experts estimate Warren could achieve only 40% of her stated total wealth tax goal. Estimates from the Wall Street Journal put a realistic expectation for this number closer to 15%. You don’t have to look far to see failed wealth tax attempts: try Sweden, Germany, France, and Austria, just to name a few.
Even worse are Warren’s plans to slash all payments to hospitals to near-Medicare rates, along with lowering the prices of branded prescription drugs by a staggering 70%. Hospitals are currently paid significantly more than Medicare rates by private insurance companies for similar procedures. To think that incentives for drug companies and hospitals to provide great products and care would remain under these assumptions strains credibility. These actions would almost certainly undermine the quality and availability of healthcare products and services in the U.S., perhaps significantly. To be sure, it can be argued that drug prices are higher than necessary, and hospitals and doctors may be enjoying profits that are overly lofty. But Warren’s cuts are dramatic and don’t seem particularly realistic. Warren has further threatened that she would revoke drug companies’ patents if they don’t comply with her new price controls.
This isn’t an exhaustive list of Warren’s plans, but you get the gist. Warren has promised that “We don’t need to raise taxes on the middle class by one penny to finance Medicare for All.” While possibly true in a very narrow sense, achieving Warren’s healthcare goals is overall unlikely. Between the failure for her actual funding methods to materialize in full and the likely degradation in quality and availability of healthcare, Warren seems to have opened the door for her rival candidates to dismantle her agenda and gain an edge in the race given the fantasy of her healthcare plan. This is particularly true as healthcare is a top campaign priority for many Americans. Perhaps Warren would have been better off glossing over details like Bernie Sanders with the simple refrain that taxes (including those on the middle class) will go up, but overall healthcare costs would go down. Simple, and probably more realistic.