This is how Warren says she can pay for Medicare for All

How did she estimate the cost?

American healthcare is the world’s most expensive. But despite spending more than anyone else to get their healthcare needs met, Americans fare worse on basic indicators—like life expectancy or maternal mortality—than those living in other rich countries.

According to worst-case estimates, turning the current health care system, as is, into Medicare for All, would require $34 trillion of additional federal funding over the next decade.

Warren says it won’t cost that much, however, because of all the savings switching to a single payer system would create. Administration costs, for instance, could be cut dramatically. Warren estimates that the cost of bureaucracy for private insurers accounts for 12% of premiums (spent on everything from dealing with claims to litigations), while Medicaid’s is only about 2.3%.

The reimbursements hospitals would require would be lower due to smaller administration costs, and all the physicians and non-hospital services would be paid at current Medicare rates—which are typically lower than private insurance, but higher than Medicaid.

Does this mean doctors will be paid less? It does. Warren claims that this won’t however result in overall losses for medical practitioners because they, too, spend a lot of money on administrative costs. Warren’s plan doesn’t address what will happen with the administrative jobs and insurance industry jobs that would be lost in the transition to a single payer system.

The plan would also nix reimbursements based on individual services and instead proposes bundles to cover specific treatments (say: one payment is issued for emergency appendix removal surgery, rather than many individual payments for every drug used, each day in the hospital, and so on), and suggests applying the same level of reimbursement regardless of where a service is provided.

Drug costs are bound to go down as well under a single payer system because the negotiation power of a single payer buying medication for the whole country is a lot stronger than that of individual providers, or an insurance company.

Plus, Warren says that further savings would be achieved as competition between service providers goes up: given that the cost to the user is the same, providing better optimized services becomes the way to attract patients and, therefore, reimbursements.

All of this would bring the cost of the plan to a cool $26.5 trillion over 10 years. By way of comparison, the combined public and private spending for health care in the United States is now more than $3.5 trillion annually.

Warren plans to also redirect $6 trillion in state funds now devoted to other healthcare programs (such as children’s health insurance policies) to Medicare for All (which would absorb these programs), bringing the plan’s total cost to an extra $20.5 trillion in 10 years.

How is she going to pay for it?

If that money isn’t coming from people’s premiums and copays, where does it come from? Warren’s answer is familiar: She’d make both corporations and the rich pay for it.

Employers will continue to pay a health care contribution that will be slightly smaller than what they now pay. This obligation would apply to companies employing more than 50 people, as well as so-called “pass-through” entities, such as partnerships. Self-employed workers won’t need to pay unless they hit a certain threshold, and small companies won’t either.

Warren’s team expects these contributions to bring in $8.8 trillion in 10 years. If it doesn’t, Warren says, an additional contribution will be asked of only very large companies with extremely high executive compensation. The threshold of the company size, as well as executive compensation aren’t presented in the plan.

So what about the rest of the money?

Warrens says it would come from a combination of fighting tax evasion, taxes on corporations, financial institutions, and higher taxes on the wealthy (including a two cent tax per every dollar of net worth above $50 million, and six cents of every dollar above $1 billion).

The senator notes other streams of revenue too: Value generated by immigration reform, for one, and the reduction of military spending, another.

If everything goes according to plan, this would essentially put back into the pockets of employees the full amount they now pay in healthcare spending, without any additional taxation on anyone other than the very rich.