What is National Health Insurance?

April 14, 2003

Who is Eligible
Every person living in the United States and the U.S. Territories would receive a United States National Health Insurance Card and i.d number once they enroll at the appropriate location. Social Security numbers may not be used when assigning i.d cards. No co-pays or deductibles are permissible under this act.

Benefits/Portability
This program will cover all medically necessary services, including primary care, inpatient care, outpatient care, emergency care, prescription drugs, durable medical equipment, long term care, mental health services, dentistry, eye care, chiropractic, and substance abuse treatment. Patients have their choice of physicians, providers, hospitals, clinics, and practices.

Conversion to a Non-Profit Health Care System
Private health insurers shall be prohibited under this act from selling coverage that duplicates the benefits of the USNHI program. They shall not be prohibited from selling coverage for any additional benefits not covered by this Act; examples include cosmetic surgery, and other medically unnecessary treatments.

Cost Containment Provisions/ Reimbursement
The National USNHI program will annually set reimbursement rates for physicians, health care providers, and negotiate prescription drug prices. The national office will provide an annual lump sum allotment to each existing Medicare region, which will then administer the program. Payment to health care providers include fee for service, and global budgets.

The conversion to a not-for- profit health care system will take place over a 15 year period, through the sale of U.S. treasury bonds; payment will not be made for loss of business profits, but only for real estate, buildings, and equipment.

Funding & Administration
The United States Congress will establish annual funding outlays for the USNHI Program through an annual entitlement. The USNHI program will operate under the auspices of the Dept of Health & Human Services, and be administered in the former Medicare offices. All current expenditures for public health insurance programs such as S-CHIP, Medicaid, and Medicare will be placed into the USNHI program.

A United States National Health Insurance Advisory Board will be established, comprised primarily of health care professionals and representatives of health advocacy groups.

Proposed Funding For USNHI Program
$1.86 Trillion Per Year
An equitable way to raise a budget of $1.861 trillion ($56.7 billion less than without reform) is the following:

A payroll tax on all employers of 3.3%
Maintain employee and employer Medicare payroll tax of 1.45%
Implement a variety of mechanisms so that low and middle income families pay a smaller share of their incomes for health care than wealthiest 5% of Americans
A small tax on stock and bond transfers
Close corporate tax shelters
Repeal of the Bush tax cut of 2001

Using data from the Lewin Groups recent study of single-payer in California, along with a package of progressive financing developed under the direction of the late Tony Mazzochi, a life-long advocate for economic justice, it is estimated that the NHI would reduce health spending in 2005 from $1,918 billion to $1,861.3 billion (a savings of over $56 billion) while covering all the uninsured. Ninety-five percent of families would pay less for health care than they do today.

Sources of Revenue (2005)
Government
$852.5 billion
Keep existing federal, state and local revenues that currently pay for Medicare (employer and employee payroll taxes of 1.45% each or $194 billion) and other federal and state programs (with the exception of revenues that now pay government workers health premiums).

Employers
$220.8 billion
Implement a modest payroll tax of 3.3% on all public and private employers, while eliminating employer premiums for private health plans. Employers that currently pay all or part of their employees health premiums will face much lower health costs than they do today (employers who provide coverage currently pay an average of 8.5% of payroll for much less comprehensive coverage). A 3.3% payroll tax is low enough so that all employers (including those that do not provide coverage today) should be able to contribute without undue hardship.

In 2005, without reform, the average employer that offers coverage will contribute $2,600 to health care per employee (for much skimpier benefits). Under this proposal, the average cost to employers for an employee earning $35,000 a year will be reduced to $1,155, less than $100 per month.

Heath tax on the wealthiest 5% of Americans
$221.8 billion
The wealthiest Americans, who accumulated nearly all the gains from economic growth in the past two decades, should pay their fair share for health care. Today, poor and middle-income Americans pay a higher percentage of their incomes for health care than the very wealthiest Americans. This budget includes an additional 5% income tax on the top 5 to 1% of the population, the group that in 2002 had declared incomes of $140,000 to $250,000. This tax exempts the first $140,000 in income, and does not include unrealized capital gains in stocks, bonds, home sales, etc. The budget also includes a 10% income tax on the richest 1% of Americans, those with average incomes of $1,100,000 (exempting the first $250,000 in income, and not counting capital gains on stocks, bonds, property). The most well-off Americans also are the most dependent on a healthy labor force for employees and services. Thus, they will benefit greatly from their modest additional investment in universal health care.

Tax on stock and bond transactions
$144.6 billion
Anyone who buys or sells a stock will pay a transaction tax equal to one quarter of one percent of the purchase price. For example, a $100 stock purchase will be taxed a total of 50 cents. For those who invest and hold on to stocks, the tax is minimal. Other financial transactions will also be taxed minimally. This will provide another progressive revenue stream for health care. The wealthiest 10% of households own over 80% of all stocks, including those in mutual funds or pension plans. Over 40% of all stock is owned by the richest 1 percent of households. About half of all households own no stocks, not even in mutual funds or pension plans such as IRAs, 401(k), 403(b) or Keogh plans.

Close corporate tax shelter loophole
$105.2 billion
According to the Treasury Department, corporations are very skilled at avoiding paying their taxes, costing the government billions annually. An increase in abusive tax shelters - various accounting methods that have no legitimate business purpose and are invented solely to lower a companys taxes means that corporations are paying less in taxes (as a percentage of profits) than they did in the 1960s. Closing these loopholes and making corporations pay their fair share of taxes will raise over $100 billion annually for health care (David Cay Johnston, ‘Corporations Taxes are Falling Even as Individuals Burden Rises’ New York Times, Feb 20, 2000 and ‘US Takes Aim at Tax Shelters for Companies’ New York Times, Feb 29, 2000.)

