Rough guess of sales tax required to fund health care

[Retiree_Having_Fun]

It was mentioned in a previous thread about funding health care with a sales tax - wondering is possible and what it would take.

I would propose a Sales Tax to pay for a universal health care system. I have no idea what percentage tax would be needed but everyone would be paying based on their spending.

Everyone would have access to health care. The world would continue to spin on its axis.

Rough assumptions here. Median income in the US is around $32K. A silver plan (unsubsidized) plan for a 42 year old (avg working age) in the US is about $6k - which pays 70% actuarial value - so say $8,500 to really cover the cost.

Now assume the median person spends their whole paycheck with about 70% of that (excluding rent/mortgage) is already subject to an avg of about 5% sales tax (approx $21k *.05)

This means to cover the additional $8.5K - would have to raise the avg sales tax to about 40% plus whatever sales tax already exists. This assumes non working people (medicare/kids/non-working) are already covered somehow through existing taxes).


I think people under the 400% poverty level and early retirees that can control their MAGI would be better with the existing system.

Any comments/improvements to these quick assumptions would be appreciated.

 

[CaptTom]

It would be an interesting research project. It would be difficult to avoid political bias, but done well, it would be very helpful information.

One variable is that if everyone is covered, less of our medical bills go to cover the un-insured.

Another is that a single provider can negotiate better rates. This is talked about a lot for medications, but to some extent it could apply to anything.

It might be possible to look at other countries where taxes cover health care. What are their overall tax rates, compared to our taxes plus healthcare? There are many other variables which would make it difficult to extrapolate, but maybe at least get it in the ballpark.

 

[USGrant1962]

Interesting calculation. Unfortunately, it is only a starting point. U.S. Federal income tax brackets began at 1% to 7%, and are now ten times that at the bottom and about six times that at the top, not even considering state income taxes. VAT began around 8-10% in Europe, and now ranges from 20-25%.

Any and every new tax becomes a slush fund for politicians.

 

[HFWR]

Current figures indicate that healthcare in the USA costs $3.2T.

 

[Retiree_Having_Fun]

Current figures indicate that healthcare in the USA costs $3.2T.

With a population of 321 million people, that works out to be about $10k per person (seems to make sense)

For the states that do have a sales tax - they all take in around 1 trillion so without regard to low/high/none sales tax states, you would have to multiple the current sales tax by a factor of 4 to collect.

So in Illinois, a $10 snow shovel would be taxed around $2.40 vs the current $.60.

 

[Midpack]

It’s very easy to search and total healthcare costs, total GDP, average wages, population and do a rough calculation. As a back of the napkin ROM calc it would take something like a 25-40% sales tax to fully pay for healthcare for all Americans at current prices with no premiums or out of pocket costs. [BTW US healthcare costs twice as much as the average of all other developed countries, and we don’t have better outcomes by any means.]

Sounds ridiculous huh? But if average wages are about $50K/yr and healthcare is $10K/yr per capita...

But that’s what we’re already paying.

That $3.2T is being paid (of $18T+ GDP by tbe way). Instead of a sales tax, we pay insurance premiums, out of pocket costs, taxes, debt (public/personal), etc. - the rest is paid by corporations. ALL those costs are included in the goods and services we buy - ultimately “we” pay, all of it. All the complexity and intermediaries just shift costs among us...

So if we levy a sales tax to pay for healthcare, we’d better be sure ALL the costs above are eliminated...good luck.

There are better ways to attack US healthcare costs, and 30-60 models around the world to learn from - all (much) cheaper than our current chaotic “system.”

 

[HFWR]

With a population of 321 million people, that works out to be about $10k per person (seems to make sense)



For the states that do have a sales tax - they all take in around 1 trillion so without regard to low/high/none sales tax states, you would have to multiple the current sales tax by a factor of 4 to collect.



So in Illinois, a $10 snow shovel would be taxed around $2.40 vs the current $.60.

