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Medicare for All saves money; Medicare for some doesn’t

February 28, 2020

Topics: Quote of the Day

By Diane Archer
The Hill, February 24, 2020

The evidence abounds: A “Medicare for All” single-payer system would guarantee comprehensive coverage to everyone in America and save money.

Christopher Cai and colleagues at three University of California campuses examined 22 studies on the projected cost impact for single-payer health insurance in the United States and reported their findings in a recent paper in PLOS Medicine. Every single study predicted that it would yield net savings over several years. In fact, it’s the only way to rein in health care spending significantly in the U.S.

All of the studies, regardless of ideological orientation, showed that long-term cost savings were likely. Even the Mercatus Center, a right-wing think tank, recently found about $2 trillion in net savings over 10 years from a single-payer Medicare for All system. Most importantly, everyone in America would have high-quality health care coverage.

Medicare for All is far less costly than our current system largely because it reduces administrative costs. With one public plan negotiating rates with health care providers, billing becomes quite simple. We do away with three-quarters of the estimated $812 billion the U.S. now spends on health care administration.

Administrative costs are so high because thousands of insurance companies individually negotiate benefit rules and rates with thousands of hospitals and doctors. On top of that, they rely on different billing procedures — and this puts a costly burden on providers.

Administrative savings from Medicare for All would be about $600 billion a year. Savings on prescription drugs would be between $200 billion and $300 billion a year, if we paid about the same price as other wealthy countries pay for their drugs. A Medicare for All system would save still more with implementation of global health care spending budgets.

Even more savings are possible in a Medicare for All system because, like every other wealthy country, we would have a uniform electronic health records system. Such a system generates additional savings because system problems would be easier to detect and correct. A uniform claims data system helps reduce health care spending for fraudulent services. In 2018, total U.S. health care costs were $3.6 trillion, representing 17.7 percent of GDP.

Savings are in part a function of the benefits Medicare for All covers. The Mercatus report and others projected savings, even with the elimination of deductibles and out-of-pocket costs. Under both Sen. Bernie Sanders’s (I-Vt.) Medicare for All bill and Rep. Pramila Jayapal’s (D-Wash.) Medicare for All bill, patients would not pay deductibles or coinsurance when they receive medical care. Their bills also provide for vision, hearing and dental care, as well as long-term services and supports, such as home care and nursing home care.

No matter how you design a single-payer public health insurance system, it would have lower overall health care costs, so long as for-profit private health insurers no longer exist to drive up health care costs. Yes, it’s true that some other wealthy countries rely on “private insurers” to provide benefits and spend far less than we do on care. But, these insurers do not operate in any way like health insurers in the U.S.

Other wealthy countries dictate virtually every element of the health insurance people receive, including what’s covered, what’s paid, and people’s out-of-pocket costs — all identical for everyone. The insurers operate like claims processors or bill payers. They follow the coverage and payment rules set by the government, nothing like the private health insurers in the U.S. which revel in product diversity (read: complexity and confusion).

And, if you’re thinking that having the federal government guarantee coverage to all Americans is a big deal, it’s actually not. The government already pays for about two-thirds of health care costs. Among other things, it pays for Medicare, Medicaid, VA, TriCare and a wide range of state and local health care programs, along with private insurance for government employees and tax subsidies for private insurance.

Whether you call it single-payer or Medicare for All, it isn’t some socialist pipe dream. It’s a sensible, efficient, and effective way to guarantee excellent health insurance to everyone.

Diane Archer is a senior adviser at Social Security Works.

https://thehill.com…


PLOS Medicine, “Projected costs of single-payer healthcare financing in the United States: A systematic review of economic analyses” by Christopher Cai, Jackson Runte, Isabel Ostrer, Kacey Berry, Ninez Ponce, Michael Rodriguez, Stefano Bertozzi, Justin S. White, James G. Kahn

PDF version can also be downloaded at this link: https://doi.org…


Comment:

By Don McCanne, M.D.

We continue to hear that single payer Medicare for All costs too much, and we cannot afford it. Although the PLOS study mentioned above was covered in a previous Quote of the Day, the link is provided again since it is a highly credible summary of prior single payer analyses that shows that single payer actually saves money after the initial transition from our current system.

The article above by Diane Archer is useful because it explains the model in terms that most audiences can understand. Although the PLOS article is technical, it is also useful for those who need to understand in greater detail how the conclusion of savings was reached.

It is particularly important to understand that analyses that were omitted used various assumptions or model variations that disqualified them as bona fide single payer models for the United States. S1 Appendix lists the studies excluded and the reasons for that. This should refute the claim of those who say that these studies were cherry-picked to obtain a desired result.

Those supporting the addition of a Medicare-like public option are the most outspoken in claiming that single payer Medicare for All costs too much. Yet it is their model that leaves in place our overpriced system while adding the costs and administrative complexity of yet another plan – the public option (for those who want it). Do not let them dismiss single payer with the glib comment that we don’t know how to pay for it. We do; we would pay for it with progressive taxes which would make it affordable for absolutely everyone and at a total cost that the nation can afford – a total cost lower than what they propose by merely tweaking our current system and adding a public option.

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About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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