Democratic presidential nomination candidate Bernie Sanders

Bernie Sanders’ Healthcare Plan Will Save Average American Family Nearly $1,200 Per Year: PolitiFact

PolitiFact has conducted a “fact-checking” analysis of the Democratic presidential candidate Bernie Sanders’ proposed healthcare plan, which promises better healthcare at lower costs for Americans. And despite widespread doubts that it would be possible to pay for Sanders’ proposed plan to expand Medicare to all Americans without increased taxes on middle class Americans, the analysis by the Pulitzer Prize winning project concluded that the Vermont senator’s proposed “Medicare for All” single-payer system would save the average American family and businesses thousands of dollars in healthcare costs.

The analysis estimated that it could save the average family $505 to $1,823 per year.

Although PolitiFact’s estimation of healthcare cost savings under “BernieCare” is significantly lower than the Sanders campaign estimate of $3,855 to $5,175, Sanders’ supporters argue that the most significant point to note is that PolitiFact has confirmed Sanders’ claim that American households would pay less under his proposed single-payer healthcare system than they are paying under President Barack Obama’s Affordable Care Act (ACA).

When CNN’s Dana Bash raised questions about the Vermont senator’s proposed healthcare plan during a January 3 interview on State of the Union, Sanders answered that “Our proposal will save the average middle-class family thousands of dollars a year in health care.”

“There are a variety of ways to go forward, Dana. Our proposal will save the average middle-class family thousands of dollars a year in health care.”

Sanders repeated the claim after President Barack Obama’s January 12 State of the Union address, while responding to criticisms from Chelsea Clinton.

Although Sanders has not released the full details of his proposed plan, he has indicated that it would be based on the bill for a single-payer expanded Medicare system he introduced in 2013.

Sanders proposes to fund his single-payer healthcare system with a 6.7 percent payroll tax on employers, and a 2.2 percent healthcare tax on Americans earning an income of less than $200,000 per year, or joint incomes under $250,000 per year.

Americans earning more than $250,000 a year (top 2 percent earners) will be taxed at progressively higher rates. He also proposes a 5.4 percent surcharge on Americans whose modified adjusted gross income exceeds $1 million (top 1 percent earners) and a 0.02 percent tax on Wall Street financial transactions.

Bernie Sanders, Democratic presidential candidate
Democratic presidential candidate Bernie Sanders (I-Vt.) [Photo By Charlie Neibergall/AP Photo]
According to Sanders, in place of insurance premiums, deductibles, and co-pays, Americans will pay only healthcare income taxes that furnish significant savings in overall healthcare costs.

For instance, a family making a median income of about $50,000 a year would pay only $1,100 in healthcare income taxes, about $3,855 less than the average insurance premium — estimated at $4,955 in 2015 by the Kaiser Family Foundation — and about $5,173 less if a deductible of $1,318 (as per Kaiser Family Foundation) if factored in.

The chart below, based on a median income of $50,000, compares costs under Sanders’ proposed single-payer system with costs under Hillary Clinton’s “inaction.”

Healthcare costs under BernieCare
Average healthcare costs for American families under ‘BernieCare’ compared with under ‘HillaryCare’ [Source: Press Release/Bernie Sanders’ Campaign]
The chart uses estimates of private health insurance costs based on 2015 data from the Kaiser Family Foundation.

Based on Kaiser Family Foundation estimates that employer healthcare premium contributions for workers earning a median income of $50,000 costs businesses $12,591, Sanders’ campaign notes that the 6.7 percent payroll tax on businesses will save more than $9,000, since employers now have to put up only $3,350 for family healthcare insurance coverage.

But some experts have pointed out that the picture presented by Sanders’ campaign could be an oversimplification.

Critics note, for instance, that the 6.7 percent payroll tax will more likely come from workers’ wages than from employers’ pockets.

According to Gerard Anderson, John Hopkins professor of health policy, employers are “paying nothing for insurance, in reality,” since employer contributions are actually fringe benefits under the employee’s total compensation package. So, if employers stop providing insurance, workers’ paychecks could take a hit.

Based on 2013 tax return data from the Internal Revenue Service (IRS), PolitiFact estimated that under the proposed tax regime, the top 5 percent earners will contribute $117 billion per year to funding “BernieCare,” while the remaining 95 percent of Americans will pay $126 billion.

Payroll taxes will contribute $432 billion.

And based on 2008 estimates by economist Dean Baker, the 0.02 percent financial transactions tax will contribute $117 billion per year. The estimate takes into consideration the reduction in trading volume due to the imposed tax.

Estimated revenues from the new taxes thus add up to about $800 billion, significantly less than the $1.2 trillion healthcare costs incurred in 2013, according to figures by the Centers for Medicare and Medicaid Services.

However, Sanders’ campaign argues that the single-payer system will help to lower healthcare costs drastically because it places government in a stronger position to negotiate costs with healthcare providers.

PolitiFact notes that experts agree with Sanders that the single-payer system will help to trim healthcare costs significantly by cutting administrative overheads, professional fees, and drug prices. But not all experts are optimistic that costs will be reduced sufficiently to pay for BernieCare as outlined by Sanders’ campaign.

However, some experts believe that with some tweaks, Sanders’ single-payer system could be made to pay for itself.

Peter Hussy, an analyst with RAND Corporation, pointed out that the tax rates proposed by Sanders are on the low side.

Gerald Friedman, University of Massachusetts-Amherst health economist, also calculated that with some tweaks and extra taxes, Sanders’ proposed single-payer system should be able to provide effective comprehensive healthcare to all Americans and still generate an annual surplus of a whopping $51 billion.

[Photo by Evan Vucci/AP Photo]

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