In our previous article, Bernie – Heal Thyself, we exposed the flaws in Senator Bernie Sanders (I) VT‘ Medicare for All proposal, which promises universal healthcare without addressing its true costs or economic impact. Today, we go deeper into Medicare’s looming insolvency, the inefficiencies of government-run healthcare, and the moral and financial hazards of government investment.

Medicare for All is being proposed within a system where Medicare itself is on track for insolvency by 2028. This isn’t just an unsustainable model—it’s a warning of the consequences of static funding, inefficiency, and overuse.

Bernie’s Pitch: The Fantasy vs. Reality

The Marketing Fantasy

Bernie’s campaign materials promise Medicare for All will cost Americans just 4% of household income above $29,000. For a single worker earning $50,000 annually, this translates to an additional $840 per year—a figure designed to appear palatable to voters.

But the reality of U.S. healthcare costs, which total $4.3 trillion annually, makes this fantasy impossible. Bernie’s 4% tax would fund only 6.5% of the total cost, leaving a catastrophic shortfall.

The Reality

To fully fund Medicare for All, taxes would need to increase to 61.43% on income above $29,000. Here’s how this impacts take-home pay:

For a single worker earning $50,000 annually:

• Current Take-Home Pay: $40,175
• Bernie’s Fantasy Take-Home Pay: $39,335
• Reality Take-Home Pay: $27,275

For a married couple with two kids, each earning $50,000 annually:

• Current Take-Home Pay: $87,898
• Bernie’s Fantasy Take-Home Pay: $85,058
• Reality Take-Home Pay: $44,282

This crushing tax burden doesn’t even account for the likelihood of healthcare costs rising further, as history has shown is inevitable when systems are perceived as “free.”

The Medicare Time Bomb: Insolvency by 2028

Medicare’s Hospital Insurance (HI) Trust Fund is projected to become insolvent by 2028. This looming crisis is driven by:

1. Static Revenue Streams: Medicare relies on payroll taxes and premiums, which don’t grow with healthcare costs.
2. No Investment Growth: Medicare does not invest its funds to generate additional revenue, relying entirely on incoming tax dollars.
3. Rising Costs and Demand: With an aging population and increasing utilization, Medicare expenses are rapidly outpacing revenues.

Expanding Medicare to cover the entire population through Medicare for All would accelerate its collapse and amplify its inefficiencies.

A Tale of Two Funding Models: Private Insurance vs. Medicare

Private Insurance: Risk and Revenue Growth

Private insurers don’t just collect premiums—they make them work:

• Investments: Insurers invest premium dollars in diversified portfolios (stocks, bonds, etc.) to generate returns, which help pay claims and reduce reliance on premium increases.
• Risk Management: Insurers bear all the financial risk of paying claims. If investments fail or claims exceed expectations, insurers face bankruptcy. This inherent risk forces them to adopt prudent investment strategies.
• Efficiency Through Competition: Private insurers compete in the marketplace, incentivizing them to optimize operations, cut waste, and offer competitive premiums.

Medicare: Static and Inefficient

Medicare operates on a static funding model:

• No Investments: Medicare doesn’t grow its reserves through investments, relying instead on tax revenue and premiums.
• Cost Shifting: Medicare reimburses providers below cost, forcing private insurers to make up the difference, driving up premiums.
• No Market Incentives: Without competition or profit motives, Medicare has little incentive to innovate or control costs.

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The Hazards of Government Investment

At first glance, allowing Medicare to invest its funds might seem like a solution to extend its solvency. However, this introduces significant moral and social hazards:

1. Political Influence: Government investments could become vehicles for political agendas, such as favoring “green” industries or divesting from fossil fuels, leading to suboptimal financial returns.
2. Market Manipulation: Large-scale government investments would be highly visible, making them vulnerable to exploitation. The 1992 case of George Soros “breaking the Bank of England” offers a cautionary tale. Soros leveraged financial strategies to exploit the UK’s vulnerabilities, forcing the British government to withdraw from the European Exchange Rate Mechanism (ERM) and profiting $1 billion in the process. Similar strategies could target U.S. investments, destabilizing the economy.
3. Insider Trading and Corruption: Managing billions in public funds would create immense opportunities for corruption, insider trading, and political favoritism.
4. Risk Mismanagement: Unlike private insurers, the government lacks expertise and incentives to manage investments prudently, increasing the likelihood of financial mismanagement.

The Biden administration’s proposal to redirect revenue from the Net Investment Income Tax (NIIT) to Medicare is an acknowledgment of the funding shortfall but provides only a temporary reprieve—it does nothing to fix the structural flaws of Medicare’s static model.

The Real Cost of “Free” Healthcare

A History of Overuse

When Medicare was introduced, the promise of “free” healthcare led to a surge in utilization, overwhelming providers and driving up costs. Medicare for All would amplify this problem, incentivizing overuse on a massive scale and pushing healthcare costs to unsustainable levels.

What Needs to Happen Instead

Reform Through Competition

1. Deregulate State Markets: Allow insurers to compete across state lines, increasing competition and driving down premiums.
2. Promote Price Transparency: Require providers and insurers to disclose costs upfront, enabling consumers to make informed decisions.
3. Encourage Direct Primary Care: Expand models where patients pay doctors directly for routine care, reducing reliance on insurance for basic needs.
4. Fix Medicare’s Structure: Explore limited, carefully managed investments for Medicare funds, with strict safeguards to prevent political interference.

Conclusion: Fantasy Fails Economics

Bernie Sanders’ Medicare for All plan ignores the harsh realities of funding healthcare. Private insurers operate efficiently by growing their funds through investments and managing risk. In contrast, Medicare relies on static tax revenues, draining taxpayer dollars without generating value.

Expanding this flawed system would devastate the economy, destroy take-home pay, and create moral and social hazards that threaten the very fabric of fiscal responsibility. Real reform lies in empowering markets, controlling costs, and fostering innovation—not chasing Bernie’s utopian fantasy.

Oh, and by the way, you will still owe $200 for medications.

Dave Soulia | FYIVT

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