Repeal the Bush tax cut of 2001 and invest the Bush ‘economic stimulus plan’ of 2003 into health care
$206 billion
The 2001 Bush tax cut ($120 billion) benefited the wealthiest Americans the most. Everyone should pay their fair share for health care. Bush has also proposed $865 billion in additional cuts over the next nine years (an average of $86 billion a year over the next decade), tax cuts that would mostly benefit those with very high incomes. Redirecting this funding into health care spending would provide a genuine economic stimulus while providing an important public service. Health care is a social good that benefits everyone (e.g. wealthy Americans not only need secure health coverage for their own families, they also depend on a healthy labor force for their incomes and services).

Household
$65.9 billion
National health insurance eliminates all household contributions to private premiums (including Medi-gap plans), co-payments, deductibles and all out-of-pocket costs for services not currently covered like dental, vision, and prescription drugs. Total household expenditures will drop from $326.7 billion to $65.9 billion annually. The only expenses left for individuals will be over-the-counter drugs such as aspirin, elective cosmetic surgery, etc. This represents an 80% reduction in current out-of-pocket expenses.

Existing non-patient revenues
$44.5 billion
Existing funds raised from donations from individuals and foundations and from hospital gift shops will continue to contribute a small percentage of the total budget.

Total budget: $1.861 trillion

This progressive funding package was developed in 2001 by Tony Mazzochi (Labor Party),Drs. David Himmelstein and Steffie Woolhandler (Harvard), with assistance from Dean Baker (Center for Economic Research and Policy).

Technical Appendix on Financing National Health Insurance
Dean Baker, Center for Economic Research and Policy
February, 2003

1) Overall estimates of spending with and without reform, 2005: Includes savings from administrative simplification ($178.2 billion) and bulk purchasing ($50.5 billion) minus an increase in utilization ($172 billion) as a result of universal coverage. The estimate of savings on administration (9.3 percent) and bulk purchases (2.6 percent) are taken from the Lewin Groups analysis of the Cal Care single payer proposal for California, figure 17 [www.healthcareoptions.ca.gov]. The estimates have been multiplied by the ratio of projected health care spending in 2005 to 2002 spending. The data on national health care expenditures and public expenditures for 2005 is taken from the Centers for Medicare and Medicaid Services, Table 3: National Health Expenditures Aggregate and per Capita Amounts, Percent Distribution and Average Annual Percent Change by Source of Funds: Selected Calendar Years 1980-2010 [http://cms.hhs.gov/statistics/nhe/projections-2000/t3.asp].

The estimated cost of a single payer system is taken from the Lewin Groups analysis of the Cal Care single payer proposal for California, figure 17 [www.healthcareoptions.ca.gov]. The estimate assumes that the ratio of the cost of a national single payer system to the cost of the current system will be the same in 2005 as the ratio Lewin estimated of the Cal Care plans to base line spending for California in the year 2002. This estimate includes the cost of home health care. It also uses the Lewin Groups estimate of a 10.7 percent increase in utilization resulting from universal coverage and the elimination of most forms of co-payments.

Future projections are based on data from the Centers for Medicare and Medicaid Services that show that health spending will grow 7.3% annually without reform (Table 3: National Care Health Expenditures Projections: 2002-2011). The growth rate of expenditures is assumed to be 1.3 percentage points lower each year in the universal system than with the current system, following the analysis of the California Cal Care plan by the Lewin Group (Lewin Appendix page H-18, Figure 9). The estimate of per capita expenditures divides the 2005 expenditures by population (levels and growth are taken from the Social Security trustees report, table V.A.2).

2) A 3.3 percent payroll tax will raise $220.8 billion, based on the Social Security trustees projection of the revenue yielded in 2005 by the 2.9 percent Medicare tax (Social Security trustees report, 2002 (table VI.E.10). 9) The savings per worker for firms that already provide workers with coverage are derived from Lewin Groups estimate that the average premium per worker in California in 2002 was $2256. This figure is increased by 15.1 percent to account for cost increases between 2002 and 2005

3) The tax yields from a 10 percent income tax on the richest 1% of families and a 5% percent income tax on the top 5 to 1% of families were calculated by taking the share of these groups income as indicated in Mishel, Bernstein, and Boushey, 2003, table 1.22

4) The estimates of revenue for the stock/bond transfer tax are taken from Pollin, Baker, and Schaberg, 2002. The 1997 estimate was multiplied by 1.49 to take account of GDP growth between 1997 and 2005. Other minimal rates of taxation used for this estimate are: Government bonds (0.1%), corporate bonds (0.1%), futures contracts (.02%), currency (0.1%), swaps (0.02%).

5) Reversing the Bush tax cut would raise an estimated 1 percent of GDP, which would be $120 billion in 2005. Re-directing the ‘economic stimulus’ plan to health care would contribute $86 billion a year (Families USA, ‘Tax Cuts for the Rich or Solving Major National Health Problems’ 2/3/03).

6) The estimate of $105.2 billion from closing corporate loopholes and having corporations pay their fair share of taxes is estimated by comparing corporate tax rates on profits from 1960 to 2002.

7) It is estimated that 3.7 percent of medical expenses will be born directly by households (e.g. purchases of over the counter drugs) and that 2.5 percent would come from charitable donations or other non-patient forms of income.