Labor Party proposes a national health insurance program for the United
States that would provide universal coverage of comprehensive health
benefits for every U.S. resident. By eliminating administrative waste and
profit in the private health insurance industry, the United States can pay
for universal coverage as well as extensive benefits such as nursing home,
prescription drugs and long term care for the same total amount of money
(an estimated $1.213 trillion for 1999) that we now spend.
Labor Party proposes to keep most existing government revenues in place
(nearly half the current U.S. health care budget); implement a variety of
mechanisms to make the wealthy pay their fair share; and impose a modest
tax on all employers (a dramatic windfall for employers now purchasing
Components of Just Health Care Financing
Keeps much of the existing health care financing in
place – the government already accounts for half of health care
Eliminates employer contributions to private
insurance premiums; replacing them with a modest employer payroll tax of
Eliminates individual premiums including Medicare
Part B and co-payments as well as 80 percent of out of pocket costs
Creates no new taxes for workers (except for
wealthiest 5 percent of Americans)
Creates new funding sources that draw on the
incredible wealth gained by the richest Americans over the last decade
Protects health industry workers via Just Transition
Labor Party 2000 Publication Number 706
Although we spend more on health care than any other
industrial nation, we are the only one not to cover all its residents.1
Nearly 45 million of us – most with full-time jobs – have no coverage
whether through the job or government program like Medicare and Medicaid.2
Many of us lucky enough to have health insurance have inadequate coverage
and forego needed care and medication because of high co-payments and
The Labor Party proposes national health insurance: a
public insurance fund (with the federal government as the insurer) and a
private delivery system (health care services – doctors, hospitals,
clinics – remain private). Individual health care consumers will have
the freedom to choose their doctors, hospitals and other health care
From birth to death, all medical care is covered,
including: • doctor visits •
access to specialists • hospitalization •
prescription drugs • mental health
treatment • nursing home and long-term care
• dental and vision services •
occupational health services • preventive
and rehabilitative services • medical
supplies and equipment
Much Does the United
States Spend on Health Care?
In 1999, the United States spent an estimated $1.2
trillion on health care – 12.8 percent of the Gross Domestic Product or
an average of $4,443 per person.3
The total U.S. health care budget – for all doctors, drugs, dentists,
hospital care and administration – is funded currently by:
(including the employer and employee Medicare payroll tax) fund government
services including Medicare, Medicaid, public health programs, health care
for government workers and the military and medical research.
Medicare Payroll Tax (1.45% each on employee &
Employer contribution to Medicare for federal workers:
Health insurance premiums for federal workers: $13.8
Medicaid and additional Medicare: $185
Public health programs: $49.7
Total: $372.3 billion
State and Local programs
Health insurance premiums for state and local employees:
Employer contribution to Medicare for state and local
State share of Medicaid and other services: $127.5
Total: $191.8 billion
Federal/State/Local Hospital Construction and Research
Total: $40.4 billion
Total: $604.5 billion
Employers contribute to employee health care premiums, worker compensation
and company in-patient health facilities.
Employee health insurance premiums: $224.5
Workers compensation: $23.6
In-patient health facilities: $4
Total: $252.1 billion
Individuals pay all or part of health care premiums, co-payments, Medicare
Part B premiums and out-of-pocket expenses.
Premiums paid by households: $83.7
Part B Medicare Premiums: $19.9
Out of Pocket Spending: $223.1
Total: $326.7 billion
raised from donations from individuals and foundations and from hospital
gift shops contribute a small percentage of the total budget.
Total: $30.2 billion
Total: $1.213 trillion
Financing of U.S. Health Care System
By eliminating administrative waste and profit in the
health care system, the United States can provide comprehensive health
care coverage to every resident of the United States for the same total
amount of money (an estimated $1.213 trillion for 1999) that we now spend.4
The savings from the elimination of private insurance, however, comes at
the expense of the jobs of nearly 1.25 million workers in the health care
To raise a global budget of $1.213 trillion and to provide
a Just Transition for health care industry workers, the Labor Party
Keep most existing government revenues in place (nearly
half the current U.S. health care budget);
Implement a variety of mechanisms to make the wealthy
pay their fair share; and
Impose a modest payroll tax on all employers which will
create a dramatic windfall for employers now purchasing health care.
Part of the windfall in the first three years of Just Health Care will
fund the Just Transition for workers.
