Washington Post blogger Max Ehrenfreund’s piece “Study: Bernie Sanders’s health plan is actually kind of a train wreck for the poor” is the latest to rely on economist Kenneth Thorpe’s debunked analysis of the Sanders’s single payer plan. In “train wreck”, Ehrenfreund uses Thorpe’s data to conclude that single payer under Sanders would leave millions of poor families “substantially worse off”.
The Post is just one of many news outlets that have been using Thorpe’s study to dismiss the feasibility of Sanders’s single payer plan. For a thorough review of the report’s errors, see Physicians for a National Health Program’s response here.
Ehrenfreund’s piece prompted further research into Thorpe’s findings, which exposed yet another major flaw of the study that had gone unnoticed: the omission of the plan’s tax exemption for the poor. On the first page of the economist’s report:
“Low income populations living in poverty receiving Medicaid would pay more through the 2.2% income tax and 6.2 percent reduction in wages.”
This is false. Sanders’s outline clearly indicates that there’s a personal exemption; a family of 4 earning up to 120% of the poverty line ($28,800/year) would not pay the tax. The campaign provides the following example to illustrate how the exemption works: a family of 4 earning $50,000/year would pay $466/year under the new tax, paying 2.2% tax only on the income that family is earning above $28,800/year. The exemption means that the vast majority of Medicaid recipients across the country would pay nothing under the new tax, and those with incomes above poverty would pay a very small amount – far less than 2.2% of their income, and probably less than they pay in co-payments or services not covered by Medicaid.
Ehrenfreund clearly did no fact-checking, as he accepts this faulty premise and the other mistakes in Thorpe’s report uncritically.
Thorpe also seems to assume that in addition to this 2.2% tax, all 6.2% of the employer payroll tax will be shifted onto Medicaid recipients as well. This clearly ignores the fact that minimum wage workers can have exactly 0% of the tax shifted onto them. Even for the poor who are working at a rate above rock bottom, the idea that employers will go so far as to cut wages is historically improbable; it’s more likely that wages would simply continue to stagnate. Ironically, it is the country’s runaway healthcare costs – the kind only serious government intervention can curtail – that have already inured us to decades of stagnating wages.
To summarize, there is very little to indicate that low-wage workers would be “substantially worse off” under single payer. They wouldn’t pay the 2.2% income tax, and employers would find it very difficult – at least in the short term – to pass on costs to the employee. Although Thorpe’s numbers are not credible, he raises a valid question about single-payer: who would see the savings from moving to a single-payer system? Would savings go to workers, or would their employers pocket the savings and pass along tax expenses to their employees? It turns out the best way to ensure that these savings go to workers is to couple single-payer reform with an increase in the minimum wage – a policy Sanders has also proposed, but Thorpe ignores.