Medicaid Public Option Plan Decreases the Deficit

What’s the math that shows that a 10 percent payroll tax contribution (per household income) from Americans who receive Medicaid would pay for Medicaid for everyone who doesn’t receive private insurance from an employer, provide a new annual revenue stream of $226 billion the federal government does not now receive and bring down the cost of health insurance for EVERYONE.

First, we need to know some details:

Since there are .65 children per household and 1.93 adults per household and Medicaid on average costs $2,492 per child and $4,141 per adult, the Medicaid Public Option plan  would cost $9,612 per household.

0.65 (number of children per household) X $2,492 (current Medicaid cost for a child) + 1.93 (number of adults per household) X $4,141 (current Medicaid cost for an adult = $1,620 (child) + $7,992 (adults) = $9,612.

Anyone could buy into Medicaid under this plan, but there are 42 million households that need it because they don’t receive health insurance through an employer program, Medicare or the VA.

Where do we get the 42 million?

Where does the new annual revenue stream come from?

The 42 million households X 10 percent of the annual household income of $5,372 = $226 billion in new in new revenue the federal government does not now receive.

This plan is better than deficit neutral. It creates additional revenue for the federal government and takes everyone (but the most disabled and elderly in nursing homes) off the dole, as it were. No matter what you make, you pay 10 percent. It’s a shared expense and a shared benefit like Social Security and Medicare.

As a result, of the $574 billion we now budget every year for Medicaid, we would now only have to spend $482 billion because people who receive Medicaid will be paying $226 billion through payroll deductions. This would actually shrink the annual federal deficit by $92 billion. ($574 – $482 = $92 billion) And we would be covering 34 million more people — everyone who doesn’t have health insurance from their employer Medicare or the VA.

How is this possible?

The 10 percent of household income which amounts to $5,372 covers slightly more than half of Medicaid costs for each household ($9,612).  The federal government, which currently pays $574 billion for Medicaid, would only be responsible for $182.3 billion (the remaining $4,340 X 42 million = $182.3)

And based on these estimates, 34 million more people will be covered because 42 million X 2.58 people per household = 108.4. Currently , Medicaid only covers 74.2 million Americans.

How would we cover more people for less money?

There are two parts to this answer:

The difference between  the $482.3 billion ($182.3 billion plus the $300 billion for severely disabled individuals and elderly in nursing homes) and the $574 billion the federal government is currently paying ($274 plus the $300 billion for the severely disabled and elderly in nursing homes) is the new revenue — $92 billion.

https://www.kff.org/medicaid/state-indicator/total-medicaid-spending/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D and https://www.medicaid.gov/medicaid/program-information/medicaid-and-chip-enrollment-data/report-highlights/index.html

Right now, private insurance pays much higher rates to health care providers. Medicaid competition would push those rates down because a greater share of the market would  only be willing to pay Medicaid prices.

What if you don’t want to purchase health insurance? Well tell me how you’ll pay for an unforeseen $100,000 health care emergency like a bad car accident?  If you have a good answer (ex. the equity in your home or bank account) then use the equity in your answer to provide a guarantee in writing that your health care bills will be paid in an emergency and no insurance is necessary.

If you don’t have that kind of equity you can commit to cover your health care bills in an emergency you are subject to the 10 percent payroll tax.

Medicaid is a very effective, efficient low-cost health insurance program that is supported by Democrats, Republicans and independents across the US and worth considering for expansion. https://www.washingtonpost.com/news/posteverything/wp/2018/01/17/medicaid-is-an-effective-efficient-program-highly-valued-by-its-beneficiaries-and-yet-republicans-are-relentlessly-trying-to-cut-it/?utm_term=.c5eb657a5ba3

Instead of shopping for pricey insurance on the exchanges citizens would have access to low cost Medicaid (with no deductibles and no co-pays) for an affordable 10 percent payroll tax deduction. If you want to purchase more expensive private insurance go for it but it must meet minimum care standards of Medicaid.

(Note: Since some of the households having access to Medicaid would earn enough to pay the full cost of Medicaid total revenue would be slightly lower than the estimate here.)