William Hsiao’s single payer proposal for Vermont

Posted by on Wednesday, Jan 19, 2011

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Statement by William C. Hsiao

Vermont State Legislature
January 19, 2011

Act 128 calls upon our team to develop three options. The Legislature requires that we evaluate a state government-administered and publicly-financed single-payer health benefits system. This system, which we refer to as Option 1, would provide all Vermonters with a uniform benefits package. Within those parameters, we looked at costs of both a “comprehensive” benefits package and a leaner, “essential” benefits package, which I will define and discuss later. The second option is a state government-administered, public option that would allow Vermonters to choose between public and private insurance coverage. Option 2 is designed to allow for and promote competition between the public and private plans, while keeping in place the current multiple payer system. Act 128 allows our team to develop a third option that we design after analyzing all aspects of Vermont’s health care and assessing the positions of key stakeholders across the State of Vermont. We call Option 3 a public/private single-payer system. It provides an “essential” benefits package, is administered by an independent board with diverse representation, and it employs a competitively-selected third party to manage provider relations and claims adjudication and processing.

In analyzing the three options, we determined that all will yield significant savings. However, our research and analysis indicate that the single-payer options will have a more dramatic impact on reducing cost than the public option because they incorporate a uniform benefits package and reduce much of the administrative structure needed to compensate multiple payers. Therefore, we estimate that Option 1 will produce savings of 24.3% of total health expenditure between 2015 and 2024. Option 2 will produce savings of 16.1% of total health expenditure between 2015 and 2024. Finally, Option 3 will produce savings of 25.3% of total health expenditure between 2015 and 2024. Option 3 produces additional savings as compared to Option 1 because it incorporates a public/private partnership in governance and administration.

In 2015, the first full year of implementation, PPACA would reduce the number of uninsured by 18,000 people; however 32,000 Vermont residents will remain uninsured. Ultimately in 2019, PPACA will reduce the number of uninsured by 22,000 in 2019. PPACA will likely add an additional $240 million of federal funds in 2015 to the State of Vermont, which will eventually rise to $420 million in 2019. All of these dollar values are expressed in 2010 dollars.

In comparison with option 1 and 3, Option 2 would still leave approximately 30,000 Vermonters uninsured. Option 2 would not expand the current benefits to cover some dental and vision care nor bring up the benefits for those who are currently under-insured.

The comprehensive benefit package under option 1 covers all health services with minimum cost sharing. As a result, it costs more and requires more funds to finance it. Under a payroll contribution scheme of financing, employers and workers will have to pay more than what they would pay if no reform takes place. This comprehensive benefit option would also increase the total health spending in Vermont which would make this option less feasible.

The essential benefit package under option 1 and 3 have leaner benefits and they can be financed through payroll contributions without increasing the amount that most employers and workers would have to pay as compared to if no reform takes place. It would reduce the total health spending in Vermont slightly in 2015 when the proposed reforms are implemented.

Statement (10 pages):

Full report – William Hsiao, Steven Kappel and Jonathan Gruber (138 pages):

Although advocates of the pure single payer model will find some problems with this report on a reform proposal for Vermont, there is very good news in this analysis. The report emphatically confirms the superiority of the single payer model in ensuring that everyone is included while containing health care costs.

In an analysis of the impact of the Patient Protection and Affordable Care Act (PPACA), the authors demonstrated that far too many would still be left without insurance, and it would have a negligible impact in controlling health care costs. As we have said all along, the financing system in PPACA is grossly inadequate and needs to be replaced.

The authors’ Option 2 is essentially PPACA with a “public option” added – a public insurance plan that competes with the private plans. Their analysis shows that it would have only a very modest impact on reducing costs, and an almost negligible impact on reducing the numbers of uninsured. Thus the bluster in support of the public option was misdirected. That energy should have been redirected to supporting single payer instead.

Options 1B and 3 are almost identical. They are both single payer models that totally replace the private insurance plans. They have an “Essential Benefits Package” with an actuarial value of about 87 percent which is close to the typical employer-sponsored plans before they began introducing high deductibles. Their analyses shows that these plans would cover everyone without any increase in spending since the single payer efficiencies would be enough to pay for those currently uninsured or under-insured. So this is the really good news – single payer works (though read on).

