How Much Does Single Payer National Health Care Cost?

Physicians for National Health Program

PNHP newsletter, October 1999

National fiscal studies performed on single payer.

December, 1998: Two estimates for the Massachusetts Medical Society:

* Lewin Group

* Solutions for Progress/Boston University

School of Public Health (SFP/BUSPH)

(The full text of these studies are posted at: www.mms.org/ physicians/resource/lewin.html)

"In early 1997, the Massachusetts Medical Society, retained the services of two consulting teams to independently analyze the relative costs of a Canadian-style single-payer system, and the current multi-payer health care system in Massachusetts."

"While Lewin and SFP/BUSPH reports differed in their orientations and methodologies, they reached similar conclusions. First, a single-payer system would achieve significant administrative savings [between $1 .8 and $3.6 billion] over the current multi-payer system. Secondly, these savings are of such a magnitude that the available funds would be sufficient to insure universal coverage in the state and provide comprehensive benefits including outpatient medications and long-term care and eliminate all out-of-pocket payments (co-payments, deductibles)."

"The major difference in the studies findings had to do with the timing of achieving the cost savings. SFP/ BUSPH estimated that the savings could be in the first year of implementation of the system. Lewin felt the savings would begin in year six."

-Massachusetts Medical Society House of Delegates Report 207, A-99 (B)

May, 1991, Physicians for a National Health Program

"[A] national health program could reap tens of billions of dollars in administrative savings in the initial years, enough to fund generous increases in health care service not only for the uninsured, but for the underinsured as well .... We suggest a funding package that would augment existing government health spending with earmarked health care taxes. Because these new taxes would replace employer-employee insurance premiums and substantial portions of cur

rent out-of-pocket expenditures, they would not increase health costs for the average American." ("Liberal Benefits, Conservative Spending," Grumbach, Bodenheimer, Himmelstein, and Woolhandler, JAMA, May 15, 1991).

June, 1991 General Accounting Office

"If the US were to shift to a system of universal coverage and a single payer, as in Canada, the savings in administrative costs [10% of health spending] would be more than enough to offset the expense of universal coverage." ("Canadian Health Insurance: Lessons for the United States")

December, 1991 Congressional Budget Office

"[I]f the nation adopted ... [a] single-payer system that paid providers at Medicare's rates, the population that is currently uninsured could be covered without dramatically increasing national spending on health. In fact, all US residents might be covered by health insurance for roughly the current level of spending or even somewhat less, because of savings in administrative costs and lower payment rates for services used by the privately insured. The prospects for controlling health care expenditures in future years would also be improved." ("Universal Health Insurance Coverage Using Medicare's Payment Rates")

April, 1993 Congressional Budget Office

"Under a single payer system with co-payments .... on average, people would have an additional $54 to spend....more specifically, the increase in taxes ... would be about $856 per capita .... private-sector costs would decrease by $910 per capita, the net cost of achieving universal insurance coverage under this single payer system would be negative."

"Under a single payer system without co-payments people would have $144 a year less to spend than they have now, on average...consumer payments for health would fall by $1,1 18 per capita, but taxes would have to increase by $1,261 per capita to finance this plan." ("Single-Payer and All-Payer Health Insurance Systems Using Medicare's Payment Rates")

July, 1993 Congressional Budget Office

"Enactment of H.R. 1300 [Russo's single payer bill] would raise national health expenditures at first, but reduce spending about 9 percent in 2000. As the program was phased in, the administrative savings from switching to a single-payer system would offset much of the increased demand for health care services. Later, the cap on the growth of the national health budget would hold the rate of growth of spending below the baseline. The bill contains many of the elements that would make its limit on expenditures reasonably likely to succeed, including a single payment mechanism, uniform reporting by all providers, and global prospective budgets for hospitals and nursing homes." ("Estimates of Health Care Proposals from the 102nd Congress")

December, 1993 Congressional Budget Office

S 491 (Senator Paul Wellstone's single payer bill) would raise national health expenditures above baseline by 4.8% in the first year after implementation. However, in subsequent years, improved cost containment and the slower growth in spending associated with the new system would reduce the gap between expenditures in the new system and the baseline. By year five (and in subsequent years) the new system would cost less than baseline. ("S.49 1, American Health Security Act of 1993")

June, 1998, Economic Policy Institute

"In the model presented in this paper, it is assumed that in the first year after implementing a universal, single-payer plan, total national health expenditures are unchanged from baseline. If expenditures were higher than baseline in the first few years, then additional revenues above those described here would be needed. However, these higher costs would be more than offset by savings which would accrue within the first decade of the program."

Universal coverage could be financed with a 7 percent payroll tax, a 2 percent income tax, and current federal payments for Medicare, Medicaid, and other state and federal government insurance programs. A 2 percent income tax would offset all other out-of-pocket health spending for individuals. "For the typical, middle income household, taxes would rise by $731 annually. For fully 60% of households, the increase would average less than $1,000. For another 20%, the increase would average about $1,600...costs would be redistributed from the sick to the healthy, from the low and middle-income households to those with higher incomes, and from businesses currently providing health benefits to those that do not.

"Even more important, greater efficiency and improved cost containment would become possible, leading to sizable savings in the future. The impediment to fundamental reform in health care financing is not economic, but political. Political will, not economic expertise, is what will bring about this important change." ("Universal Coverage: How Do We Pay For It?" - Edie Rasell, M.D. PhD.)

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