How Would We Pay for U.S. Health Care Reform?

Early in my career, I worked on health care legislation in Washington state, including efforts to expand coverage for children and women and to address end-of-life care. Whenever I pitched a new bill, there was usually a price tag attached: a “fiscal note.” Inevitably, legislators would ask, “How are we going to pay for it?” Over time, I learned to always have an answer.

It is a fair question—and an important one. So, let’s ask it directly: how would we pay for comprehensive health reform in the United States?

First, a reminder: the reforms we have been discussing would lower the overall cost of health care in the U.S. while improving outcomes. Here is the basic math.

· In 2025, U.S. gross domestic product (GDP) was about $30.77 trillion.

· U.S. health care spending was roughly 18.5% of GDP, or about $5.7 trillion.

· Australia—a free-market country with universal coverage and one of the models discussed earlier—spends about 10.5% of GDP on health care.

· If U.S. health care spending had been 10.5% of GDP in 2025, total spending would have been about $3.23 trillion - roughly $2.47 trillion less than current spending, while still covering everyone.

Even before OBBBA passed, the U.S. had far too many uninsured people despite the gains of the 2010 Affordable Care Act (ACA). Estimates put that number at roughly 28 million Americans. The Congressional Budget Office has estimated that Medicaid changes and ACA marketplace provisions in OBBBA, combined with related policy changes, could leave millions more people uninsured by 2034.

OBBBA also reduces federal revenue by trillions over a ten-year period, while offsetting part of that cost through cuts to health care and other safety-net programs. The benefits are not evenly distributed: households at the top of the income distribution gain the most, while many lower-income households lose resources.

If this sounds depressing, that’s because it is.

There are many roads to universal coverage in the U.S. I want to focus on two. The first is Medicare for All, which would replace our current mishmash of private insurance and public programs with a single-payer system. The second would build on the ACA by keeping private insurance, strengthening regulation and oversight, and adding a public option with subsidies to cover all uninsured Americans.

Medicare for All is a single-payer system in which the federal government becomes the insurer for all U.S. residents. It would replace most private insurance and out-of-pocket costs with tax-funded universal coverage, including medical, dental, vision, and prescription drug benefits.

As discussed in my earlier post on single-payer systems in Canada and Australia, this approach offers major advantages: universal enrollment, comprehensive benefits, simpler administration, and lower drug costs.

My heart is with this approach. But it would also be a huge political lift. It would take on nearly every major industry in health care, which means it would face enormous opposition. It would also require a major shift in federal financing. Cost estimates for moving the entire U.S. health system to single payer range from $30 trillion to more than $50 trillion over ten years, depending on the assumptions used.

Expanding the ACA with a public option would introduce a government-run insurance plan into the marketplace to compete with private insurers. By using Medicare-style payment rates and the federal government’s negotiating power, a public option could lower costs and pressure private plans to become more affordable. It could also become a vehicle for expanding coverage through automatic enrollment and federal subsidies.

This second approach would still face opposition, but likely less than Medicare for All. It would build on the existing ACA framework rather than replacing the entire system at once. For that reason, I favor the ACA-plus-public-option approach.

I realize this oversimplifies both approaches. The devil is always in the details. But the bottom line is simple: we should do this.

We live in a new Gilded Age on steroids, with levels of wealth and income inequality that would have been hard to imagine even in the 1890s, when the robber barons ruled the country.

That means we should rethink what fairness requires in federal taxation - especially if we want all Americans to live with security and dignity. Specifically, we need to reject the idea that cutting the taxes on the wealthy leads to trickle down benefits for workers and generates more revenue. This has been disproved by historical experience.

There are many proposals for taxing extreme wealth:

· California has proposed a one-time 5% wealth tax on assets above $1 billion.

· New York has considered a pied-à-terre tax, a yearly surcharge on empty second homes in New York City worth more than $5 million.

· Washington state has enacted a 9.9% tax on household income above $1 million.

Many of these approaches are facing ballot measures, repeal efforts, or court challenges.

A New York Times guest essay by Yale professor Zachary Liscow, “The Simple Answer to Taxing the Rich Is the Best Answer,” argues that Congress should raise rates on existing taxes rather than rely on complex wealth taxes that may be legally vulnerable. That could include restoring the top marginal ordinary income tax rate to its pre-2017 level of 39.6% and raising the capital gains tax rate.

Raising those rates would generate hundreds of billions of dollars over a decade without inviting the same kind of constitutional challenge that wealth taxes may face.

Nobel prize-winning economist Paul Krugman recommends a top marginal income tax rate of 73% for top earners, which economic research suggests would extract the optimal revenue to fund public services without cause excessive economic damage. This would generate even greater revenue.

Or, in a country no longer controlled by the current administration, we could reverse OBBBA. That alone would generate an estimated $3.4 trillion over a decade after accounting for inflation and interest costs.

The money is already out there. It is just being taken away from public needs – housing, food assistance, mental health and addiction - and redirected upwards to the wealthy.

Getting it back would allow us to build a better health care system with universal coverage—and to repair the safety-net and social programs that millions of Americans depend on.

What do we choose? There’s an election coming up – make sure to look closely at what candidates are offering and VOTE!