Medicare for All? At What Cost? Plus, 4 Stocks to Avoid

Friday, February 15, 2019
Tony Sagami

Socialism scares the heck out of me. You can see what that has done to Venezuela. But the so-called Democratic Socialism that's popped up in the U.S. puts just as much fear in my free-market heart.

I didn't feel that way a few years ago -- not even when Sen. Bernie Sanders (I-Vt.) made a serious run at the Democratic presidential nomination. At the time, I considered Sanders nothing more than an isolated curmudgeon who was largely unknown outside of New England.

However, Sanders came on like a hurricane, was wildly popular with young voters, and may have even won the Democratic nomination if not for the underhanded political tricks that the DNC and Hillary Clinton pulled against him.

But while most hurricanes abate within a few days or weeks, Democratic Socialism's season has gained momentum over the past couple years. Sanders has gotten lots of socialist company along the way, including Sen. Elizabeth Warren (D-Mass.) and the new Democratic darling Rep. Alexandria Ocasio-Cortez (D-N.Y.).

If Warren or Ocasio-Cortez get their way, those of us who have diligently saved for the future or make comfortable incomes will have a big bullseye on our 1040 backs.

  • Warren wants to implement a wealth tax that confiscates 2% to 3% of the net worth of households with more than $50 million in assets. I won't be affected, but I have several friends who would be. And believe me, steam is coming out of their ears.
  • Ocasio-Cortez wants to raise the top income tax rate to 70% on incomes over $10 million. Only 16,000 people in the U.S. make more than $10 million a year, but this would give the U.S. the highest tax rates in the developed world.

I doubt either of those proposals will become realty anytime soon. But one of the one of the most radical ideas that does have a chance of becoming a reality is the "Medicare For All." This is being floated by several hopeful Democratic 2020 presidential candidates.

Sanders' proposal calls for the abolishment of Medicare and outlaws employer-provided coverage.

In other words, everyone will be enrolled in the same, one-size-fits-all government coverage. Children will be signed up for it at birth.

Sure, the concept of universal healthcare is appealing. But the everything-for-free crowd doesn't understand is that someone has to pay for Medicare for All.

That someone is you and me.

The estimates for the cost of healthcare to everyone varies among government agencies and outside watchdogs, but everyone agrees that it will be VERY expensive. The number that seems the most credible to me is $3.5 trillion a year.

Yes, $3.5 trillion.

To put that in perspective, the entire U.S. federal budget for fiscal year 2019 is $4.4 trillion ... and that's with a deficit of almost $1 trillion.

Like I said, you and I will have to foot the bill, such as Ocasio-Cortez's proposed top tax rate at 70%. And/or we could see the capital gains tax soar to as much as 64.2%, as proposed by Sanders.

There are many ways to squeeze more tax dollars out of us. According to the Congressional Budget Office, we would have to raise the tax rate by 36% of EVERY American in the U.S. to pay for the cost of universal healthcare.

In other words, if you're filing as a married couple with taxable income of $350,000 per year, you could see your 32% tax rate for 2019 soar to 68%.

So it's not just the rich. Everyone!

Image credit: TaxFoundation.org

That stratospheric cost is one of the reasons that Starbucks CEO Howard Schultz is considering a run for president as an independent, third-party candidate.

A lifetime Democrat, Schultz says the Democratic Party has moved too far to the left and that the socialist ideals — such as Medicare for All — is unrealistic. However, he is being widely criticized by many democrats who feel his candidacy would all but guarantee a 2020 victory for Trump.

Maybe, maybe not.

But what I do know is that, if Medicare for All starts to start to get traction, you'd be a fool to own any hospital stock, such as HCA Holdings (HCA), Community Health Systems (CYH), Tenet Healthcare (THC) or HCP Inc. (HCP).

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Best wishes,
Tony Sagami

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