By Ida Hellander, M.D.
Director of Health Policy and Programs, PNHP
Misinformation about single payer is nothing new. When the U.S. was at war with Germany in WWI, national health insurance was attacked as “the Kaiser’s health plan.” President Johnson’s Medicare program – which turned 50 last year – was aggressively red-baited as “socialized medicine” by the right.
Responses to 10 recent attacks on single payer in the news are below.
1. Single payer is an expensive “tax hike on the middle class.”
By eliminating the waste and bureaucracy associated with the private insurance industry, single payer saves over $400 billion (yes, that’s with a “b”) a year on administrative costs that can be funneled into patient care. That’s enough money to cover all the uninsured and to eliminate co-pays and deductibles for everyone. Negotiating drug prices with pharmaceutical companies, as other nations do, will save even more. As a result, single payer is able to cover everyone with no increase in national health spending, and is the only reform that pays for itself. A recent attack by Ken Thorpe that single payer will raise costs is refuted here.
Over the long term, single payer’s ability to control health care costs will generate even more savings compared to the status quo. At the current rate of medical inflation (5.6 percent), health care is projected to consume 20 percent of GDP in 2024 year, about double the share of GDP other wealthy nations devote to health care. Single payer controls costs with proven effective strategies such as negotiated fees with doctors, global budgets for hospitals and other institutions, bulk purchasing from drug and device companies, and real health planning for capital investment. Since Canada adopted a single-payer program, their health care costs have grown more slowly than costs in the U.S. One study estimated that U.S. could have saved over $2.2 trillion between 1980 and 2009 in the Medicare program alone if costs had grown at Canadian rates.
A new study shows that taxes already fund 64.3 percent of U.S. health spending. As a result, the tax increase necessary to fund a national health program is relatively low. Americans spend more public dollars per capita ($5,960 per capita in 2013) on health care than the citizens of other nations pay – including those with universal health systems – except Switzerland. In that sense, Americans are paying for national health insurance, but not getting it.
In terms of how single payer would be financed, PNHP does not have a specific plan, but advocates replacing most private funding from households and businesses – about one-third of health spending – with progressive taxes. Taxes would replace health benefit costs by employers and the heavy burden of current health care spending by families on insurance premiums, co-pays, and deductibles for medically necessary care.
In addition to replacing premiums and other health spending with income-based taxes, single payer redistributes the current burden of health care costs from the poor and sick (who often fall into bankruptcy from medical debt and job loss) to the wealthy. Health care costs must be redistributed because they are so high that people of low and middle-incomes can no longer afford health care. This is evidenced by research showing that medical bankruptcy was unaffected by ACA-like reforms in Massachusetts. The Milliman actuarial firm estimated the cost of health care for an average family of four in a PPO to be $23,215 in 2014, while average household income was $53,657. By redistributing health care costs, single payer helps reduce income equality.
The reason health care costs are so high in the U.S. is because we have a market-driven health care system. This is especially obvious with medications, as drug companies price their products as high as the market will allow, irrespective of how much it cost to develop and produce a drug. But it’s true across the medical-industrial complex: From hospitals to hospice care, studies show that for-profit health care raises costs and lowers quality. And among insurers, overhead is sevenfold high in private insurance than in the traditional Medicare program, where it is less than 2 percent.
Two possible financing schemes have been proposed for single payer, one for H.R. 676, single-payer legislation in the House, and another by Sen. Bernie Sanders. Both plans would raise household incomes for the vast majority of families. An attack on the Sanders financing plan is refuted here.
The Sanders plan would institute a small payroll tax or “income-based health premium” that would replace current health care spending by middle-class families on insurance premiums, co-pays, and deductibles for medically necessary care. (Goods and services that would not be covered include over-the-counter medications – $44 billion in 2014, or 1.5 percent of health spending – as well as luxury eyeglasses, cosmetic surgery, and some dental. Long-term care services would require case management.) In his financing plan, this tax is 2.2 percent of income. As a result, net household incomes for the vast majority of families would rise under single payer. Employers would also pay a payroll tax of 6.2 percent for health care for their workers that would replace what they are currently spending on health benefits (private employers pay 7.7 percent of total compensation towards health benefits, while state and local government pays 11.6 percent).
The Sanders plan redistributes the burden of health care costs from low- and middle-income households to the wealthy by raising marginal tax rates on incomes above $250,000, taxing capital gains, dividends, and estates, and closing some tax loopholes. The top one-tenth of 1 percent of households (average incomes of $2 million – $10 million) and in particular, the 1,300 wealthiest households (average incomes over $10 million) would pay the highest marginal tax rates (48 percent and 52 percent, respectively). The average middle-class household would pay less in taxes than they are already paying for care.
2. Single payer would “eliminate the ACA” and its protections for people with preexisting conditions.
In fact, single payer would replace current skimpy policies that are inadequate and require very high cost sharing (e.g. a $10,545 deductible for a “bronze” family plan, a $6,010 deductible for a “silver” plan) with guaranteed lifelong coverage regardless of age, income, or health status. It would also eliminate co-payments and deductibles, which is important for people with preexisting and chronic conditions, and anyone with a serious illness. A recent article by oncologists advocated for single payer because of the burden of the high cost of cancer care on their patients.
