Breaking Down the American Health Care Freedom Act: Part 2 – How Would It Be Funded?

Disclaimer: I’m not a healthcare policy expert, economist, or tax professional. This analysis represents my personal perspective as a layperson who drafted this legislation with AI assistance to craft the specific legal language. The content below reflects my reasoning for the funding mechanisms and should not be considered professional financial or policy advice.

When I started drafting the American Health Care Freedom Act (AHCFA), the most daunting question wasn’t what benefits to include or how to structure the system—it was how to pay for it. I knew that any proposal for universal healthcare would live or die on its funding mechanism. The approach I settled on reflects my core belief that healthcare financing should be progressive, transparent, and ultimately more equitable than our current system where medical bankruptcies devastate families while others enjoy platinum-level coverage.

My Funding Philosophy

I designed the funding structure around three principles that emerged from my research into healthcare economics and my own values about fairness:

First, progressive distribution of costs. Those with greater ability to pay should contribute more to the system that benefits everyone. This isn’t radical—it’s how we fund most successful government programs.

Second, transparency and simplicity. People should know what they’re paying for healthcare rather than having costs hidden in insurance premiums, copays, and surprise bills.

Third, comprehensive sustainability. The system needs multiple revenue streams to remain stable through economic cycles and demographic changes.

Rather than inventing entirely new funding mechanisms, I chose to build on existing ones while redirecting the enormous amounts Americans already spend on healthcare. This includes consolidating all current federal healthcare spending—Medicare, Medicaid, CHIP, federal employee benefits, premium tax credits, and other healthcare subsidies—into the National Health Care Program (NHCP).

Back to Table of Contents

Payroll Tax Adjustments: The Foundation

The most significant funding source would be expanding the Medicare payroll tax, which I chose because it already exists and people understand it. Currently, most employees pay 1.45% of their wages toward Medicare, with employers matching that amount. Under my proposal, employee contributions would increase gradually:

• Year 1: 2.45% (increase of 1%)
• Year 2: 3.45% (increase of 2%)
• Year 3: 5.25% (increase of 3.8%)
• Year 4 and beyond: 7% (increase of 5.55%)

I structured the increases gradually rather than all at once because I wanted to give people and businesses time to adjust their budgets and for policymakers to monitor economic impacts.

For employers, I created a tiered system based on company size because I believe larger companies should contribute more to the public infrastructure that enables their success:

Small employers (fewer than 50 employees):

• Starting at 2.5%, eventually reaching 5%

Medium employers (50-499 employees):

• Starting at 6.5%, eventually reaching 9%

Large employers (500+ employees):

• Starting at 6.5%, climbing to 12.5%

This progressive structure reflects my belief that large corporations benefit most from having a healthy workforce and stable healthcare system, so they should contribute proportionally more. Small businesses, which often struggle to provide health benefits today, would pay the least while gaining access to comprehensive coverage for their employees.

Self-employed individuals would see their contribution rise from the current 2.9% to eventually reach 7%, putting them on par with employees rather than paying double as they effectively do today.

Critically, I included requirements for economic impact assessments after each increase, with authority to adjust timelines if significant problems emerge. This wasn’t just political cover—I genuinely believe good policy requires monitoring real-world effects and making course corrections when necessary.

Back to Table of Contents

Eliminating the Income Cap: A Progressive Reform

Currently, Social Security and Medicare taxes only apply to income up to certain thresholds ($168,600 for Social Security in 2024). This creates a regressive situation where someone making $50,000 pays these taxes on 100% of their income while someone making $500,000 pays them on only about one-third of their income.

I chose to gradually eliminate this cap entirely:

• Year 2: 25% of wages above the cap become taxable
• Year 3: 50% become taxable
• Year 4: 75% become taxable
• Year 5: The cap disappears entirely

This change alone would significantly increase revenue while making the overall tax system more equitable. I phased it in gradually to give high earners time to adjust their financial planning and to monitor economic effects on investment and entrepreneurship.

