Nov 14
2017
The Economics of a Single-Payer Healthcare System
Guest post by Ken Perez, vice president of healthcare policy, Omnicell, Inc.
Though largely overshadowed by the continued pursuit of repeal and replacement of the Affordable Care Act by the Trump administration and congressional Republicans, the concept of a single-payer healthcare system is gaining popularity, and a referendum on it is already starting to take place.
According to a June 2017 national survey by the Pew Research Center, 60 percent of the American public feels it’s the federal government’s job to provide healthcare coverage for all Americans, and a third of the public favors a single-payer health insurance system run by the federal government.
On September 13, Sen. Bernie Sanders (I-Vt.) introduced the Medicare for All Act of 2017. In striking contrast with his previous solitary introductions of this approach, this time 16 Democratic senators—one-third of the party’s Senate caucus—identified themselves as co-sponsors, including Senators Cory Booker, Kirsten Gillibrand, Kamala Harris, and Elizabeth Warren, all possible presidential candidates.
Medicare for All Defined
Per Sanders, Medicare for All would create a federally administered single-payer healthcare program that provides comprehensive coverage for all Americans, spanning the entire healthcare continuum, “from inpatient to outpatient care; preventive to emergency care; primary care to specialty care, including long-term and palliative care; vision, hearing and oral health care; mental health and substance abuse services; as well as prescription medications, medical equipment, supplies, diagnostics and treatments.” Every doctor would be in network, and saliently, there would be no deductibles, copays or cost-sharing requirements of any kind.
Estimating the Cost of a Single-Payer System
One admittedly simplistic way to estimate the cost of a single-payer system would be to assume that the federal government would pay for the nation’s entire national health expenditures (NHE), which the Centers for Medicare and Medicaid Services projects will reach about $3.5 trillion in 2017, which would be equivalent to a more than tripling of the roughly $1.1 trillion the federal government will spend this year on Medicare, Medicaid, the Children’s Health Insurance Program, health insurance subsidies and related spending, and Veterans’ medical care.
Single-payer advocates argue that administrative savings and decreased waste would reduce spending, generally by 20 percent to 30 percent, but such savings would likely be offset by the cost of covering the approximately 25 to 30 million Americans without health insurance, as well as higher demand (from those currently with coverage), resulting from the elimination of all cost-sharing requirements, which tend to curb overutilization of medical services. Per a landmark 1982 Rand Corporation study that examined the spending patterns of patients with insurance that covered 100 percent of expenses versus those with copays and deductibles, patients without out-of-pocket fees spent 30 percent more for medical services. A 30 percent increase in demand for medical services would add more than $1 trillion to the nation’s annual healthcare bill.
Citing the lower per capita costs of healthcare in other industrialized countries with single-payer systems, Sanders argues that NHE would actually decrease under his single-payer plan, by $6 trillion over 10 years. Sanders’ white paper, “Options to Finance Medicare for All”— which outlines a dozen tax revenue-generating ideas —presents $16.2 trillion as the implied expected increase in federal expenditures over a 10-year period under Medicare for All.