The primary difference in 1B and 3 is that 1B is publicly administered whereas 3 is administered by an independent board that contracts with a competitively-selected third party to manage provider relations and claims adjudication and processing. The authors state a preference for Option 3 claiming that it saves a little bit more money by requiring potential managers to compete for the contract. That is highly dubious and more likely was inserted to appease the market ideology of a sector of the twenty some odd contributors to this study. Considering this, I think that we can extrapolate the fact that the authors would also endorse Option 1B, since it is otherwise identical.

Option 1A is like 1B except that it provides a “Comprehensive Benefits Package” – virtually all health care services and products – achieving approximately an actuarial ratio of 97% for medical and mental health services, 90% for drugs and vision care, and 85% for dental, nursing homes and home care. It would cost more than Option 1B, but not that much more. It was not selected by the authors since one of the goals of study was to cover everyone without increasing spending over current levels. In a single payer system the benefits should be comprehensive.

One very serious deficiency is that they decided to leave in place Medicare and Medicaid, primarily because of existing barriers to move them into a single payer system. Thus their proposal is not a single payer system. Leaving these programs in place sacrifices some of the important single payer efficiencies.

They also tout accountable care organizations (ACO), suggesting that capitation should apply to primary care and salaries should apply to specialists. Yet by questions that they pose, they recognize that ACOs are not well defined. For instance, how can they effectively manage the care of a patient that PPACA grants the right to move in and out of the ACO at any and all times?

Within the next couple of days, we’ll have a clearer concept of where the single payer community should be on this report. Tentatively, it seems that it deserves our support, but support that is qualified by strong advocacy to make it right by such measures as including comprehensive benefits, and rolling in and eliminating Medicare and Medicaid.

IOM’s “essential benefits” may serve interests of private insurers

Posted by on Tuesday, Jan 18, 2011

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Health care lobby mum on repeal

By Kate Nocera
January 18, 2011

It’s at meetings like the Institute of Medicine’s Committee on the Determination of Essential Health Benefits where these groups (AHIP and others) can begin to voice their concerns. The committee convened for three days last week to hear from experts, lobbyists and special advocacy groups. The IOM will soon make recommendations to the Department of Health and Human Services on what defines an “essential benefit” that insurers must cover if they want to be listed on the exchanges that are coming in 2014.

Carmella Bocchino, AHIP executive vice president of clinical affairs and strategic planning, asked HHS not to load specific benefits into the bill, so the 10 broad categories of benefits would remain as they are and the market would decide what type of coverage is needed. The group also asked HHS not to include the 2,000 state mandates as part of an essential benefit package. Each state directs insurance providers on what must be covered in the policies they sell. The inclusion of every state mandate in the health care reform law would significantly drive up consumer costs and mandates for all states, which does not necessarily make sense, AHIP argues.


IOM meeting on essential benefits:

The Institute of Medicine (IOM) will be making recommendations to HHS on the definition of required essential benefits for the health plans that are to be offered through the state insurance exchanges. Several experts testifying before IOM’s Committee have called for flexibility in the definition (testimonies provided at IOM link above).

We should all be concerned that the insurance industry intends to use this approach to “let the market decide what type of coverage is needed.” Although the health reform legislation closed large loopholes in insurance coverage, it is clear that the industry fully intends to use innovations in essential benefit design to continue to profit by depriving patients of essential health care.

It was a terrible mistake to design health care financing reform based on the existing model of private insurance plans. No matter how much the private insurers are regulated, they will always find a way to place their own interests first.

It is not too late to stop this nonsense and do it right – establish our own publicly-administered and publicly-financed single payer national health program, an improved Medicare for all.

Wishful thinking on health costs?

Posted by on Monday, Jan 17, 2011

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Wishful Thinking on Health Costs

By David Leonhardt
The New York Times
January 13, 2011

Opponents of the health law sometimes like to suggest that cutting health costs would be easy, if only we’d be willing to try common-sense ideas. But that’s wishful thinking. The law does include most of the common-sense ideas supported by health economists ranging from Mark McClellan (the former Bush administration official) to David Cutler (a former Clinton and Obama adviser). There’s just no getting around the fact that reducing the growth rate of health costs will be difficult.

So many noted policy experts have trumpeted the supposed fact that the health reform law contains essentially all of the cost containment ideas known that now this concept is being accepted unchallenged. This ignores the fact that the most effective model of cost containment was rejected at the very beginning of the reform process.