Back to Table of Contents

Broader Tax Code Reforms

I included several changes to the tax code that would take effect after 2025, essentially reversing much of the 2017 Tax Cuts and Jobs Act:

• Return to pre-2017 individual income tax rates
• Reduce the Child Tax Credit from $2,000 to $1,500—this was a difficult decision, but the original credit had already expired and needed to be reauthorized anyway. However, the families who benefit most from the Child Tax Credit—working families with moderate incomes—will save far more money under the NHCP through eliminated healthcare premiums and out-of-pocket costs than they lose from the $500 reduction in the credit
• Restore pre-2017 standard deduction and personal exemptions
• Increase the State and Local Tax (SALT) deduction cap from $10,000 to $20,000—a compromise that helps middle-class families in high-tax states without fully removing the cap
• Return to pre-2017 corporate tax rates and implement a 16.5% corporate minimum tax for large corporations
• Reduce the estate tax exemption from $5 million to $2 million

These changes reflect my belief that the 2017 tax cuts were poorly targeted and fiscally irresponsible. Returning to the previous structure while keeping some beneficial changes (like the higher SALT deduction cap) creates a more balanced approach.

Back to Table of Contents

Pharmaceutical Revenue Contribution: Innovation with Accountability

One of my more innovative funding mechanisms addresses the relationship between public research investment and pharmaceutical profits. Since taxpayers fund much of the basic research that leads to new drugs through the National Institutes of Health, I believe pharmaceutical companies should contribute back when they profit from that investment.

For products developed with federal research funding, pharmaceutical companies would contribute:

• Year 1: 5% of export revenue
• Year 2: 10% of export revenue
• Year 3 and beyond: 17% of export revenue

I limited this to export revenue rather than all sales to avoid disrupting domestic drug pricing while the system transitions. The phased implementation gives companies time to adjust their business models, and I included requirements for biennial studies to ensure this doesn’t harm innovation or global access to medicines.

Back to Table of Contents

Supporting Displaced Workers: A Moral Imperative

One of the most substantial aspects of my funding plan is the allocation of up to $60 billion for comprehensive worker transition support. This reflects my conviction that when government policy eliminates jobs—even jobs in industries I believe are harmful—we have a moral obligation to help those workers transition to new careers.

The comprehensive support includes:

• Priority hiring for displaced insurance workers in the NHCP and other federal agencies
• Income protection providing 80% of previous salary for up to 12 months
• Extended support for workers nearing retirement age
• Career transition pathways for healthcare administration, delivery, and technology
• Educational opportunities with full tuition coverage and living stipends
• Regional transition centers in areas with high concentrations of insurance industry employment
• Early retirement options for workers within 7 years of Medicare eligibility
• Entrepreneurship assistance for those starting healthcare-related businesses
• Community economic stabilization for areas where insurance employment exceeds 15% of the workforce

This represents one of the most comprehensive worker transition programs ever proposed. I included it because I believe progressive policy must account for its human costs and because politically, major economic changes are more sustainable when they include robust support for affected workers.

Back to Table of Contents

Economic Oversight and Flexibility

Recognizing the massive economic implications of these changes, I established an Economic Impact Advisory Council composed of economists, agency heads, and sector representatives to monitor effects on growth, employment, wages, and competitiveness. If severe adverse impacts emerge, the Secretary of the Treasury could temporarily modify implementation timelines in consultation with Congress.

I also created a dedicated NHCP Trust Fund to receive and manage all healthcare revenues, with annual assessments to ensure funding adequacy. If revenues fall short, the Secretary could implement cost-saving measures that don’t reduce benefits, propose revenue adjustments, or as a last resort, temporarily adjust payroll tax rates by up to 0.5 percentage points if Congress doesn’t act within 120 days.

These provisions reflect my belief that good policy requires flexibility and responsiveness to changing conditions while protecting the core commitment to universal coverage.

Back to Table of Contents

A More Equitable System Than What We Have Now

The current American healthcare financing system is fundamentally regressive and inequitable in several ways that my proposal would address:

Hidden and Unpredictable Costs

Right now, most Americans have little idea what their healthcare actually costs. Employer-sponsored premiums are largely hidden from employees, who see only their portion of the premium plus unpredictable copays, deductibles, and surprise bills. The average family premium now exceeds $23,000 annually, but most employees see only their $6,000-$8,000 portion.

