Reality Check: Will Wages Go Up Under Single-Payer Medicare for All?

This is an argument you hear often as a counterpoint to those who say that workers who have and like an employer-sponsored health care coverage plan, especially union workers who have negotiated great benefits, should not be forced to give up their plan in favor of a single, government-payer only Medicare for All system. That argument, made by those who favor such a government-payer plan that essentially eliminates private health insurance, is that the plan they favor would be beneficial to union workers. Unions will no longer have to negotiate on health care and trade that off against larger increases in wages, and that will lead, they say, to both better health insurance and higher wages.

We have already debunked the idea that government-payer plans provide better health insurance. Neither do left-to-their-own-devices private plans, though. In fact, it turns out that in the United States, traditional Medicare and non-Medicare private plans earn about the same satisfaction rating from their members. Private plans provided under Medicare - otherwise known as Medicare Advantage plans - perform better than either option.

But what about the idea that if workers - especially union workers, but all workers - did not have to negotiate health care as part of their compensation, and if employers did not have to worry about providing health insurance, it would result in higher wages? Makes sense, at least on the surface, doesn’t it? Lending credibility to this argument are certain unions themselves - although some of those unions have a horse in the race.

So let’s focus today’s analysis on this segment of workers - on whether, for employees who enjoy health insurance as an employer-benefit, and especially union for workers, taking health insurance out of the hands of employers will actually make higher wages more likely. For that, we need to look at just who is most likely to have employer-sponsored insurance coverage.

Who gets health insurance as an employment benefit and how will they be affected?

There are two major categories of workers who obtain their health insurance coverage from their employers:

The numbers of unionized employees are roughly the same for public and private sector unions. According to the latest BLS data, 7.2 million public-sector employees are unionized (33% of all public sector employees), while 7.6 million private-sector employees are part of a union (6.4%).

About 90% of large corporation employees get health insurance, while only 55% of firms employing less than 100 people offer coverage. Since smaller firms also tend to pay less, this data would support that workers who make more are more likely to have employer health insurance, not less.

A government-only, forced, single-payer Medicare plan is unlikely to change anything at all for public-sector employees in terms of wages. The government has been, and will continue, paying for those employees’ health care.

Even if the idea that cutting employer costs for health care results in higher wages held true in the private sector - and I demonstrate below that it does not - the second major category of unionized workers, those who work for wealthy corporations, would not see any wage-related benefits from this version of Medicare for All.

This is because the proponents of single-payer Medicare for All have made it more than clear that under their plan, the health-care-related costs for the large, wealthy corporations are going up. Allow me to quote Elizabeth Warren from this month’s Democratic primary debate:

So I have made clear what my principles are here, and that is costs will go up for the wealthy and for big corporations…

She reiterated minutes later:

So let me be clear on this. Costs will go up for the wealthy. They will go up for big corporations.

The principle of making big corporations and the wealthy contribute their fair share in the common good and the social safety net is laudable and worthy. But you cannot argue that doing so will be an automatic boon to wages of people who already have health insurance from their employers which, presumably presently costs their employers less than the Warren-Sanders version of Medicare for All.

Let us also observe that unionized employees in the private sector are more likely to have employer-sponsored health coverage, pay less for it and make higher wages than non-union workers, which may indicate that for unionized workers by and large, employer-sponsored health benefits are not pulling wages down.

This is a change from what used to be the case pre-Obamacare. In those days, wages and health care costs were closely correlated, and a major reason for the correlation was that employers did not have to provide coverage and could simply choose not to, choosing, instead, to pay a somewhat higher wage. By requiring medium and large employers to either provide affordable coverage to their employees to pay a penalty, the Affordable Care Acr broke that link by removing health care as a primary competitive factor among large employers.

Between 1999 and 2009, worker compensation rose by 38% while health insurance premiums skyrocketed by 131%, showing an obvious downward pressure on wages from health insurance premiums. In the following 10 years under Obamacare, however, the trend has been nearly reversed, as between 2009 and 2019, health insurance premiums for employer plans rose 54% compared to wage increases of 28%.

Despite causing a wholesale trashing of Obamacare, however, the single-payer Medicare plan would not alter this basic math: it would maintain or even expand the responsibility of large employers to pay for health coverage (in the form of taxes), which is instrumental in breaking the link between wages and health care benefits.

What about the employee cost of employer-sponsored health insurance? If an employee has to pay more for their share of an employer insurance plan, does that mean they make less money?

Asked another way, is there a correlation between an employee making a lower wage and paying more for health insurance? The evidence, in fact, is to the contrary. Earlier this year, a major study of working families who have health insurance through their employers showed that in absolute dollar amounts, both premiums and out-of-pocket health care costs are higher for families with higher incomes. Now, the Peterson-Kaiser Health Care System Tracker also shows that lower-income workers covered by employer health insurance pay a higher share of their income in health care costs, but the fact that higher-income employees pay more in dollar amounts for their share of employee benefits belies the idea that taking health care off the table will result in higher wages for low-income employees.

But you don’t have to look to private, health insurance industry-funded research to know that single-payer government-only Medicare for All will not increase wages. The most ardent proponents of the plan tell you that themselves, IF you know where to look..

Bernie Sanders’s white paper on financing the plan implicitly acknowledges that if health care is taken off the table, employers will not, in fact, pass on the savings to employees.

Savings from Health Tax Expenditures

Revenue raised: $4.2 trillion over ten years.

Several tax breaks that subsidize health care would become obsolete and disappear under Medicare for All. The biggest health expenditure is the preference that excludes employer-paid premiums from payroll and income taxes. This is a significant tax break that would be eliminated under this plan because all Americans would receive health care through the new Medicare for All program instead of employer-based health care. The exclusion for contributions to cafeteria plans and the medical expense deduction will also be eliminated.

The only way this assumption works is if the savings from employee health care expenditures - to the extent there are any - are added to the corporate bottom line and not worker pay. All the money in tax expenditures from employer-subsidized health insurance will come back to the coffers of the treasury if - but only if - that money is also not spent on any other cost of doing business, such as wages. This saving would not be realized if employers turned around and paid their employees the amount they would otherwise pay for health insurance for those employees, in which case the tax expenditure saving would be zero, as the what the employer took off in health care expenses before would simply be rebilled as wage expense, which is deducted from revenue to calculate taxable profit as it is.

This, my friends, is why pay-fors are important to see. Show me your pay-for, and I’ll tell you whether what you say about your plan is true.

It is fair to debate whether a single-payer only option will reduce total costs, increase quality, or simplify care and coverage. But the fact is that not only is there no evidence that single-payer Medicare for All will make it easier for union employees to negotiate higher wages, the proponents - if accidentally - affirmatively admit that they expect no wage benefit from their plan.