By CBO’s Single-Payer Health Care Systems Team
Congressional Budget Office, December 2020
In this paper, CBO describes the methods it has developed to analyze the federal budgetary costs of proposals for single-payer health care systems that are based on the Medicare fee-for-service program. Five illustrative options show how differences in payment rates, cost sharing, and coverage of long-term services and supports under a single-payer system would affect the federal budget in 2030 and other outcomes. CBO’s projections of national health expenditures under current law are a key basis for the estimates.
CBO projects that federal subsidies for health care in 2030 would increase by amounts ranging from $1.5 trillion to $3.0 trillion under the illustrative single-payer options—compared with federal subsidies in 2030 projected under current law—raising the share of spending on health care financed by the federal government. National health expenditures in 2030 would change by amounts ranging from a decrease of $0.7 trillion to an increase of $0.3 trillion. Lower payment rates for providers and reductions in payers’ administrative spending are the largest factors contributing to the decrease. Increased use of care is the largest factor contributing to the increase.
Health insurance coverage would be nearly universal and out-of-pocket spending on health care would be lower—resulting in increased demand for health care—under the design specifications that CBO analyzed. The supply of health care would increase because of fewer restrictions on patients’ use of health care and on billing, less money and time spent by providers on administrative activities, and providers’ responses to increased demand. The amount of care used would rise, and in that sense, overall access to care would be greater. The increase in demand would exceed the increase in supply, resulting in greater unmet demand than the amount under current law, CBO projects. Those effects on overall access to care and unmet demand would occur simultaneously because people would use more care and would have used even more if it were supplied. The increase in unmet demand would correspond to increased congestion in the health care system—including delays and forgone care—particularly under scenarios with lower cost sharing and lower payment rates.
Congressional Budget Office Scores Medicare-For-All: Universal Coverage For Less Spending
By Adam Gaffney, David Himmelstein, Steffie Woolhandler
Health Affairs Blog, February 16, 2021
For the first time in a quarter century, the Congressional Budget Office (CBO) has undertaken an economic analysis of single-payer health care reform, also known as Medicare for All. The more than 200-page working paper, released last month, includes a rich explanation of methodology together with cost projections for 2030 and will no doubt serve as an important reference for years to come.
The report makes many sound assumptions but also some questionable ones that are overly pessimistic. Yet, overall, its bottom-line estimates should reassure those concerned about the economic feasibility of single payer: The CBO projects that such reform would achieve universal coverage, bolster provider revenues for clinical services, and eliminate almost all copayments and deductibles—even as overall health care spending fell.
We discuss below (see article at link) the CBO’s estimates of single payer’s overall effects on national health spending, the implications of the estimates for providers, and the concerns the analysts raise about worsened “provider congestion” under a single-payer health care system. Throughout, we point out instances where the CBO’s assumptions differ from previous, widely publicized analyses, or from provisions included in the Medicare for All legislation currently in Congress.
The Economics Of Single-Payer Financing: CBO’s Bottom Line
Overall, the CBO report provides one of the most detailed explorations to date of the economics of single-payer financing. As we have noted, it makes many sound assumptions, particularly about payer- and provider-side administrative savings. At the same time, it adopts some unfavorable assumptions about the structure of single-payer reform (including some that conflict with key provisions of the Medicare for All bills in Congress), projects excessive windfalls for some providers, and asserts clinically nescient portrayals of “unmet demand.” Nonetheless, the bottom line of the CBO analysis—that universal coverage can be affordably achieved even as benefits are expanded and cost sharing all but eliminated—should reinvigorate debate over such reform.
By Don McCanne, M.D.
The CBO report discusses the potential impact of various models of a single payer system not only on the federal budget, but also on national health expenditures. In considering these theoretical changes, it is fully expected that assumptions may be made that are not shared by all in the policy community. In their Health Affairs blog, single payer experts Adam Gaffney, David Himmelstein and Steffie Woolhandler explain the deviations from more widely accepted single payer analyses and what impact these revised assumptions would have.
Since we are more interested in an analysis of a preferred model of single payer Medicare for All, the 200 plus page CBO report should be read only in conjunction with the brief Health Affairs article. You will find that single payer is potentially even better than the favorable CBO analysis.
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