Single payer does not “eliminate” the ACA or require that we “re-litigate” old health debates. It moves the country forward, replacing the ACA and other public and private programs with a program that works by addressing the underlying cause of the health care crisis – a market-based health care system driven by profits, not patients.
3. Single payer would require that we pay physicians and hospitals less.
No. Single payer is not financed by reducing physician incomes and hospital revenues, but by slashing administrative overhead and bureaucracy associated with the private insurance industry and funneling those resources – $400 billion annually – into patient care. Currently, one-quarter of hospital spending goes to billing and insurance related overhead, and administrative work consumes one-sixth of physicians’ time. Doctors in the U.S. spend four times as much ($82,975) as Canadian physicians on overhead due to the complexity of our payment system. Private insurance overhead is sevenfold as much as Medicare’s. By slashing administrative costs, and monopsony purchasing of drugs and devices, single payer frees up enough money to expand coverage to the uninsured and eliminate co-pays and deductibles for everyone.
While physicians on the whole won’t make less, the gap between what the various specialties earn may narrow. In Canada, physician income has increased under their single-payer plan.
Single payer is also a potent tool for improving quality and detecting fraud in health care because health care utilization and payment information is all in one database, instead of hundreds of proprietary databases run by insurance companies. This makes it easy to identify outliers (e.g. a physician billing for many more tests than their peers) and to track what’s going on (e.g. the UK was able to easily track down every patient who had received a certain type of defective hip implant, and Medicare was able to detect inappropriate anti-psychotic prescribing to seniors in nursing homes).
4. Single payer will put state governors in charge of health care.
No. The ACA did that with Medicaid, after the Supreme Court ruled that the Medicaid expansion contained in the ACA was, in effect, optional. As a result of the opposition of Republic governors and legislatures, 5 million poor Americans in 19 states remain uninsured.
Single payer would be administered at the federal level, as Medicare is today. In some single-payer proposals, starting with the late Sen. Paul Wellstone and in earlier versions of Sen. Sanders’ plan, single payer would have been administered at the state level, like Canada’s provincial health plans, but the federal government would have taken over running the health system for any state that did not do so. Sen. Sanders’ current plan is administered at the federal level.
5. Vermont decided not to adopt single payer because it was too expensive.
The Vermont plan, known as Green Mountain Care, was not a single-payer plan. The ultimate design for GMC retained multiple payers, and would have continued to pay hospitals and other institutional providers on a per-patient basis, perpetuating the expensive billing apparatus that siphons funds from care. Hospitals would have continued to rely on surpluses from day-to-day operations as their main source of capital funds, forcing hospital administrators to identify and pursue profit opportunities. Single payer pays hospitals via lump-sum budgets with separate grants for capital costs. Even so, it was political will, not cost, that defeated the Vermont health reform. The health exchange the state set up under the ACA didn’t work (as happened in several other states as well), draining political capital, and the governor barely squeaked through his re-election. A contributing factor was that the financing plan developed by the governor’s own team was not very progressive or diversified. Finally, making formerly hidden health care costs transparent by replacing them with taxes, even if the taxes are lower, is a heavy political lift.
6. Moving to a single-payer system would be a “tumultuous” experience. Single payer would require a massive transformation of the health care system.
Transitioning to single payer would be easier than for any other health reform, or dealing with annual insurance changes at work, for that matter. Americans would only need to enroll once for life, and most people could be automatically enrolled through the Social Security System. For those that aren’t enrolled automatically, it should be noted that Medicare enrolled 19 million people in 1966 with index cards, for a cost of $867 million (in today’s dollars), including the cost of beneficiaries’ medical care. In contrast, the transition to the ACA was filled with “glitches” and cost $6 billion.
The major change in the health system would be that patients would be able to choose their doctors and hospitals, and doctors would only need to bill one source. Patients would no longer receive medical bills and doctors and hospitals would no longer have to commit so much time and money to getting paid.
No other reform will actually control costs and get us to universal coverage. What is tumultuous is the health care crisis, which will remain until we have a single-payer system. Providers are rapidly consolidating into large health and hospital systems to gain market power and assure their revenues for the future. This process is raising, not lowering, costs. Consolidation would not be necessary under a single payer. In fact, by simplifying the payment system, single payer enables providers to return to small or solo practice if they choose.
7. A simple, efficient single payer is not politically feasible in the current Congress.
That’s why we need a grassroots mobilization and campaign finance reform, so that Congress can represent the people they are supposed to serve, not the insurance and drug companies. A December 2015 poll found that 58 percent of Americans support Medicare for All, including 81 percent of Democrats, 60 percent of Independents and even 37 percent of Republicans. Women’s suffrage and abolition were once politically infeasible too.
