Can the US Afford Universal Healthcare? Costs, Savings, and Deficit

The United States can afford universal healthcare in the narrow sense that the money already exists inside the system — national health spending hit $5.3 trillion in 2024, roughly 18 percent of GDP, and about 65 percent of that already flows through public programs.¹² Whether the country can afford it in the political and operational sense depends on design choices — chiefly how much the government pays doctors and hospitals, and whether Congress will approve the taxes needed to redirect spending that employers, insurers, and patients currently handle themselves. Independent estimates from the Congressional Budget Office, the Urban Institute, and the Mercatus Center land in a wide range: total national spending could fall by as much as $700 billion or rise by a few hundred billion, depending on how the system is built.³

The Spending Baseline

Healthcare spending grew 7.2 percent in 2024, outpacing the broader economy for the second consecutive year.¹ For scale, healthcare alone runs about three times the size of the federal government’s entire discretionary budget.

The money flows through several channels. Medicare and Medicaid together accounted for roughly $1.75 trillion in 2022, with Medicare at $944 billion and Medicaid at $806 billion. Private insurance covered another $1.3 trillion that year, mostly through employer-sponsored plans.⁴ Patients pay the rest through deductibles, co-pays, and uncovered services. And despite all of that spending, 27.2 million people — 8.2 percent of the population — had no insurance at all in 2024.⁵

That combination — highest spending in the world, still leaving millions uncovered — is what makes the affordability question answerable in the first place. The system already generates more than enough money for universal coverage. The debate is about redirection.

What the Major Cost Estimates Found

Every serious analysis agrees the federal government’s share of healthcare spending would roughly double. Analyses diverge on what happens to total spending, which is the number that actually matters for the economy. This distinction gets lost in most public arguments. A proposal can raise federal outlays by trillions each year while simultaneously reducing total national spending, because dollars now flowing through employers, insurers, and patients would move through the government instead.

The Congressional Budget Office modeled several single-payer designs in 2022 and found additional federal subsidies would range from $1.5 trillion to $3.0 trillion annually, depending on features. On total national spending, CBO estimated changes from a $700 billion decrease to a $300 billion increase — meaning some designs save money overall and others cost slightly more.³ The single biggest variable driving that range is provider payment rates.

The Urban Institute estimated a comprehensive single-payer plan would increase federal spending by $2.8 trillion in its first year, or $34 trillion over a decade.⁶ The Mercatus Center at George Mason University landed on a similar ten-year federal cost of $32 trillion. Buried in its analysis was a finding that often gets stripped out of headlines: total national health expenditures would be about $202 billion lower in 2026 than under the status quo, assuming providers accept Medicare-level payment rates.⁷ That assumption carries the whole argument, and it’s where the real fiscal debate lives.

Where the Savings Come From

Administrative Overhead

Private insurers spend roughly 17 percent of revenue on administrative costs, marketing, and profit. Medicare runs at about 2 percent overhead. Providers carry their own administrative burden too: billing staff navigating hundreds of different plans, each with its own coding and prior authorization rules.

A single payer eliminates much of that complexity. Mercatus projected $158 billion in administrative savings in 2026 alone, based on overhead dropping from roughly 13 percent to 6 percent for people currently on private insurance.⁷ A Yale epidemiological study estimated administrative simplification could save approximately $500 billion annually once provider-side paperwork reductions are counted.

Drug Prices and Provider Rates

When there’s only one buyer, that buyer sets prices. The federal government already does this to a limited degree. The Inflation Reduction Act of 2022 authorized the Secretary of Health and Human Services to negotiate prices on certain Medicare drugs — 10 starting in 2026, 15 more in 2027, and expanding further afterward.⁸ Under a universal system, that negotiating power would extend to all medications and services.

Mercatus estimated drug savings alone at $80 billion in 2026 under single-payer. Applying Medicare rates across the board would cut $505 billion from personal health spending that same year.⁷ The catch: those savings come directly out of doctors’ and hospitals’ revenue.

How the Government Would Pay for the Rest

Because roughly $2 trillion in current health spending already flows through Medicare, Medicaid, veterans’ care, and ACA subsidies, that money doesn’t need to be found. It gets folded into the new system.² The gap between existing public spending and the full cost of universal coverage would require new revenue. The most detailed blueprint comes from Senator Sanders’ Medicare for All proposal, which stacks several mechanisms:

A 7.5 percent employer payroll tax replacing what employers currently pay in private insurance premiums, projected to raise $3.9 trillion over ten years. An employer spending $12,750 or more per worker on insurance would come out ahead.²
A 4 percent household income-based premium applied after the standard deduction. A family of four earning $50,000 would pay roughly $844 a year, well below typical insurance premiums. Projected revenue: $3.5 trillion over ten years.²
Eliminating health-related tax breaks, including the tax-free treatment of employer-paid premiums (worth over $300 billion a year in forgone federal revenue). Combined recovered revenue: roughly $4.2 trillion over ten years.²

Other proposals layer on a wealth tax on billionaires (one analysis estimated a 5 percent annual tax on households worth over $1 billion could raise roughly $370 billion a year), higher top marginal income tax rates, or changes to capital gains taxation. No single mechanism covers the full cost. The political question isn’t whether enough money exists in the system. It’s whether Congress would approve the taxes needed to redirect it.

