Single Payer Savings for Households: Calculator Results

January 29, 2023

Summary: Four thousand individuals reporting current healthcare spending and income reveal that … nearly 9 in 10 will save money, more than $5000 per year on average, with single payer.

At a time of inflation, California should take a bold step to tame rising health care costs
Viewpoints
Sacramento Bee
January 11, 2023
By James G. Kahn & Michael Lighty

The word of the year for 2022 could have been “inflation.” Air travel prices rose nearly 40% from a year earlier. Grocery, housing, energy and other prices are also up. And once again, the cost of health care, which makes up nearly a fifth of our economy, is rising sharply.

Most health insurers in the individual market are expecting premium increases between 5% and 14% this year, according to Axios, and family out-of-pocket health care costs have jumped 10%.

But health care is different from other elements of the consumer price index. There is a way to control health care inflation while providing everyone with high-quality coverage.

Universal public financing of health care — often called single-payer coverage or “Medicare for all” — can cure what ails us both medically and financially.

Single-payer coverage would control health care inflation by eliminating the excessive profits and charges, outrageous drug prices and bureaucratic waste inherent in our current system of private health insurance.

Want proof? We have it.

The single-payer advocacy coalition Healthy California Now and the National Union of Healthcare Workers recently developed a household health care cost calculator for use by individuals and families who live in California. It’s designed to compare the costs associated with a single-payer program to current health care expenses.

So far, 4,000 households have tried it. Users enter their premium payments for the prior year, employer premium contributions, out-of-pocket expenses and annual income. The calculator then compares their costs under the current system to projected single-payer taxes at their income level.

Eighty-seven percent of those who used the calculator found average annual savings of more than $6,000 per household. Medicare beneficiaries were more likely to achieve net savings at a slightly lower average, $5,150 per household. The 13% of households that wouldn’t enjoy net savings generally had very low current premium and out-of-pocket expenses due to extremely generous health plans or annual incomes exceeding $350,000.

Take five minutes and try this exercise for yourself at Healthy California Now’s website. …

Our leaders in Sacramento … have the power to make single-payer a reality for the state.

The Healthy California for All Commission, formed by Gov. Gavin Newsom and the Legislature last year, defined a “unified financing” plan offering universal coverage and comprehensive benefits for everyone. Under this plan, out-of-pocket costs and cost-sharing would be eliminated. Rather than payments to private insurers, the funding would come from a progressive tax that can easily generate the necessary funds.

The tax plan used in the calculator includes a 2% sales tax on nonessential items plus a payroll tax that starts at incomes of at least $75,000 and a personal income tax that starts at $300,000 a year. Additional taxes would be levied on the state’s wealthiest individuals and corporate profits.

It’s true that some well-paid professionals would be at risk of paying more for single-payer coverage, and the super-wealthy would have to share some of the burden. But in exchange, all Californians would get a system that guarantees excellent coverage, including for long-term care, and a health plan that efficiently and equitably covers health care costs for everyone.

We can fight health care inflation while providing quality care for all, and California can show the way. The words on everyone’s lips this year should be “Medicare for all.”

Comment by: Jim Kahn

Developing and deploying this online cost calculator was very gratifying. We knew from past research that single payer saves money for the health system (see here). We also knew that funding single payer – collecting the revenue needed to cover all costs via the public budget – could be done with progressive taxes, i.e., a heavier burden on the rich.

What we didn’t know was how diverse households would fare. That is, how savings (ending current premiums and out-of-pocket costs) would compare with new taxes based on income. So we decided to ask. To estimate taxes, we designed a progressive mix of sales, payroll, income, wealth, and corporate profit taxes that yield the $223 billion needed in California for a no cost-sharing version of single payer (per the Health California for All Commission).

We found that nearly 9 out of 10 individuals who used the calculator would save money with single payer. That is, new taxes would be less than current spending on premiums (including wage effects of the employer portion) and out-of-pocket such as deductibles, copays, and uncovered services. The average savings are more than $5000 per year.

This is very encouraging in terms of public support for single payer. It’s not the last word on the topic – out-of-pocket burden is rising, so savings may grow over time, and different tax proposals will alter the exact numbers.

Still, the fundamental message is powerful: a progressively financed single payer proposal will financially benefit the vast majority of households. And (need I say?) do so while providing access to care with any provider.