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Tags: Healthcare Reform | medicalcosts | employer | medicareforall

Why Medicare For All? Because 'Employer's Share' of Medical Costs Is $0

stethoscope lying on a calculator and a spread of twenty dollar bills
(Roman Motizov/Dreamstime)

By Wednesday, 04 March 2020 09:33 AM Current | Bio | Archive

Medicare for All would save Americans a lot of money,  but most people don't understand why they would save: They don't realize how much the current system is costing them, and they don't understand why Medicare for All would be much more cost-efficient.

A major part of what American families now spend — the so-called "employer's share" of the cost of job-based insurance — is virtually invisible. 

"Employer's share" misleadingly implies that the insurance it pays for costs workers nothing. But this expense is actually borne, not by the employers who write the check, but indirectly by their workers.  

Imagine  that a company budgets $90,000 as annual salary offered to one applicant.  It won't provide insurance, so she'll need to buy insurance costing $10,000 a year. She offers to accept $80,000 a year if the company provides her insurance.    

The employer's annual cost is $90,000 a year either way, so the $10,000 remitted by the employer for her insurance is obviously paid indirectly by the worker.

Since  medical insurance is entirely paid for, directly or indirectly, by workers,  the  "employer's share" is actually $0.  Reports that the "worker's share"  — visibly deducted from paychecks — is increasing and the "employer's share" is decreasing are misleading.  It is impossible  to pay more than the 100% workers were already paying. 

Medicare for All should require  employers, no longer paying insurance companies, to  add all of their savings to each employee's wages.

If you are curious about how much your pay would increase, see line 12 of your annual W-2 form employers send you in January.  It doesn't explain what this number means, but  just lists code DD next to the amount. The back of the W-2 explains that this is the "cost of employer-sponsored health coverage."

If you are insured through your job, your bonus could be substantial. According to the Kaiser Family Foundation, this so-called "employer's share"  now averages about $14,600 annually for family coverage and more than $5,000 for an individual. 

Knowing  this amount, you can compare your costs under Medicare for All with today's system. Your present costs include this "invisible" amount plus all of your currently visible costs — co-pays,  deductibles and premiums. All of these present  costs — visible and invisible — would disappear under Medicare for All as visualized by its current proponents. 

These costs will be replaced by higher taxes. The increase will be large and will apply to everyone, there not being enough rich people to "soak." But the administrative efficiency of Medicare for All will save so much that our tax increases will be less than what most of us are now paying, both directly and through the "employer share." More cash will remain in our pockets. 

Billing dozens of insurance companies and multiple government programs, each with its own red tape and procedural requirements, costs an estimated $80,000 to $100,000 per year for every doctor in the country. Medicare for All would eliminate something like 80% of these billing costs.

A "public option" or "Medicare for all who want it" would only add additional complexity to the current system and would not save on billing expenses. 

If we ignore the invisible amounts now paid indirectly by workers, Medicare for All  looks like a terrible deal. The all-too-visible tax increases would appear larger than what we would be saving.  

Vested interests that would be harmed by Medicare for All will exploit people's unawareness of these invisible current costs. This is the main political obstacle to enacting the new program.

It won't be enough just to claim, correctly, that Medicare for All will be cheaper. It won't be enacted until most Americans understand why it will benefit their bottom line.   Educating people about where their  real interests lie should therefore be a high priority for health care reform advocates. 

Paul F. deLespinasse is Professor Emeritus of Political Science and Computer Science at Adrian College. He received his Ph.D. from Johns Hopkins University in 1966, and has been a National Merit Scholar, an NDEA Fellow, a Woodrow Wilson Fellow, and a Fellow in Law and Political Science at the Harvard Law School. His college textbook, "Thinking About Politics: American Government in Associational Perspective," was published in 1981 and his most recent book is "Beyond Capitalism: A Classless Society With (Mostly) Free Markets." His columns have appeared in newspapers in Michigan, Oregon, and a number of other states. To read more of his reports — Click Here Now.

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It won't be enough just to claim, correctly, that Medicare for All will be cheaper. It won't be enacted until most Americans understand why it will benefit their bottom line.  
medicalcosts, employer, medicareforall
Wednesday, 04 March 2020 09:33 AM
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