Indeed, though wouldn’t the $3.2T currently spent get subtracted out somewhere. We’re not taxing in addition, but replacing one way of funding for another (or, perhaps, shuffling the deck chairs on the Titanic...).

 

[gauss]

"Bottom Line" newsletter had an article recently comparing the amount spent on health care today vs a single-payer proposal. I believe the conclusion was that the single-payer would not be that much more than what we have today.

An online version of the article is available here.

 

[Midpack]

Indeed, though wouldn’t the $3.2T currently spent get subtracted out somewhere. We’re not taxing in addition, but replacing one way of funding for another (or, perhaps, shuffling the deck chairs on the Titanic...).

$3.2T is total HC spend so you wouldn’t subtract it from anything. You could leave some current funding sources in place and use a sales tax for some, but you’d have to define what you’d want in each category.

 

[CaptTom]

Midpack is on the right track. I think the best way to come to agreement on something like this is to actually see how different options would work out. If it's true that a single-payer system is bad, the numbers will bear that out. If there's a better idea, it'll rise to the top. But for that to work, everyone has to listen to other people's ideas, and actually take them seriously. If you're right, your idea will win. If you're wrong, saying it louder won't make it right. If you just hurl turds at other peoples' ideas, you're part of the problem.

My theory is that a large chunk of that $3.2T goes to stockholders as profit. I've always wondered how much of that goes to insurance companies, pharmaceutical companies, middlemen and large healthcare corporations, instead of actual caregivers, supplies and equipment. And of course, at each level there is overhead. Buildings, clerical support, IT infrastructure, multiple levels of management, etc.

Obviously, we want to leverage market efficiencies in some of these areas. But to me, the money that goes into the hands of insurance companies, for example, does nothing to improve health outcomes.

 

[Scuba]

According to my PCP, much of the money is going to insurance companies. I had my annual physical yesterday and he started talking about what the docs get paid nowadays. He said that he got paid only $157 for treating a Medicaid patient in the hospital for 5 days and saving his life. I asked him where all the money goes because as a consumer, we are paying way more than just a few years ago. He said the insurers are making most of the money. He said in our market, there used to be 60 docs that treated Medicaid patients at our local hospital and now there are only 7 as most of the older docs have retired, and the young ones won’t do it given the rates.

 

[VanWinkle]

With a population of 321 million people, that works out to be about $10k per person (seems to make sense)

For the states that do have a sales tax - they all take in around 1 trillion so without regard to low/high/none sales tax states, you would have to multiple the current sales tax by a factor of 4 to collect.

So in Illinois, a $10 snow shovel would be taxed around $2.40 vs the current $.60.

We're shoveling stuff in Illinois, but it ain't snow!!

 

[USGrant1962]

According to my PCP, much of the money is going to insurance companies. I had my annual physical yesterday and he started talking about what the docs get paid nowadays. He said that he got paid only $157 for treating a Medicaid patient in the hospital for 5 days and saving his life. I asked him where all the money goes because as a consumer, we are paying way more than just a few years ago. He said the insurers are making most of the money. He said in our market, there used to be 60 docs that treated Medicaid patients at our local hospital and now there are only 7 as most of the older docs have retired, and the young ones won’t do it given the rates.

I'm not following you - Medicaid has nothing to do with insurance companies. Medicaid is a government single payer program.

 

[ChiliPepr]

My theory is that a large chunk of that $3.2T goes to stockholders as profit. I've always wondered how much of that goes to insurance companies, pharmaceutical companies, middlemen and large healthcare corporations, instead of actual caregivers, supplies and equipment. And of course, at each level there is overhead. Buildings, clerical support, IT infrastructure, multiple levels of management, etc.

If we went to a single payer, you are really only cutting out the insurance companies, the government would pay the premiums and pay the bills to the providers and the drug companies. Currently according to MLR Rules an insurance company must pay out 80-85% of its premiums to pay providers.