Numerous microsimulation studies plus the experience of several nations has demonstrated that a single payer system (e.g., an improved Medicare for all) actually bends the cost curve down when contrasted with the fragmented, multi-payer system that we have in the United States.

These same microsimulation studies show that building on our current system, which is precisely what the current law does, is the most expensive model of reform, primarily because it retains the profound administrative inefficiencies that are a major contributor to our very high costs. Setting medical loss ratios recovers only a negligible portion of the administrative waste which permeates our system. The many other efficiencies of a single payer system, such as reducing the administrative burden on the health care delivery system, would recover much of this waste.

Another factor that is not receiving the attention that it should is that the current law can never result in truly universal coverage – tens of millions will remain uninsured. A single payer system not only costs less and slows the growth of health costs into the future, it also automatically covers everyone. Moreover, it uses progressive tax policies to ensure that funding is equitable, making health care affordable for everyone.

The popularity of Medicare is understandable, since it provides us with health security in our later years. But the projected spending increases in this high-risk pool are of concern. We could fix that problem immediately by diluting the costly Medicare pool with the couple hundred million of us who are relatively healthy.

We’re already paying for the Medicare pool anyway, so why shouldn’t we all have the advantage of an efficient health care financing system that eliminates the profound waste of our costly, dysfunctional, fragmented system of a multitude of private and public payers? An improved Medicare for all is the only practical solution to our problem of intolerable cost increases.


Gov. Christie claims that health care will bankrupt New Jersey

Posted by on Friday, Jan 14, 2011

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Christie Says Health-Care Costs to Bankrupt New Jersey Without Concessions

By Terrence Dopp
January 13, 2011

New Jersey Governor Chris Christie said health-care costs “will bankrupt” the state unless it requires workers to pay more for medical coverage.

Christie wants all public employees in New Jersey to contribute more than the current 1.5 percent of salary toward their health benefits.

“We have to have a plan where everyone has some skin in the game,” Christie said. “Right now 1.5 percent is just something we can’t afford. Everyone knows that but they won’t say it.”


“Health care bills are going to bankrupt the government.” New Jersey Gov. Chris Christie is but the latest of conservative politicians to sound this alarm. You would think that they would recommend truly effective policies to bring escalating health care costs under control. But no. They merely wish to shift health care costs from the government, in this case, to their own public employees.

Virtually all economists agree that employer-sponsored health plans actually are paid for by the employees in the form of forgone wage increases. Gov. Christie’s proposal to shift the costs to the employees is not merely a nominal transfer of the payment responsibility; it is a true shift because he is not going to replace the forgone wages.

In trying to contain health care costs we need to look at our entire health care spending, not simply how it is distributed between public and private payers. Reducing government spending on health care by shifting it to others does not reduce total health care spending, except in one very important regard. Making health care unaffordable rations health care based on the inability to pay – the most inhumane form of rationing, and one that is uniquely American.

The claim that health care costs will bankrupt the government is a false claim since we have one of the lowest total tax burdens of all industrialized nations. A very modest increase in tax revenues would solve this problem. On the other hand, passing health care costs onto already financially-strapped employees will surely increase the rate of personal bankruptcies.

I am especially appalled by Gov. Christie’s use of the old standby argument that patients need “more skin in the game.” It creates visions of patients who are out of money and are forced to turn to their own skin to barter for the health care that they desperately need – only to learn that skin is not accepted at banks or currency exchanges.

Is anybody listening on controlling costs?

Posted by on Thursday, Jan 13, 2011

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

The CBO Is Telling Us Something. Is Anybody Listening?

By Austin Frakt
Kaiser Health News
January 11, 2011

The problem is health care costs. They’ll cause budgetary distress with or without health reform. The CBO’s estimates, both of them, show it clearly. Health care costs have been the source of budgetary woes for decades, and there’s no end in sight under any realistic scoring of any serious health reform proposal.

One way to get serious is to embrace the cost control provisions of the new law and to protect them from the likely efforts of future policymakers to undo them. In this, I agree with health economist Henry Aaron, who wrote about the health reform law:

“[T]he bill contains, at least in embryonic form, virtually every idea for cost control that any analyst has come up with. … The most practical cost-control strategy that is now available to Congress is to accelerate the implementation of these provisions, not to stymie them.”



