The Sanders Single-Payer Health Care Plan: The Effect on National Health Expenditures and Federal and Private Spending
By John Holahan, Matthew Buettgens, Lisa Clemans-Cope, Melissa M. Favreault, Linda J. Blumberg, Slyabonga Ndwandwa
Urban Institute, May 9, 2016
Presidential candidate Bernie Sanders proposed a single-payer system to replace all current health coverage. His system would cover all medically necessary care, including long-term care, without cost-sharing. We estimate that the approach would decrease the uninsured by 28.3 million people in 2017. National health expenditures would increase by $6.6 trillion between 2017 and 2026, while federal expenditures would increase by $32.0 trillion over that period. Sanders’s revenue proposals, intended to finance all health and nonhealth spending he proposed, would raise $15.3 trillion from 2017 to 2026—thus, the proposed taxes are much too low to fully finance his health plan.
Urban Institute Board of Trustees:
An Analysis of Senator Bernie Sanders’s Tax and Transfer Proposals
By Gordon B. Mermin, Leonard E. Burman, Frank Sammartino
Tax Policy Center, May 9, 2016
Presidential candidate Bernie Sanders proposes significant tax increases that would raise $15.3 trillion over the next decade. All income groups would pay more tax, but most would come from high-income households, particularly those with very high incomes. Sanders would also implement new government benefits—notably government-financed single-payer health care, long-term services and supports, college, and family leave benefits—and expand Social Security benefits. TPC finds the new government benefits would more than offset new taxes for 95% of households but the combined tax and transfer plan would increase federal budget deficits by more than $18 trillion over the next decade.
The Urban Institute’s Attack On Single Payer: Ridiculous Assumptions Yield Ridiculous Estimates
By David Himmelstein and Steffie Woolhandler
The Huffington Post, May 9, 2016
The Urban Institute and the Tax Policy Center today released analyses of the costs of Sen. Bernie Sanders’ domestic policy proposals, including single-payer national health insurance. They claim that Sanders’ proposals would raise the federal deficit by $18 trillion over the next decade.
We won’t address all of the issues covered in these analyses, just single-payer Medicare for all. To put it bluntly, the estimates (which were prepared by John Holahan and colleagues) are ridiculous. They project outlandish increases in the utilization of medical care, ignore vast savings under single-payer reform, and ignore the extensive and well-documented experience with single-payer systems in other nations – which all spend far less per person on health care than we do.
The authors’ anti-single-payer bias is also evident from their incredible claims that physicians’ incomes would be squeezed (which contradicts their own estimates positing a sharp rise in spending on physician services), and that patients would suffer huge disruptions, despite the fact that the implementation of single-payer systems elsewhere, as well as the start-up of Medicare, were disruption-free.
We outline below some of the most glaring errors in the Holahan analysis (which served as the basis for Tax Policy Center’s estimates) regarding health care spending under the Sanders plan.
1. Administrative savings, Part 1: Holahan assumes that insurance overhead would be reduced to 6 percent of total health spending from the current level of 9.5 percent. They base this 6 percent estimate on figures for Medicare’s current overhead, which include the extraordinarily high overhead costs of private Medicare HMOs run by UnitedHealthcare and other insurance firms. However, Sen. Sanders’ proposal would exclude these for-profit insurers, and instead build on the traditional Medicare program, whose overhead is less than 3 percent. Moreover, even this 3 percent figure is probably too high, since Sanders’ plan would simplify hospital payment by funding them through global budgets (similar to the way fire departments are paid), rather than the current patient-by-patient payments. Hence a more realistic estimate would assume that insurance overhead would drop to Canada’s level of about 1.8 percent. Cutting insurance overhead to 2 percent (rather than the 6 percent that Holahan projects) would save an additional $1.7 trillion over the next 10 years.
2. Administrative savings, Part 2: Holahan completely ignores the huge savings on hospital administration and doctors’ billing under a streamlined single-payer system. Every serious analyst of single-payer reform has acknowledged these savings, including the Congressional Budget Office, the Government Accountability Office, the Lewin Group (a consulting firm owned by UnitedHealth Group), and even Kenneth Thorpe (a former Clinton administration official who has criticized Sanders’ plan, although his recent estimates of savings are far lower than those he made prior to the current presidential campaign).
These provider savings on paperwork would, in fact, be much larger than the savings on insurance overhead. At present, U.S. hospitals spend one-quarter of their total budgets on billing and administration, more than twice as much as hospitals spend in single-payer systems like Canada’s or Scotland’s. Similarly, U.S. physicians, who must bill hundreds of different insurance plans with varying payment and coverage rules, spend two to three times as much as our Canadian colleagues on billing.
Overall, these administrative savings for doctors and hospitals would amount to about $2.57 trillion over 10 years. Additional savings of more than $1.5 trillion from streamlined billing and administration would accrue to nursing homes, home care agencies, ambulance companies, drug stores and other health care providers.
In total, the Holahan analysis underestimates administrative savings by about $6 trillion over 10 years.
3. Drug costs: Holahan projects that a single-payer plan would have to pay 50 percent higher drug costs than those paid at present by Medicaid. Moreover, their estimate assumes that the U.S. would continue to pay much higher prices for drugs than other nations, despite the fact that a U.S. single-payer system would have much greater negotiating leverage with drug companies than other national health insurance schemes.
Reducing drug prices to the levels currently paid by European nations would save at least $1.1 trillion more than Holahan posits over 10 years.