Keep existing federal, state and local revenues that
currently pay for Medicare (employer and employee payroll taxes –
1.45percent each or $121 billion) and other federal and state programs
(with the exception of revenues that now pay government workers’ health
Implement a 3.303% tax on the payroll of all public and
Keep existing employer expenditures for corporate clinics:
$ 4.0 billion
With a modest tax of 3.303 percent on employers’
payroll, those employers currently paying all or part of their employees’
health premiums will see an enormous windfall. Private employers spent an
estimated $224.5 billion in 1999 on health insurance for their employees
and contributions to federal, state and local government employee health
premiums totaled $71.3 billion — a total of $295.8 billion. Part of this
windfall will fund a Just Transition for health care industry workers in
the first three years following implementation of national health
In addition, the federal government will gain additional
revenue by taxing the windfall (after completion of Just Transition during
the first three years of implementation). Of the $151.1 billion proposed
employer tax, approximately $126.8 billion comes from private employers.
This represents a savings of $97.7 billion for private employers. If the
full amount were taxed at the marginal corporate tax rate of 35 percent,
the federal government could reap up to $34.2 billion in additional
corporate tax revenues.
Employers currently offering few or no health benefits to
their employees will see costs go up. However, under Just Health Care, the
annual employer cost on the average wage of $28,861 will be $874.50.5
In addition, the employer contribution will continue to be tax-exempt
making the 3.303percent tax an affordable contribution for all employers.
Income taxes on
the wealthy: $161.9 billion
The Labor Party believes that the richest Americans should
pay their fair share. Our budget includes an additional 5 percent income
tax on taxpayers with average incomes of $183,200. This is income only and
does not include unrealized capital gains in stocks, bonds, home sales,
etc. The budget also includes a 10 percent income tax on the richest one
percent, those with average incomes of $763,200 (not counting stocks,
Tax on stock and
transactions: $128.4 billion
Anyone who purchases a stock will pay a transaction tax
equal to one half of one percent of the purchase price. For those who
invest and hold on to stocks, the tax will be minimal. For example, a $100
stock purchase will be taxed 50 cents. If the stock is for four years and
sold for $125, the tax represents only two percent of the gain. However,
speculators who buy and sell rapidly (such as day traders) pay more. If
the same $100 stock is sold in two months for $101, the tax represents 50
percent of the $1 gain. This will dampen speculation and also provide a
healthy revenue stream for Just Health Care.6
See the box below for details.
In 1997, about half of all households owned no stocks, not
even in mutual funds or pension plans such as IRAs, 401(k), 403(b) or
Keogh plans. The wealthiest 10 percent of households owned 82 percent of
all stocks, including those in mutual funds or pension plans. Fully 41
percent of all stock is owned by the richest 1 percent of households.7
Table One: Stocks and Bonds Transaction Fees
after tax volume)
|| Annual Revenue
|| .25% each on
buyer & seller
|| $36.5 billion
|| $27.7 billion
|| $14.7 billion
|| $13.3 billion
|| $33.3 billion
|| $2.9 billion
|Source: Center for Economic and Policy Research, 2000
Economic growth and cuts in social spending are expected
to yield a federal budget surplus of between $3.2 and $4.2 trillion
between 2001 and 2010 according to the Congressional Budget Office.8
The Democrats and Republicans want to spend the surplus on tax cuts that
will mostly benefit corporations and the wealthy. The Labor Party proposes
to spend part of the surplus to offset the cost of national health
insurance for working people. In addition to the projected surplus, Just
Health Care will create additional revenue for the federal government by
taxing the employer windfall (see above).9
shelter loophole: $60 billion
According to the Treasury Department, corporations are
getting away with murder when it comes to avoiding taxes. While profits
have soared over the past few years, corporate taxes have not. For every
dollar of profit reported to shareholders, 91 cents were taxable by the
Internal Revenue Service in 1990. By 1997, that number fell to 70 cents on
the dollar. In 1997 alone, corporations paid $60 billion less in income
taxes than they would have if they had paid taxes at the same rate as in
1990. In contrast, individuals paid $80 billion more than in 1990.
An increase in abusive tax shelters — various accounting
methods that have no legitimate business purpose and are intended solely
to lower a company’s taxes — is responsible for a growing share of the
shortfall. Such schemes cost the government at least $10 billion a year
(and possibly much more) according to the Treasury Department.10
Closing these loopholes and making corporations pay their fair share will
raise $60 billion annually for Just Health Care.
Just Health Care eliminates all household contributions to
premiums, co-payments, Medicare Part B and all out-of-pocket costs for
services not currently covered like dental, vision and prescription drugs.
Total household expenditures will drop from $326.7 billion to $44.6
billion annually. The only expenses left for individuals will be
over-the-counter drugs such as aspirin, elective cosmetic surgery, etc.
This represents an 80 percent reduction in current out-of-pocket expenses.11
non-patient revenues: $30.2 billion
Existing funds raised from donations from individuals and
foundations and from hospital gift shops will continue to contribute a
small percentage of the total budget.
and Just Transition12
One of the most attractive aspects of national health
insurance is its cost savings in the area of administration.