A Milestone in the Health Care Journey

By Ronald Brownstein
The Atlantic
November 21, 2009

“I’m sort of a known skeptic on this stuff,” (Jonathan) Gruber told me. “My summary is it’s really hard to figure out how to bend the cost curve, but I can’t think of a thing to try that they didn’t try. They really make the best effort anyone has ever made. Everything is in here….I can’t think of anything I’d do that they are not doing in the bill. You couldn’t have done better than they are doing.”


Austin Frakt’s voice is now added to those of Jonathan Gruber , Henry Aaron and others who claim that every cost control measure is in the Patient Protection and Affordable Care Act (PPACA). Yet they left out the most effective measure of all – single payer – the one that wasn’t even granted a seat at the table.

Over 30 percent of our national health expenditures are diverted to administration. That is almost twice the percentage of administrative costs in Canada – a nation with a single payer system. If we were to adopt the administrative efficiencies of Canada’s single payer system, we conceivably could recover about 14 percent of our national health expenditures, not in just the first year, but in every year to follow. Even if we were to recover only 10 percent, think of what that would amount to over the years.

The authors of PPACA were aware of this administrative waste, but because they elected to leave the fragmented system of private insurers and public programs in place, they focused narrowly on the administrative costs of the private insurers, which is only a fraction of the administrative costs of our system. They decided to allow the insurers to continue to use 15 to 20 percent of their revenues for administrative functions and profits. Since some were already functioning at this level – especially the non-profits – the net savings is almost negligible. More importantly, this did not address any of the other administrative excesses – especially the huge administrative burden placed on the providers of health care.

There are other important cost-saving features of a single payer system that were also left out of PPACA. These include very effective tools such as the monopsonistic power of a single buyer, global budgeting, negotiated rates, bulk purchasing, and preventing over-utilization of excessive capacity through separate budgeting of capital improvements. These measures, along with the permanent administrative savings, truly bend the cost curve down to more sustainable levels.

Austin Frakt asks the right question. Is anybody listening?

California financial crisis, health students, and single payer

Posted by on Wednesday, Jan 12, 2011

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Brown Unveils Budget Plan With Extensive Spending Reductions

California Healthline
January 11, 2011

(Gov. Jerry) Brown’s proposed budget would reduce spending by about $135.7 million by enacting changes to Healthy Families, California’s Children’s Health Insurance Program.

Brown’s budget also proposes $1.7 billion in cuts to Medi-Cal, California’s Medicaid program.



Labor is out-organized at budget protest

By Michael J. Mishak
Los Angeles Times
January 10, 2011

If today’s budget protests are any indication, organized labor needs to get, well, organized.

After Gov. Jerry Brown unveiled his budget, a handful of labor leaders gathered on the north steps of the Capitol to talk about the concerns of workers and recipients of In-Home Supportive Services and other programs that would see steep cuts. They didn’t get very far.

George Popyack, of the American Federation of State, County and Municipal Employees, was explaining how shifting state services to local governments could compromise quality when he was drowned out by hundreds of students descending on the steps for a separate demonstration in support of single-payer healthcare. Reporters and a camera crew turned to observe the students, who were chanting through bullhorns and banging drums.

“Well, we just lost the camera,” Popyack said.


For report on the single payer rally by Erica Mu of KALW (audio and transcript):

California Health Professional Student Alliance (CaHPSA):

California’s budget crisis is a disaster. The draconian budget cuts will especially impact the state’s health and human services programs, including Medi-Cal and the Children’s Health Insurance Program. The good news is that California’s health professional students are not going to put up with it. They showed up by the hundreds to demand the enactment of a single payer system.

The future of our health care system is in good hands.

A conservative and a liberal on single payer

Posted by on Tuesday, Jan 11, 2011

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Buckle Up for Round 2

By David Brooks
The New York Times
January 6, 2011

Over all, there is a strong likelihood that the current health care law will face an existential threat over the next five years. Each party should be preparing contingency plans.

After the trauma of the last two years, many people wish the issue would go away. But it’s not going away, especially since costs will continue to rise.

When the crisis comes, Democrats will face an interesting choice — to patch the Obama system or try to replace it with something bigger. The administration may want a patch, but by a ratio of nearly 2 to 1, according to a CNN poll, Democratic voters would prefer a more ambitious law. Liberals could logically say that the mistake was trying to create a hybrid system, rather than moving straight to a single-payer one.



