In our previous exploration of the proposed Medicare for All (M4A) program, we leaned heavily on Bernie Sanders’ campaign numbers to estimate a required flat tax rate of 61.43% to cover the $4.3 trillion annual cost of U.S. healthcare. However, after diving deeper and correcting some foundational assumptions, we’ve recalculated these figures using our methodology rather than campaign marketing materials. Here’s what we found:

New Tax Calculations: Achieving $4.3 Trillion

Regardless of whether a flat tax or a progressive tax is implemented, either system can theoretically achieve the $4.3 trillion needed to fund M4A based on the current cost of U.S. healthcare. Our updated numbers suggest:

• Flat Tax: With revised calculations, the required flat tax is 29.23%, significantly lower than the original 61.43% figure. The average flat tax necessary to cover $4.3 trillion falls within a range that still impacts take-home income significantly but avoids the catastrophic rates previously cited.
• Progressive Tax: The progressive tax structure, which increases rates with higher income levels, distributes the burden differently. Higher earners contribute disproportionately more, while lower earners see a lesser impact on take-home pay.

Under either approach, the numbers—at least initially—don’t seem as catastrophic as initially portrayed. This is because we are working with the current cost of healthcare, which stands at $4.3 trillion annually.

The Real Problem: Growth in Healthcare Costs

While a $4.3 trillion annual cost may seem manageable under these tax structures, it’s critical to note the historical trajectory of U.S. healthcare costs. Since the inception of Medicare in 1965, healthcare spending has grown at an alarming rate. When Medicare was introduced, its architects grossly underestimated its future costs. Originally projected at $9 billion annually by 1990, Medicare’s actual costs reached $67 billion in that year—a 7.4-fold increase over initial estimates.

Even conservative estimates place future growth of healthcare costs at around 5-6% annually. If such growth continues, the $4.3 trillion we’re grappling with today could exceed $7 trillion by 2035. The tax increases required to sustain such growth would quickly outpace the ability of most Americans to contribute without experiencing severe financial strain. Alternatively, the system would face harsh cuts and rationing of services, jeopardizing its promise of universal and comprehensive coverage.

Looking at just the next year, even a modest 5% increase in healthcare costs would raise the total annual cost to $4.52 trillion, requiring flat and progressive tax rates to increase proportionally. A flat tax, for instance, might rise from 29.23% to 30.7% within a year. Over a decade, assuming consistent growth, the tax burden could soar to over 37%, with progressive taxes following a similarly steep trajectory. These compounding increases highlight how unsustainable the system becomes without meaningful cost control.

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Why Cost Reduction Must Be the Priority

Before we dive headfirst into funding an M4A system, we must first address the root issue: the exorbitant cost of healthcare in the United States. Without meaningful cost reductions, any tax structure—flat or progressive—will eventually crumble under the weight of compounding expenses.

Consider these critical areas for cost reduction:

1. Pharmaceutical Pricing: The U.S. pays significantly more for prescription drugs than other developed nations. Addressing this discrepancy could save billions annually.
2. Administrative Overhead: Reducing inefficiencies in billing, insurance processing, and hospital administration could slash costs dramatically.
3. Preventative Care: Investing in preventative measures to reduce the prevalence of chronic conditions would lead to long-term savings.
4. Hospital Pricing Transparency: Standardizing and regulating hospital pricing could curb exorbitant charges for basic services.
5. Healthier Lifestyles: Encouraging healthier living by reducing processed foods, sugars, and seed oils can significantly decrease chronic disease rates, leading to lower overall healthcare costs.

Conclusion: Lower Costs First, Then Get Fancy

While the revised calculations show that M4A can theoretically be funded through taxation, the underlying problem lies in the unchecked growth of healthcare costs. Without addressing this issue, any funding mechanism will become unsustainable in the long term. History has already shown us how initial estimates can grossly underestimate future expenditures—a mistake we cannot afford to repeat.

The real work lies in lowering the cost of healthcare first. Only then can we responsibly implement a system that ensures universal coverage while maintaining financial stability for both individuals and the nation as a whole.

Dave Soulia | FYIVT

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