Unfortunately, these savings come at the expense of the jobs of workers in
health care administration. The Labor Party believes we have an obligation
to provide a just transition for these workers. In fact, just transition
is integral to the Just Health Care plan.
Just Transition’s goal is to alleviate the financial
burden of eliminating health care jobs and to make it easier to find
another job at a comparable salary. Every worker who loses his or her job
because of the transition to Just Health Care will receive:
Full take-home pay and benefits for up to four years, or
A wage subsidy for any worker who takes a job that pays
less than the old job; and
Full tuition for up to four years if the worker chooses
to attend school.
Will Lose Their Jobs?
An estimated 27 percent of all health care delivery
workers were employed in administrative jobs in 1997 compared to 18.4
percent in Canada. Administrative jobs include managers, clerical and
financial workers in hospitals, nursing homes and doctor’s offices. In
addition, the thousands of private insurance companies employ 1,667
workers per one million residents compared to 145 per million residents in
|Table Two: Job Dislocation Under Just Health Care
|Health managers & related
|Health Insurance Industry
|Total Job Loss
Much Will a
Just Transition Cost?
To provide four years of full pay and benefits or wage
subsidies to the nearly 1.25 million workers dislocated will cost an
estimated $150 billion.14
If 50 percent of the workers also opted for tuition costs for two years
@$15,000 per year, the tuition cost would be $18 billion. The total Just
Transition will cost approximately $168 billion. In reality, these figures
could be much lower if a large number of workers return to work quickly
and if the transition works to move them to newly created jobs to provide
health care for the previously uninsured and to offer new services such as
long-term care. But by budgeting generously, these workers will have a
number of options available to them.
GI Bill of Rights: Example
of a Successful Just Transition
In 1944, faced with the possibility of mass unemployment
when millions of U.S. veterans returned from World War II, Congress passed
the GI Bill of Rights. The idea was simple: pay returning veterans a
living wage to go to school, redefining "work" while the economy
made the transition from war to civilian production. The GI Bill of Rights
provided government funds for education including tuition, lab fees,
books, health insurance and supplies. In addition to tuition, students
received up to $1,440 per year for living expenses. A 1988 congressional
of the program showed it to be a major success: for every dollar the
government invested, the return was $6.90. According to the report, about
40 percent of those who took advantage would not otherwise have attended
college. The additional education led to higher wages for the GIs and more
taxes for the government.
Will We Pay
for Just Transition?
Just Health Care imposes a 3.3 percent payroll tax on all
employers. Employers currently paying for part or all of their employees’
health care (an estimated $224.5 billion), would be poised to reap a
significant windfall. With the 3.303 percent payroll tax, total health
care costs will be only $126.7 billion – a savings of $97.81 billion per
The windfall could, of course, be captured for health
spending or retained by employers giving workers leverage in bargaining
for higher wages or to allow investors to recoup some of the surcharges
they will pay in income taxes, stock and bond transaction fees and the
closing of corporate tax shelter loopholes.
Just Health Care proposes instead to fund the Just
Transition for health industry workers by capturing a share of the
employer windfall over the first three years of the new system. In other
words, employers that currently pay for health insurance will continue to
pay all or part of the higher rate for the first three years.
In the first year, all of the windfall profits will go to
the Just Transition fund. In the second year, half will go to the fund
with employers keeping the other half and in the third year, 25 percent
will go to the fund and 75 percent kept by employers. In the fourth and
subsequent years, employers will keep 100 percent of the windfall, paying
only the 3.3 percent payroll tax each year.
Allocation of Windfall to Fund Just
|| $98 billion
|| $49 billion
|| $49 billion
|| $24.5 billion
|| 73.5 billion
|| $98 billion
|| $171.5 billion
Will Workers Pay
Under Just Health Care?
In 1997 the average household in the United States spent
$1,841 on health care – premiums, co-payments, doctor and hospital
bills, prescription drugs and medical supplies – a $700 increase from
health care costs escalated in the past two decades, employers
increasingly shifted health costs to employees. In 1980, only a quarter of
employees who obtained their medical insurance through their employer were
required to contribute for single coverage and just under half had to pay
for family coverage. By 1995, two-thirds of full-time employees with
employer-based medical insurance contributed to the cost of single
coverage and 80 percent contributed to the cost of family coverage.18
Under Just Health Care, income taxes will increase only for those
taxpayers with average incomes of $183,200 and above. Workers will enjoy a
lifetime of quality health care while paying less. By eliminating
premiums, co-payments, deductibles and most out-of-pocket costs, 95
percent of taxpayers will save money under Just Health Care.
(Click on the footnote number to return
Bureau of the Census Statistical Abstract of the United States 1996.