Incidentally, in 2009 the Democrats had the White House, a large majority in the House, and 60 Senators – all the votes needed to pass single payer. What was lacking was political will.
8. Single payer would cause “debate over abortion, contraception, HIV prevention, immigration policy, and other matters.”
This is a red herring. Controversial matters are debated all the time, in the context of health reform, and outside it, as with immigration policy.
As physicians, we advocate that everyone living and working in the U.S. be covered for all medically necessary care, including immigrants. Undocumented immigrants are currently excluded from many state and federal health programs, including the ACA, even though recent research shows that unauthorized immigrants contributed a net of $35.1 billion to the Medicare Trust Fund between 2000 and 2011.
9. Single payer would cut benefits for workers with employer-sponsored coverage.
Employer-sponsored benefits have been steadily eroding for over a decade, with more employees now saddled with unaffordable co-payments and deductibles. The average deductible for a family with HMO coverage is $2,758 and for an individual is $1,318. Also, workers are increasingly limited to a narrow network of providers. In contrast, 83 percent of primary care physicians and 91 percent of specialists nationally report they are accepting new Medicare patients, giving beneficiaries a much wide choice of doctors.
The ACA’s 40 percent excise tax on high-cost workplace private health insurance, the misnamed Cadillac tax, had already begun to drive benefits down when it was postponed late last year. Although the tax wasn’t supposed to go into effect until 2018, unions negotiating multi-year contracts found that employers were using it as leverage at the bargaining table to push for wage and benefit cuts.
Single payer would improve benefits for children, working age-adults, and seniors (see note below) by eliminating out-of-pocket costs and premiums and by giving patients a free choice of providers. It would also end “job lock” whereby people have to stay in a job to keep their benefits.
Note: The current Medicare program requires co-payments and deductibles and requires beneficiaries to purchase drug coverage separately (with federal subsidies). Single payer would eliminate out-of-pocket costs and the need for separate drug coverage and supplemental plans. For that reason, national single payer legislation is called the “Expanded and Improved Medicare for all Act.” It would help seniors, who have average incomes of $23,500 and currently spend an average of $4,734 a year on out-of-pocket medical costs and premiums.
10. Single payer plans “lack details.”
Not all of them. Physicians for a National Health Program’s single-payer plan (cited in the New Yorker recently as a good model) has more details about how single payer would work in practice, and served as the model for national legislation, H.R. 676. PNHP’s proposal appeared in the Journal of the American Medical Association and may be found here.
But the length of a plan is not correlated with its effectiveness. Some single-payer plans, including plans adopted in other countries, have been succinct.
The Canada Health Act was just 8 pages long. It specified the five key principles of Canadian health insurance: Universal (“all insured residents”), Comprehensive (coverage for “all necessary health services”), Portable (from province to province), Accessible (“reasonable access to health facilities” and “reasonable compensation” for providers, and Public Administration. Every provincial health plan must meet these principles, which have stood the test of time.
Rep. John Conyers single payer plan, H.R. 676, is just 30 pages long.
Conversely, the ACA contains 906 pages of details, but it hasn’t solved the health care crisis. The ACA was drafted by a former insurance company executive, Liz Fowler, who left government to become a lobbyist for a drug company.
****
The health care crisis by the numbers – 2016
33.0 million Americans (10.4 percent) are still uninsured, including 5 million children (Census Bureau).
31 million Americans are underinsured (Commonwealth Foundation). 20 percent of insured Americans have trouble paying their medical bills. Among those who reported having problems paying their bills despite having insurance, 63 percent said they used up all or most of their savings; and 43 percent said they skipped medical care they needed in the past year due to the cost (New York Times/Kaiser poll. 1/5/16).
Health care costs are high and rising by 5.6 percent a year. In 2014, health spending was $3.0 trillion, $9,523 per capita, 17.5 percent of GDP. By 2024 health care will be 19.6 percent of GDP, nearly 20 percent of the economy. Deductibles are rising seven times faster than wages. The average employer-based family policy costs $17,545, of which employees are paying $4,955 of the premiums for a plan with a deductible $2,758 for HMO coverage.
Drug prices are skyrocketing. Pfizer raised their list prices on over 60 brand name drugs with at least $10 million in annual U.S. sales by 10.6 percent at the beginning of the year, according to the Wall Street Journal (1/10/16). At least four other large drug firms have similarly raised prices across a broad spectrum of products for no reason other than to boost profits.
Dr. Ida Hellander is director of policy and programs at Physicians for a National Health Program, a 20,000-member nonprofit, nonpartisan organization of doctors headquartered in Chicago. She co-edits PNHP’s newsletter and specializes in teaching clinicians evidence-based health policy and empowering them to become effective advocates for reform. Dr. Hellander received her B.A. from Yale and her M.D. from the University of Minnesota Medical School. Before joining PNHP in 1992, she was a research associate with the Public Citizen Health Research Group. She is a member of the International Association of Health Policy, a frequent contributor to the International Journal of Health Services and co-author of the book “Bleeding the Patient: The Consequences of Corporate Health Care.”