4. Utilization of care: Holahan projects a massive increase in acute care utilization, but does not provide detailed breakdowns of how big an increase they foresee for specific services like doctor visits or hospital care. However, it is clear that the medical care system does not have the capacity to provide the huge surge in care that he posits.
For instance Holahan’s figures for the increase in acute care suggest that Sanders’ plan would result in more than 100 million additional doctor visits and several million more hospitalizations each year. But there just aren’t enough doctors and hospital beds to deliver that much care. Doctors are already working 53 hours per week, and experience from past reforms tells us that they won’t increase their hours, nor will they see many more patients per hour.
Instead of a huge surge in utilization, more realistic projections would assume that doctors and hospitals would reduce the amount of unnecessary care they’re now delivering in order to deliver needed care to those who are currently not getting what they need. That’s what happened in Canada. Doctors and hospitals can adjust care to meet increasing demand, as happens every year during flu season.
Moreover, no surge materialized when Medicare was implemented and millions of previously uninsured seniors got coverage. Between 1964 (before Medicare) and 1966 (the year when Medicare was fully functioning) there was absolutely no increase in the total number of doctor visit in the U.S.; Americans averaged 4.3 visits per person in 1964 and 4.3 visits per person in 1966. Instead, the number of visits by poor seniors went up, while the number of visits by healthy and wealthy patients went down slightly. The same thing happened in hospitals. There were no waiting lists, just a reduction in the utilization of unneeded elective care by wealthier patients, and the delivery of more care to sick people who needed it.
Bizarrely, despite projecting a roughly $1.6 trillion increase in total payments to doctors over 10 years, Holahan says in his discussion that “Physician incomes would be squeezed by the new payment rates.”
5. Holahan’s argument that the Sanders plan would cause a huge disruption of health care: This argument mirrors scare tactics used by Medicare’s opponents in 1963. Back then, there were claims that doctors would boycott Medicare, and Wall Street Journal headlines warned of a “Patient Pileup,” as “flocks of Medicare beneficiaries … suddenly clog the nation’s 7,200 hospitals.” Nothing like that ever happened, nor did it happen when Taiwan implemented single payer more recently. And there’s no reason to think it would happen here.
Moreover, surveys show that most doctors would welcome national health insurance, and thousands of doctors have recently issued a call (and detailed proposal) for single-payer reform in the American Journal of Public Health.
In summary, Holahan grossly underestimates the administrative savings under single payer; projects increases in the number of doctor visits and hospitalizations that far exceed the capacity of doctors and hospitals to provide this added care; and posits that our country would continue to pay much more for drugs and medical equipment than people in every other nation with national health insurance.
Rather than increasing national health spending, as Holahan claims, Sanders’ plan (and the plan proposed by Physicians for a National Health Program) would almost certainly decrease total health spending over the next 10 years.
Drs. Himmelstein and Woolhandler are professors of health policy and management at the City University of New York School of Public Health and lecturers in medicine at Harvard Medical School. The opinions expressed do not necessarily reflect those institutions’.
By Don McCanne, M.D.
The health policy literature is rich with studies, reports and data confirming the that single payer health care financing is much more effective in ensuring universal coverage at lower costs than is our current fragmented, dysfunctional system of financing health care. Yet there has been a recent surge of interest in analyzing the single payer model, directly attributed to Sen. Bernie Sanders’ advocacy for it during his presidential campaign. These reports from the Urban Institute and the Tax Policy Center are the latest which question the well documented fact that single payer would reduce per capita spending.
What is going on here? These two organizations are highly reputable and have produced many studies that are quite credible. Yet the nation’s two leading researchers in single payer, Steffie Woolhandler and David Himmelstein, with their impeccable integrity, have shown that the researchers producing the critical reports have used incorrect assumptions in their analyses. This is not a matter of conflicting opinions, but rather a matter of the factual basis behind the assumptions. Yet the media ignore the facts and distribute only the compromised results from these otherwise reputable individuals and institutions that challenge the savings that would be accrued through the single payer model.
Why would John Holahan and his colleagues at the Urban Institute do this, at this time? Perhaps the composition of the Board of Trustees might give us a clue (link above). Most of them are members of “the establishment”, many of them have served in President Clinton’s administration (as did another critic – Kenneth Thorpe), and some are conservatives opposed to single payer. (The Tax Policy Center is a joint project of the Urban Institute and the Brookings Institution.) The timing of this report suggests that it is more than coincidental that it would be used to help defeat the only current challenger to Hillary Clinton’s quest for the Democratic presidential nomination.
But why would respected researchers agree to such a blatantly political use of their work product? If you check their credentials, they are all deeply involved in health policy research that is designed to improve the function of our health care system, particularly its financing. That is, they are avowed incrementalists. Single payer would displace much of the work they have done with private insurance markets, Medicare, Medicaid, safety-net institutions and other aspects of our dysfunctional system. They are likely not well informed on single payer policy science since that has not been on their radar. This is not questioning the integrity of these researchers but merely an observation as to how they could come up with invalid conclusions. Their minds are simply pre-programmed to produce the results they get.
Hillary Clinton has declared that she will not consider single payer. When the policy community should be making efforts to convince her to support a superior model of reform they are instead discrediting that model in order to support her and Obamacare – the most expensive model of reform and one that fails to accomplish our goals of universality, efficiency and equity. Sadly, that reflects poorly on the policy community.
PNHP is a single issue organization supporting research and education on single payer reform. PNHP does not support nor oppose any political candidates.