Washington, DC: U.S. Government Printing Office, 1996.
Population Survey. Washington, DC: U.S. Census
estimates for 1999 are derived by taking 1992 data in Cathy A. Cowan and
Bradley R. Braden "Business, Households and Government: Health Care
Spending 1995" Health Care Financing Review (Spring 1997) Vol.
18. No. 3, p. 196 and inflating by the overall rise of health care
expenditures as cited in National Health Expenditures, by Source of Funds
and Type of Expenditure: Selected Calendar Years 1993-1998 (Table 3)
Health Care Financing Administration, Office of the Actuary, National
Health Statistics Group (http://www.hcfa.gov/stats/nhe-oact/tables/t3.htm).
U. Himmelstin, MD and Steffie Woolhandler, MD, MPH and the Writing
Committee of the Working Group on Program Design "A National Health
Program for the United States: A Physician’s Proposal" New
England Journal of Medicine 320:102-108 January 12, 1989. Steffie
Woolhandler, MD, MPH and David U. Himmelstein, MD, "The Deteriorating
Administrative Efficiency of the U.S. Health Care System," New
England Journal of Medicine 1991; 324:1253-8. Steffie Woolhandler, MD,
MPH, David U. Himmelstein, MD and James P. Lewontin, "Administrative
Costs in U.S. Hospitals," New England Journal of Medicine
1993; 329: 400-3. Unpublished updates by the authors.
wage for 1998. National Average Wage Index, Social Security
Administration, October 19, 1999 (http://www.ssa.gov).
Baker. Taxing Financial Speculation: Shifting the Tax Burden From Wages
to Wagers. Washington, DC: Center for Economic and Policy Research,
Bull Market: Is the Stock Boom a Bust for Workers?" Paycheck
Economics. Vol. 1, No. 2. Washington, DC: Economic Policy Institute,
May 1999, p. 3.
Budget and Economic Outlook: Fiscal Years 2001-2010" Washington, DC:
Congressional Budget Office, January 2000 (corrected 2/1/00) (http://www.cbo.gov/).
the employer windfall goes to pay for Just Transition in the first three
years of implementation, additional tax revenues will take effect fully
only after the transition period.
Cay Johnston. "Corporations’ Taxes Are Falling Even as Individuals’
Burden Rises." New York Times, February 20, 2000 and David Cay
Johnston. "U.S. Takes Aim at Tax Shelters for Companies." New
York Times, February 29, 2000.
Rasell and Kainan Tang. Paying for Health Care: Affordability and
Equity in Proposals for Health Care Reform Working Paper No. 111.
Washington, DC: Economic Policy Institute, December 1994, p. 27.
Leopold. "The Case for Making Workers Whole: No Net Loss"
Workshop on the Transition to Virtual Elimination: Dioxins and Furans as a
Case Study March 30-31, 1995 International Joint Commission. New York:
Labor Institute, 1995.
Himmelstein and Steffie Woolhandler. "Who Administers? Who Cares? The
Medical Care Workforce in the U.S. and Canada" American Journal of
Public Health 1996 Vol. 86 pp: 172-178 and updates by the authors.
Unpublished analysis of 1998 Current Population Survey by David
Himmelstein and Steffie Woolhandler.
at the Labor Institute and the Center for National Health Program Studies
arrived at these estimates via two separate methods, generating nearly
identical results. Method one multiplies the job dislocation estimates by
the average wage for each category. A second method uses data developed
through studies of mass layoffs during the 1980s which look at income lost
to workers due to unemployment and to taking jobs at lower wages (Louis
Jacobson, Robert LaRonde, Daniel Sullivan. The Costs of Worker
Dislocation. Kalamazoo, MI: W.E. Upjohn Institute, 1993, pp. 137-171).
Cost-Benefit Analysis of Government Investment in Post-Secondary Education
Under the World War II GI Bill. Washington, DC:
Subcommittee on Education and Health of the Joint Economic Committee,
December 14, 1988.
wages of $4.5772 trillion (public and private) as reported by the Economic
Report of the President: Transmitted to the Congress February 2000.
Washington, DC: U.S. Government Printing Office, 2000 (Table B-26, 1999 4th
the Nation Spends on Health Care: A Regional Comparison" Issues in
Labor Statistics. Washington, DC: U.S. Department of Labor, Bureau of
Labor Statistics, July 1999. (http://stats.bls.gov/opub/ils/pdf/opbils18.pdf).
Medical Care Contributions on the Rise" Issues in Labor Statistics.
Washington, DC: U.S. Department of Labor, Bureau of Labor Statistics,
April 1998 (http://stats.bls.gov/opub/ils/pdf/opbils18.pdf).