But the ACA imposed a medical loss ratio (MLR) requirement, which specifies the maximum percentage of premiums that insurers can spend on administrative costs. In the large group market, insurers must spend at least 85 percent of premiums on medical costs and health care quality improvements. In the individual and small group markets, the threshold is 80 percent. So insurers can spend at most 15 or 20 percent of claims revenue on administrative costs (depending on whether the plan is sold in the large group market, or in the individual and small group market), and the rest of the premium dollars that the insurer collects have to be spent on medical claims and things that improve patients' health care quality.

This means that only 15-20% of the premiums can be used to to pay salaries, administrative costs and profits to investors.

Personally, now that all hospitals must post their pricing sheet online, I think a good step would be that a hospital can only charge a single price for a service. Right now it is possible for a person with insurance to be charged a certain price for a procedure and a person without insurance to be charged multiples of that price. If a hospital charges an insurance company $500 for x-rays and to set a person's broken arm, it should charge the same to a person walking in off the street and paying cash.

 

[Jerry1]

I wish that we as a nation could have this type of conversation. Discussing the pros and cons of various ways to address healthcare would be very helpful in my mind. Personally, I don’t believe that one major pro has ever been discussed well enough to give it its proper weight. That being the flexibility it would give people to not have their healthcare tied to their employer. Certainly people on this board appreciate that, but imagine the freedom the population would gain by not having to stay with an employer just to maintain your health insurance. Note that this is irrespective of how it is paid for (universal vs market place). Imagine how much more likely it is that you could be an entrepreneur, a stay at home parent, a risk taking ladder climber . . . if you didn’t have to worry about your ability to obtain health insurance / healthcare.

 

[Midpack]

Midpack is on the right track. I think the best way to come to agreement on something like this is to actually see how different options would work out. If it's true that a single-payer system is bad, the numbers will bear that out. If there's a better idea, it'll rise to the top. But for that to work, everyone has to listen to other people's ideas, and actually take them seriously. If you're right, your idea will win. If you're wrong, saying it louder won't make it right. If you just hurl turds at other peoples' ideas, you're part of the problem.

My theory is that a large chunk of that $3.2T goes to stockholders as profit. I've always wondered how much of that goes to insurance companies, pharmaceutical companies, middlemen and large healthcare corporations, instead of actual caregivers, supplies and equipment. And of course, at each level there is overhead. Buildings, clerical support, IT infrastructure, multiple levels of management, etc.

Obviously, we want to leverage market efficiencies in some of these areas. But to me, the money that goes into the hands of insurance companies, for example, does nothing to improve health outcomes.

Lots of info online, but as you note the "devil is in the details" and whats' included in each segment (e.g. malpractice insurance is buried, though from what I read it's not that significant contrary to what some folks seem to think).

(In our easy answer sound bite world) Some folks try to point to a single cause such as malpractice, or insurance overhead - but the truth is the cost of everything healthcare in the US is much higher than every other developed country. If it was just one 'culprit' it might have been addressed by now. Add entrenched special interests with vast $, and a heavily subsidized mostly insured public with no idea what they are actually paying, and it's not hard to see why there are no easy answers. IMHO It's going to take an effort like the Civil Rights movement and years of work to change anything - that starts with an informed electorate...

https://www.washingtonpost.com/news...illion-on-health-care/?utm_term=.f02050715c04

 

[Retiree_Having_Fun]

but replacing one way of funding for another (or, perhaps, shuffling the deck chairs on the Titanic...).

Yes - I missed that so the average insured worker should get a raise based on the employer contribution to health care.

 

[Retiree_Having_Fun]

He said that he got paid only $157 for treating a Medicaid patient in the hospital for 5 days and saving his life.

Neighbor went to doctor visit 3 weeks ago- 6 minute visit - plus getting his weight and BP taken by the nurse. BCBS insurance paid $132. Seems like treating medicaid patients in the hospital is a disaster as far as reimbursement is concerned.


