Skepticisms on Elizabeth Warren’s Health Plan

I’m Skeptical of Elizabeth Warren’s Healthcare Plan. Here’s Why.

By: Dallas Lim

 

Senator Elizabeth Warren is famously known for her current campaigns for the Democratic President Nomination, largely riding on their Healthcare-For-All plan that entirely eliminates private insurance. The plan is similar to Sanders, but due to the amount of criticism that has come in abundance regarding the vagueness of how Warren will fund her plan, she has released the financial outline of her plan. While I advocate for some kind of a Healthcare-For-All plan, I’m wary of her plan, for while she addresses social issues faced in the healthcare industry, the economics of the plans are damning–the finances and the economic policies required to pull off such an ambitious plan is more ambitious than eliminating all private insurance. Before you ignore this article, dismiss the author, hear me out. 

Warren’s plan requires $34 trillion dollars over a decade, a huge number, but that’s okay. However the way Warren intends to find the funding for her plan worries me. Notably, she intends to implement and levy a new tax against employers that have over 50 employees, which protects small and local businesses, but may create disincentives for small and local businesses to grow. If a small business is growing within a city, they’ve opened up a few locations and have roughly around 20 employees per location, then the cost of employing another person and staffing your current employees will increase. These costs will hurt the workers: higher costs of employing people suppress wages and the likelihood of promotion in addition to creating even more disincentive to hire more workers. While there is no middle class tax increase, there is a hiring disincentive in place for the middle class; if the cost of hiring and retaining employees increase, there is a greater likelihood of job cuts and lower rates of hiring. Once again, the tax burden falls on the middle class, even if not direct.

Additionally, Senator Warren claims that her plan will save more than $1 trillion in the next 10 years as she will be able to make the growth rate of health spending the same as the growth rate of GDP. To speak frankly, I doubt her ability to do so. In advanced countries, health spending continues to grow at an increasingly faster pace, with aging populations requiring more health support, spending, and surgeries and the demand for innovation and new procedures near limitless. Additionally, the healthcare industry is especially slow to change in cost-efficiency measures, and rightfully so: healthcare providers are resistant to eliminating equipment or the use of specific procedures if it saves patient lives. These structural aspects of the industry are known barriers to lower-costs change. Warren’s plan may require reducing provider payment rates in the case that she needs to slow down the growth rate of healthcare spending in order to match the growth rate of GDP. The recent past has demonstrated the previous “success” of cutting payments to doctors: in 1997 Congress decreed that payments to healthcare providers through Medicare would be stopped if the growth of costs were too rapid, yet this specific piece of legislation was constantly suspended until it was finally repealed in 2015. 

And while I understand that the goal of Warren’s plan is to give coverage for all, it’s difficult for me to justify the (high) potential of increased debt in the case that Warren’s plan doesn’t go entirely like she plans (most likely). As cynical as this thinking is, Warren doesn’t have to live long enough to face the ramifications of increased public debt; our much younger generation does. We will be responsible for figuring out and paying off current politicians’ financial messes. The solvency condition in economics specifically points out, in theory, that if a nation’s debt interest is equivalent or less than the nation’s growth rate of GDP, then debt can continue to increase under that specific condition. This falls in line with Senator Warren’s healthcare plan, however, with an aging population that will continue to dramatically increase healthcare spending, the resistance of the healthcare industry to cut costs, and the demand for health innovation limitless, I have little faith that Warren– or any politician– will be able to fund her plan without adding more debt to the United States. And with the average amount of healthcare spending increasing with an aging population, I also doubt her ability to slow down the growth rate of healthcare spending by cutting costs– which may only tack on more to the growth of our debt.

So bear with me; I’m skeptical about Warren’s plan because I do not see the success of the plan. While it may address under-served communities now, but it will prove to be an economic concern in the future. If we want to build a healthcare system, then we need to build one that is sustainable and achieves what Senator Warren hopes to achieve: eliminating the cost of healthcare, not build a healthcare system that will only divert the costs of the healthcare system elsewhere in our lives. And with all due respect, I don’t believe Senator Warren’s plan is the way to go.

 

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