ObamaCare Repeal: GOP Should Be Careful What It Wishes For

By Robert B. Reich
The Wall Street Journal
January 7, 2011

Nonetheless, there’s a great irony in the Republican assault. The federal government wouldn’t be nearly as vulnerable to these political and legal obstacles had the health-care law been built upon the framework of Social Security or Medicare — public insurance financed by payroll taxes — as many Democrats had initially urged. Not only are these programs enormously popular — “Don’t take away my Medicare!” was a rallying cry among some conservative populists during the debates over the health-care law — but they also rest on a more widely accepted relationship among the individual, the government and the market.

Americans are accustomed to paying for public insurance through their payroll taxes. Such payments aren’t viewed as federal mandates that encroach upon individual freedoms, or as payoffs to private companies likely to make even more money from mandatory purchases of their products, but as well-deserved entitlements.

Set against this background, the current Republican attack on mandatory coverage is curious because it raises the essential question of how society would otherwise spread health-care risks. If successful — either in Congress or in the courts — a Republican victory could turn into a Pyrrhic one by opening the way to the alternative model, based on the system Americans seem to prefer: payroll taxes and public insurance.


Above are yet two more examples of a common theme. Conservative New York Times columnist David Brooks and liberal Berkeley Professor Robert Reich both imply that the opposition to the government mandate to purchase expensive private health plans may drive us to a much more logical and effective solution for financing health care: single payer (public insurance financed by taxes).

If so many individuals across the political spectrum believe that single payer is likely the inevitable outcome then why aren’t we taking a more serious look at it right now, before people are dragged, screaming and kicking, and then locked into the private insurance exchanges?

Carrying the metaphor further, their screaming should die down by the time they are transferred to the paupers’ prisons.

Metaphors are often used to appeal to the emotions. In this instance, it certainly isn’t humor. There is nothing funny about a government mandate that forces you to buy an overpriced private insurance product that takes away your choices in health care.

So which emotion? Depression? Anger? Rage? We have just seen once again the potential for tragic consequences of the latter. Please. Let’s fix our health care financing system before we’re all in a rage.

A pause

Posted by on Monday, Jan 10, 2011

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Instead of contemplating a health care Quote of the Day today, let’s take a moment to consider what each of us might do to harness the energy behind the forces that would destroy social solidarity, and bring us all together in efforts to heal our social problems such as our sick health care system that leaves so many suffering and dying.

Blue Shield of California’s rate hikes

Posted by on Friday, Jan 7, 2011

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Blue Shield of California seeks rate hikes of as much as 59% for individuals

By Duke Helfand
Los Angeles Times
January 5, 2011

Another big California health insurer has stunned individual policyholders with huge rate increases — this time it’s Blue Shield of California seeking cumulative hikes of as much as 59% for tens of thousands of customers March 1.

In all, Blue Shield said, 193,000 policyholders would see increases averaging 30% to 35%, the result of three separate rate hikes since October.

Nearly 1 in 4 of the affected customers will see cumulative increases of more than 50% over five months.



Statement of HHS Secretary Kathleen Sebelius on Blue Shield of California’s proposed rate increase

U.S. Department of Health and Human Services
January 6, 2011

“The people of California have a right to be concerned when they see this kind of rate increase month after month. We have reached out to California Insurance Commissioner Dave Jones and know he is doing everything in his power to help consumers. We stand ready to assist him and the people of California in any way that we can.”



Statement by Blue Shield of California

Blue Shield of California
January 6, 2011

The rate increases reported today cover a period of more than one year and have almost nothing to do with the federal health reform law. These rates reflect trends that were building long before health reform. Our individual market medical costs are rising rapidly due to higher provider prices, increased utilization, and the fact that healthier people are dropping coverage during a bad economy. Health reform will help slow down this trend by expanding coverage, which will keep healthier people in the system, and through quality and cost containment initiatives such as the Independent Payment Advisory Board, Center for Medicare and Medicaid Innovation, Patient-Centered Outcomes Research Institute and other incentives for prevention and coordinated health care.

Even with these rate increases, Blue Shield of California expects to lose tens of millions of dollars on its individual healthcare business in both 2010 and 2011. These new rates meet the federal requirement that 80 percent of premiums are spent on healthcare expenses.


Last year California’s for-profit Anthem Blue Cross, a division of WellPoint, enraged everyone when they attempted to raise premiums as much as 39 percent. In contrast, Blue Shield of California is a non-profit insurer attempting to compete in a market in which the rules are established by investor-owned insurers, yet they are now calling for premium increases as high as 59 percent. As a provider or a patient, it is difficult to tell the California Blues apart.