The Catch: Provider Payments and Workforce

The fiscal math depends heavily on paying providers less, and the healthcare industry knows it. Private insurance pays physicians substantially more than Medicare for identical services, and the gap varies dramatically by specialty. Family medicine doctors receive commercial rates around 110 percent of Medicare levels; anesthesiologists receive about 330 percent, emergency physicians about 250 percent.⁹

Cutting every provider to Medicare-level reimbursement would reduce hospital and physician revenue by roughly 40 percent on the commercial side of their business. Some analysts argue this is manageable because providers would save on billing costs and bad debt. Others warn it could push rural hospitals, many already operating on thin margins, into closure and discourage medical students from pursuing high-cost specialties. CBO acknowledged the tension directly: its lower-rate scenario reduced national health expenditures by 9 percent compared to a higher-rate design, but the tradeoff is reduced access if providers cut services or leave the profession.³

The workforce picture adds another layer. The country already faces a projected nursing shortage of about 8 percent nationally in 2026, and roughly 25 percent in non-metropolitan regions. Universal coverage would increase demand by bringing 27 million newly insured people into the system. A credible transition plan has to address workforce capacity alongside financing, or the savings on paper won’t materialize.

Impact on the Deficit and National Debt

Federal debt already stands at about 122 percent of GDP as of late 2025.¹⁰ Adding trillions in new federal obligations naturally raises questions about piling risk onto an already strained balance sheet. The answer depends almost entirely on whether the new taxes and savings materialize at projected levels.

If revenue mechanisms fall short — because Congress waters down the taxes, or because administrative savings take longer than projected — the shortfall lands on the deficit. Higher deficits push up interest rates, and on trillions in outstanding debt, even modest rate increases compound into hundreds of billions in additional interest costs over a decade.

The counterargument is that healthcare costs are already the fastest-growing component of federal spending, and doing nothing has fiscal consequences of its own. Medicare and Medicaid outlays rise every year as the population ages and medical prices outpace inflation. If a universal system holds per-capita cost growth below the current trajectory, even by a small margin, the long-term picture improves. The transition changes who writes the checks; affordability really comes down to whether the government can manage healthcare inflation better than the fragmented private market has.

The Transition Problem

Even if the long-run numbers work, getting from here to there involves enormous disruption. The private health insurance industry employs hundreds of thousands of people in claims, underwriting, sales, and administration. Employer benefits departments would need to restructure. Hospitals would need to overhaul their revenue cycle operations. All while continuing to treat patients without interruption.

Most serious proposals include a phase-in of three to five years, during which eligibility gradually expands (for example, lowering the Medicare age incrementally) while private coverage phases out. Urban Institute and CBO analyses both modeled costs assuming full implementation rather than a gradual rollout, meaning actual early-year federal costs would be lower during a transition but administrative complexity would be higher with two systems running in parallel.

Transition is where most proposals are weakest on specifics. The financing math assumes steady-state operation, but the first several years would involve one-time costs: building new IT systems, retraining displaced insurance workers, and standing up provider payment infrastructure nationwide. These startup costs rarely appear in headline estimates, and they represent a real fiscal risk that proponents tend to understate.

The Bottom Line on Affordability

The fiscal case is stronger than most opponents acknowledge and weaker than most proponents claim. CBO’s finding that total national health spending could range from a $700 billion decrease to a $300 billion increase, depending on design choices, means the honest answer to “can we afford it?” is “it depends on the details.”³ A system that pays providers at Medicare rates and aggressively negotiates drug prices probably saves money overall. A system that maintains something close to current provider payments while eliminating all patient cost-sharing probably costs more.

The United States already spends more than enough to provide universal coverage. The money is just distributed inefficiently. Administrative overhead, uncompensated care for the uninsured, and prices well above what other countries pay for identical drugs and procedures represent hundreds of billions in recoverable spending each year. Whether the political system can execute a transition that captures those savings without creating new problems is a question of governance, not arithmetic.

1
Centers for Medicare & Medicaid Services. National Health Expenditures 2024 Highlights
2
U.S. Senate – Senator Sanders. Options to Finance Medicare for All
3
Congressional Budget Office. A Single-Payer Health Care System That Is Based on Medicare’s Fee-for-Service Program
4
Centers for Medicare & Medicaid Services. National Health Expenditures 2022 Highlights
5
Centers for Disease Control and Prevention. Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, 2024
6
Urban Institute. From Incremental to Comprehensive Health Reform: How Various Reform Options Compare on Coverage and Costs
7
Mercatus Center. The Costs of a National Single-Payer Healthcare System
8
Centers for Medicare & Medicaid Services. Selected Drugs and Negotiated Prices
9
Urban Institute. Commercial Health Insurance Markups Over Medicare Prices for Physician Services Vary Widely by Specialty
10
Federal Reserve Bank of St. Louis. Total Public Debt as Percent of Gross Domestic Product