If that payment of $157 would be the single payer payment, most doctors and nurses would be better off selling real estate, programming or working for the city. Why go to school and incur debt for that? No reasonable person would.

 

[Retiree_Having_Fun]

That being the flexibility it would give people to not have their healthcare tied to their employer. Certainly people on this board appreciate that, but imagine the freedom the population would gain by not having to stay with an employer just to maintain your health insurance.

Agreed, always wondered why my auto and rv insurance wasn't paid by my employeer.

 

[Midpack]

Indeed, though wouldn’t the $3.2T currently spent get subtracted out somewhere. We’re not taxing in addition, but replacing one way of funding for another (or, perhaps, shuffling the deck chairs on the Titanic...).

Yes - I missed that so the average insured worker should get a raise based on the employer contribution to health care.

Huh? I'd elaborate but you can't mean what I think you mean...

 

[Retiree_Having_Fun]

Huh? I'd elaborate but you can't mean what I think you mean...

The original posting in another thread pondered if it was possible that ALL costs be replaced by a sales tax and that everybody was covered.

This would mean that employee and employer contributions to health care would be removed. This means the average employee could more easily afford the 40% sales tax since they should be given a raise since part of their compensation (health care) did not need to be provided via employment.

I don't have a stand or position on this - just wondering what the sales tax $ would be to cover everybody.

I guess this would mean that any medicare taxes would be eliminated too.

 

[Bir48die]

I've never been opposed to single payer programs but the devil is in the details. to have the government run any program with this breadth of scope scares the crap out of me. My wife has Tricare from her late husband. It can easily be a year for a procedure to be fully funded and for her to get the patient portion to be paid. I couldn't run a business this way.

To gain my full support (I've stated this in the past) that there needs to be more done on preventative medicine along with health based criteria. With that I mean we cannot have current behaviors (obesity, vices, etc) not be calculated in the mix. That would require stricter goals and guidelines (i.e. if you were a smoker or grossly overweight you would have to contribute a percentage of your personal taxes until you hit certain markers).

If you took corporations out of the funding mix we would never see the savings from a consumer standpoint. It would never be passed on. So to see this as a revenue neutral proposition is a stretch for me.

 

[Midpack]

The original posting in another thread pondered if it was possible that ALL costs be replaced by a sales tax and that everybody was covered.

This would mean that employee and employer contributions to health care would be removed. This means the average employee could more easily afford the 40% sales tax since they should be given a raise since part of their compensation (health care) did not need to be provided via employment.

I don't have a stand or position on this - just wondering what the sales tax $ would be to cover everybody.

I guess this would mean that any medicare taxes would be eliminated too.

OK, not as bad as I was imagining. But the most an employer would pass on to the employee would be whatever they were already contributing on the employees behalf, some might not even do that. And trust me corporations would be happy to unload one of their historically fastest increasing costs with no end in sight! But any increase beyond what they’re already paying would mean they’d increase the prices of the products and services they provide - to customers, including employees. So the details are crucial to avoid adding costs inadvertently - ACA was meant to (among other things) make healthcare more “affordable” and did no such thing.

The far bigger problem with healthcare in the US is cost of everything healthcare relative to all other developed countries. A national sales tax just appears to shift who pays, we’re already paying for it anyway...

 

[walkinwood]

Why not look to Canada or the UK tax system? They offer universal healthcare. One is a single payer (iirc) and the other provides it all.

 

[Midpack]

Why not look to Canada or the UK tax system? They offer universal healthcare. One is a single payer (iirc) and the other provides it all.

Why stop there? They won’t all but useful references, but there are more than 60 examples already in place, not to mention Medicare. At least one country transitioned from a “system” much like ours to universal healthcare...

https://en.m.wikipedia.org/wiki/List_of_countries_with_universal_health_care