That said, the brief statement released by Blue Shield of California explains the reasons for the increases: higher provider prices, increased utilization, and a decline in enrollment in a bad economy resulting in spiraling premiums due to adverse selection. In spite of these premium increases, Blue Shield expects to lose tens of millions of dollars on its individual health plans.

These premium increases are intolerable, but is Blue Shield really to blame? Keep in mind that the average working family of four now uses over $18,000 worth of medical care (Milliman Medical Index), and Blue Shield is trying to sell a product that covers those costs plus its own administrative expenses. With insurer administrative costs at 20 percent for the individual market, that’s about $22,500 that the premium would have to be. To lower the premium, costs are shifted directly to the family through deductibles, co-payments, coinsurance, and paring of benefits, but how much in direct costs can the family bear when median household income is about $50,000?

Blue Shield is facing an impossible situation. They cannot create a product that has both affordable premiums and adequate protection against out-of-pocket medical expenses.

That is why the Patient Protection and Affordable Care Act provides income-indexed subsidies for both premiums and cost sharing, but applying simple math to these subsidies will demonstrate that they are inadequate for the majority of low- and moderate-income families who have health care needs.

If we were to increase the subsidies to a level where they would be adequate, then you would be paying more than an improved Medicare for all would cost since the subsidies would have to pay not only for health care but for all of the administrative excesses of our fragmented system composed of a multitude of private and public plans. If taxpayers are going to pay the bill, we might as well pay the one that is a bargain.

The administrative team at Blue Shield of California is composed of fine people. We should thank them for their dedicated service and offer them job retraining to serve in our expanded and improved Medicare program. For the investors and administrative team at Anthem Blue Cross, we should show them the door.

Lowest rate of health spending increases still very high

Posted by on Thursday, Jan 6, 2011

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Recession Contributes To Slowest Annual Rate Of Increase In Health Spending In Five Decades

Anne Martin, David Lassman, Lekha Whittle, Aaron Catlin and the National Health Expenditure Accounts Team
Health Affairs
January 2011

In 2009, US health care spending grew 4.0 percent — a historically low rate of annual increase — to $2.5 trillion, or $8,086 per person. Despite the slower growth, the share of the gross domestic product devoted to health spending increased to 17.6 percent in 2009 from 16.6 percent in 2008. The growth rate of health spending continued to outpace the growth of the overall economy, which experienced its largest drop since 1938. The recession contributed to slower growth in private health insurance spending and out-of-pocket spending by consumers, as well as a reduction in capital investments by health care providers. The recession also placed increased burdens on households, businesses, and governments, which meant that fewer financial resources were available to pay for health care. Declining federal revenues and strong growth in federal health spending increased the health spending share of total federal revenue from 37.6 percent in 2008 to 54.2 percent in 2009.


How much are we spending on health care?

For 2009:

National health expenditures: $2.5 trillion

Percent of GDP: 17.6%

Spending per person: $8,086

Although the title of this article and the news reports stemming from it tout the fact that this is the slowest increase in health care spending in five decades, the 4.0 percent increase is well in excess of inflation and remarkably high considering that it occurred during the Great Recession.

Perhaps the most impressive number that demonstrates this increased spending on a background of the recession is the percent of federal revenues that were directed to federal health spending. Federal revenues decreased 18.2 percent while federal health spending increased 17.9 percent. Thus the federal revenues directed to federal health spending increased from 37.6 percent in 2008 to 54.2 percent in 2009. Over half of the recession-impacted federal revenues were spent on federal health programs!

These numbers demonstrate that even a severe recession was unable to reduce the increase in health care spending to anywhere near the rate of inflation nor the growth in GDP (gross domestic product).

Since the cost containment measures in the Patient Protection and Affordable Care Act (PPACA) are so weak, there is little hope for truly significant relief from escalating costs in the foreseeable future. Yet just the administrative savings alone of a single payer system would be much more effective, and there is no reason that an improved Medicare covering everyone couldn’t adopt some of the modest but beneficial cost-saving measures of PPACA so long as they have no detrimental policy impacts.

Instead of repealing PPACA, we need to retain the beneficial measures, but then replace the flawed financing component with one that will work – an improved Medicare for all.

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