Under the NHCP, healthcare costs would be transparent and predictable through the tax system. A worker earning $60,000 annually would pay about $4,200 in healthcare taxes at the full 7% rate—likely less than their current premiums plus out-of-pocket costs, and with no deductibles, copays, or surprise bills.

Employer Size Disparities

Currently, large employers can negotiate better insurance rates and benefits than small employers, creating significant disparities in employee healthcare access. A worker at a Fortune 500 company might have excellent coverage while someone at a 20-person small business has minimal benefits or no coverage at all.

The NHCP would provide identical comprehensive coverage to all workers regardless of employer size, while appropriately scaling employer contributions based on company size and resources.

Income-Based Access

Perhaps most importantly, our current system rations healthcare based on ability to pay. People skip medications, delay care, and face bankruptcy due to medical bills. Even those with insurance face high deductibles that create barriers to care.

The NHCP would decouple healthcare access from income by providing comprehensive coverage with no cost-sharing. A CEO and a minimum-wage worker would receive identical care, though they would contribute to the system based on their ability to pay.

Geographic Inequities

Insurance markets vary dramatically across states and regions, creating geographic disparities in both cost and coverage. The NHCP would provide uniform benefits and access nationwide, addressing the current situation where your zip code can determine your healthcare options.

Administrative Waste

The current multi-payer system generates enormous administrative costs—estimated at 8% of healthcare spending compared to 1-3% in single-payer systems. These costs are ultimately passed through to consumers in higher premiums and taxes. Consolidating administration under the NHCP would redirect these resources to actual healthcare delivery.

Back to Table of Contents

The Economic Trade-offs

I want to be honest about the tax increases involved. For many Americans, especially higher earners, taxes would rise significantly. However, these increases must be viewed in the context of eliminated premiums, copays, and deductibles.

Consider a family earning $100,000 annually. At the full 7% employee rate plus their employer’s 9% contribution (for a medium-sized company), the total healthcare tax would be $16,000. This family currently likely pays around $8,000 in premium contributions plus $3,000-$5,000 in out-of-pocket costs, totaling $11,000-$13,000. The additional tax cost of $3,000-$5,000 would buy them comprehensive coverage with no deductibles, no networks restrictions, and no surprise bills.

For lower-income families, the savings would be even more dramatic. A family earning $40,000 would pay $2,800 in healthcare taxes while gaining access to comprehensive coverage including dental, vision, long-term care, and services they likely can’t afford today.

Higher-income families would pay more in absolute terms, which I believe is appropriate given their greater ability to pay and the fact that they benefit from the healthy workforce and stable society that universal healthcare enables.

Back to Table of Contents

Long-term Sustainability

The funding structure I designed aims for long-term sustainability through several mechanisms:

• Multiple revenue streams reduce dependence on any single source
• Progressive taxation ensures the system can adapt to changing income distribution
• Economic monitoring allows for adjustments based on real-world performance
• Administrative efficiency reduces waste compared to the current system
• Preventive care emphasis should reduce long-term healthcare costs

The inclusion of pharmaceutical revenue contributions and elimination of the payroll tax cap provide significant revenue cushions that don’t exist in the current system.

Back to Table of Contents

Moving Forward

The funding approach I’ve outlined reflects my belief that healthcare is a collective investment in our society’s wellbeing, not a individual consumer purchase. By making costs transparent, progressive, and predictable, it would create a more equitable system than the current maze of premiums, deductibles, and surprise bills.

The substantial worker transition support and economic monitoring provisions reflect my recognition that major economic changes require careful management and robust safety nets. Progressive policy must be responsible policy, accounting for real-world impacts while never compromising on the core principle that everyone deserves access to healthcare.

In my next piece, I’ll examine the complex challenge of transitioning from our current fragmented system to the unified NHCP, including how existing programs like Medicare, Medicaid, the VA, and military healthcare would be integrated into the new system.

Back to Table of Contents