(Bloomberg) -- Democratic presidential hopeful Senator Elizabeth Warren rolled out a wide-ranging menu Friday to fund her multi-trillion-dollar Medicare for All plan, a defining moment that fleshes out her vision to remake one-fifth of the U.S. economy.
The plan would redirect most employer-based health care spending to the government so it can put all Americans into Medicare, while slapping a wave of taxes on large corporations and the wealthy, cracking down on tax evasion, reducing defense spending, and putting newly legalized immigrants on the tax rolls.
Her advisers also lowered the estimate of Medicare for All's price-tag to $20.5 trillion over 10 years from the $34 trillion the Urban Institute predicted, by using the new Medicare-for-All negotiating power to slash administrative spending, drug prices and provider payments.
The proposals stake out Warren's clearest position yet on a deeply divisive issue of paramount importance for voters. Rather than devise a health-care plan of her own, she made the strategic decision to adopt that of fellow progressive candidate, Senator Bernie Sanders, but until now, hasn't said how she'd pay for it.
That's prompted harsh criticism from her moderate rivals, including former Vice President Joe Biden and Mayor Pete Buttigieg, who propose adding a public option for people who don't have private health insurance. They've insisted Warren will have to raise taxes on middle-class Americans. She insists that's unnecessary.
"Medicare for All puts all health care spending on the government's books," the Massachusetts senator wrote in a medium.com post. "But Medicare for All is about the same price as our current path -- and cheaper over time. That means the debate isn't really about whether the United States should pay more or less. It's about who should pay."
Warren's funding mechanisms break down into six categories. She'd raise $8.8 trillion by redirecting 98% of current employer-based health insurance spending to the government. She'd raise $1.4 trillion through the tax revenue generated by the higher incomes of workers who no longer have to pay an insurance premium. She'd add $6.8 trillion through new taxes on financial firms, corporations and the top 1% of earners.
She'd bring in $2.3 trillion through stricter foreign tax compliance, instituting a country-by-country minimum tax on foreign earnings of 35% -- equal to a restored top corporate tax rate for U.S. firms -- and forbidding deferrals of those payments. She'd raise $400 billion by legalizing undocumented immigrants and requiring them to pay taxes. And she'd find $800 billion by scrapping the Overseas Contingency Operations fund, an accounting gimmick used by both parties to count unspent defense money as savings.
Sanders, the author of the health care bill Warren backs, has said the plan would require higher middle-class taxes while insisting that those people would come out ahead due to the elimination of premiums and out-of-pocket costs. Sanders' bill envisions cutting the Medicare reimbursement for health providers.
The $20.5 trillion estimate comes from Donald Berwick, former administrator of the Centers for Medicare and Medicaid Services under President Barack Obama, and the International Monetary Fund's former chief economist Simon Johnson.
"There have been many estimates about what the cost would be and many different payment streams," Warren told reporters on her most recent trip to Iowa. "I've been working on how to give the exact details to make that work."
Warren is in second place to Biden in the RealClearPolitics average of national Democratic primary polls for 2020. She leads narrowly in Iowa and New Hampshire, which hold the first two nominating contests.
The release of her plan comes on the eve of the Iowa Democratic Party Liberty and Justice Celebration, a longstanding tradition in the first-in-the-nation nominating contest that's well-attended by presidential hopefuls. The timing is aimed at preventing an onslaught of attacks at the Iowa event, though her rivals are sure to debate the numbers.
Health-care policy always forces politically thorny trade-offs, but the give-and-take with Medicare for All is breathtaking in its scope. The Sanders-Warren plan would end private coverage for the roughly 150 million people who now get insurance through an employer, and put all those Americans into Medicare over four years, letting them see their doctor or hospital of choice. And Warren hopes it will finally achieve universal coverage.
It's certain to face ferocious opposition from a health-care industry that's proven adept at blocking major legislation it doesn't like.
And even if Democrats win the White House, keep control of the House of Representatives, and win a Senate majority in 2020, Medicare for All is still unlikely to pass. It faces strong resistance from many Democrats in both chambers. It's a nonstarter for Republicans, who, after suffering political blowback for trying to repeal Obamacare, are salivating at the notion of campaigning against a disruptive liberal proposal.
Moderate Democrats believe suburban voters and union workers don't want to give up their private health insurance, although Warren has tried to reframe the issue. At a Democratic debate in September she said that although Americans may like their doctors, nurses and other health providers, "I have never met anyone who likes their health insurance company."
The proposal represents a new approach to governing embodied by Warren -- and Sanders. By proposing an extremely aggressive plan at the outset, they believe they can shift the debate and nudge the final bill by Congress in a more progressive direction than they'd get if they began with a compromise position that could become law.
In her medium.com post, Warren said that "there's a reason former President Barack Obama has called Medicare for All a good idea" -- potentially previewing a line of attack on Biden, Obama's vice president, who's hugged the popular Democrat closely during his campaign. "There's a reason the American people support it."
Biden campaign spokeswoman Kate Bedingfield said Friday that the estimated $8.8 trillion that companies pay into Medicare For All amounts to a middle-class tax hike.
"For months, Elizabeth Warren has refused to say if her health care plan would raise taxes on the middle class, and now we know why: because it does," Bedingfield said in a statement. "Senator Warren would place a new tax of nearly $9 trillion that will fall on American workers."
Warren is calling to double her wealth tax on billionaires, so they'd owe 6% on their accumulated wealth more than $1 billion. She'd previously proposed a 3% tax on assets more than $1 billion. A 2% tax would still kick in on fortunes worth more than $50 million.
Warren's plan would also effectively get rid of any tax advantages for capital gains income. She's calling to raise the capital gains tax rate -- currently at 23.8% -- to match the top rate on wages, which is currently at 37% but would likely go up under a Warren administration.
She's also calling for the wealthiest 1% of households to pay capital gains taxes annually on their stock and real estate appreciation. Currently, those assets can grow tax-free and levies are due when they're sold.
Investors would also get hit when they buy or sell stock, bonds or other securities. Warren would tax those transactions at 0.1% -- a levy that would especially hit day traders and money managers that frequently re-balance their portfolios.
Warren also relies on greatly expanded Internal Revenue Service audits to generate $2.3 trillion in revenue over a decade. She says these audits would collect tax revenue owed, but not collected, under current law.
The difference, known as the tax gap, has plagued the IRS for years as the agency's budget and staff has been slashed. Finding that money is an exceptionally difficult feat; the IRS admits that its own staff struggles to stay ahead of tactics creative tax professionals devise for their wealthy clients.
(Updates with Biden campaign comment in 20th paragraph.)
--With assistance from Misyrlena Egkolfopoulou and Laura Davison.
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