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Calculating the Cost of Bernie Sanders' Single-Payer Health Program

Thursday, 24 September 2015 00:00 By John Geyman, Physicians for a National Health Program | Op-Ed
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In a front-page Wall Street Journal article a few days ago, the projection was made that a single-payer national health insurance program (NHI), as part of the presidential campaign of Senator Bernie Sanders (I-VT), would cost $15 trillion over ten years. Accurate though that figure is, this under-researched article conveys disingenuous misinformation to a broad readership that might be inclined to dismiss such a program as too expensive to even consider.

This article is irresponsible in what it doesn't say - what the savings would be of reining in our current wasteful, overly bureaucratic profit-driven medical industrial complex, and the benefits that NHI would bring to our entire population compared to what we have now or have ever had.

Thanks to a landmark study in 2013 by Gerald Friedman, Professor and Chairman of the Department of Economics at the University of Massachusetts, we have a solid financial analysis of the costs and benefits of a single-payer national health plan. With NHI, $592 billion would be saved annually by cutting the administrative waste of some 1,300 private health insurers ($476 billion) and reducing pharmaceutical prices to European levels ($116 billion). These savings would be enough to cover all of the 44 million uninsured (at the time of his study) and upgrade benefits for all other Americans, even including dental and long-term care. A single-payer public financing system would be established, similar to traditional (not privatized) Medicare, coupled with a private delivery system. Instead of having to pay the increasing costs of private health insurance, so often with unaffordable deductibles and other cost-sharing, patients would present their NHI cards at the point of service without cost-sharing or other out-of-pocket costs. Care would be based on medical need, not ability to pay. (2)

The current single-payer bill in the House of Representatives, H. R. 676, The Expanded and Improved Medicare for All Act, sponsored by Rep. John Conyers (D. MI), includes funding to absorb the costs of converting investor-owned facilities, such as hospitals, nursing homes and ambulatory surgery centers, to non-profit status over a 15-year transition period. Savings would also fund $51 billion in transition costs, such as retraining displaced workers. (3)

When we look at cost controls after NHI is enacted, the argument for it becomes even more compelling. Cost controls would include negotiated annual budgets with hospitals, nursing homes and other facilities, negotiated fees with physicians and other health care professionals, and bulk purchasing for prescription drugs, as the Veterans Administration has done for many years in getting 40 percent discounts.

Health care inflation advances relentlessly, except for some temporary slowing with the depressed economy, despite virtually all efforts to contain costs in recent decades. A growing part of our population is unable to afford necessary care. For those who say that the ACA will redress these problems if we just give it more time, these are some of the markers that show how unaffordable health care still is more than five years after the ACA was enacted:

  • According to the Milliman Medical Index (MMI), the typical family of four with employer-sponsored insurance paid $23,215 in 2014 for health care, including payroll deductions and out-of-pocket costs. The MMI grew by an average of 7.6 percent a year between 2004 and 2014, about three times the annual growth rate of the consumer price index (CPI) of 2.3 percent. (4)

  • The median household income in the US was $53,657 in 2014, down from $57,357 before the recession and its peak of $57,843 in 1999, according to the most recent Census data. (5)

  • Deductibles for private health insurance grew by 42 percent in 2013 to an average of $5,081 a year in 2014. (6)

  • According to a 2014 report from the Kaiser Family Foundation, one in three Americans have difficulty in paying their medical bills, even when insured, especially as a result of unaffordable premiums, increasing cost-sharing, and health plan coverage limits or exclusions. (7)

  • New cancer drugs are routinely priced above $100,000 a year, about twice the average annual household income. (8)

Back to the $15 trillion ten-year price tag for NHI - those are federal expenditures before almost $5 trillion in savings over ten years are deducted. As Gerald Friedman has written in an open letter to the Huffington Post:

[The Wall Street Journal article] correctly puts the additional federal spending for health care under H.R. 676 (a single-payer health plan) at $15 trillion over ten years. It neglects to add, however, that by spending these vast sums, we would, as a country, save nearly $5 trillion over ten years in reduced administrative waste, lower pharmaceutical and device prices, and by lowering the rate of medical inflation. These financial savings would be felt by businesses and by state and local governments who would no longer be paying for health insurance for their employees; and by retirees and working Americans who would no longer have to pay for their health insurance or for co-payments and deductibles. Beyond these financial savings, H.R. 676 would also save thousands of lives a year by expanding access to health care for the uninsured and underinsured. (9)

In addition to the federal government saving money with NHI, 95 percent of Americans would pay less than they now do for health insurance and medical care. NHI would be funded by a progressive system of taxation, mainly the payroll tax for those with annual incomes less than $225,000 - $900 for those with incomes less than $53,000 a year, $6,000 for those earning $100,000 a year, and $12,000 for those with incomes of $200,000. Employers would be relieved of their burden of paying for employer-sponsored health insurance, while gaining a healthier workforce and greater capacity to compete in a global marketplace.

So here's the bottom line - NHI would bring our entire population more protection against the costs of health care, at a lower cost than we now pay, with more efficiency and fairness, while eliminating today's narrow networks that restrict our choice of physicians, other health professionals, and hospitals. Opponents who decry its costs are distorting the issue as they try to perpetuate profit-driven markets at the expense of patients, their families, and taxpayers.

References:

1. Meckler, L. Price tag of Sanders proposals: $18 trillion. Wall Street Journal, September 15, 2015: A1.

2. Friedman, G. Funding H. R. 676: The Expanded and Improved Medicare for All Act. How We Can Afford a National Single-Payer Health Plan. Physicians for a National Health Program. Chicago, IL, July 31, 2013. Available at:

3. Ibid # 2.

4. Armour, S. Health costs hinge on Supreme Court's ruling. Wall Street Journal, May 25, 2015.

5. http://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-252.pdf

6. Scism, L, Martin, TW. Deductibles fuel new worries of health-law sticker shock. Wall Street Journal, December 9, 2013.

7. Pollitz, K, Cox, C, Lucia, K et al. Medical debt among people with health insurance. Kaiser Family Foundation, January 2014.

8. Szalso, Z. Skyrocketing drug prices leave cures out of reach for some patients. USA Today, June 15, 2015.

9. Friedman, G. An open letter to the Wall Street Journal on its Bernie Sanders hit piece. Huffington Post, September 15, 2015.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

John Geyman

John Geyman, MD, is the author of  The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans. Visit his website.


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Calculating the Cost of Bernie Sanders' Single-Payer Health Program

Thursday, 24 September 2015 00:00 By John Geyman, Physicians for a National Health Program | Op-Ed
  • font size decrease font size decrease font size increase font size increase font size
  • Print

In a front-page Wall Street Journal article a few days ago, the projection was made that a single-payer national health insurance program (NHI), as part of the presidential campaign of Senator Bernie Sanders (I-VT), would cost $15 trillion over ten years. Accurate though that figure is, this under-researched article conveys disingenuous misinformation to a broad readership that might be inclined to dismiss such a program as too expensive to even consider.

This article is irresponsible in what it doesn't say - what the savings would be of reining in our current wasteful, overly bureaucratic profit-driven medical industrial complex, and the benefits that NHI would bring to our entire population compared to what we have now or have ever had.

Thanks to a landmark study in 2013 by Gerald Friedman, Professor and Chairman of the Department of Economics at the University of Massachusetts, we have a solid financial analysis of the costs and benefits of a single-payer national health plan. With NHI, $592 billion would be saved annually by cutting the administrative waste of some 1,300 private health insurers ($476 billion) and reducing pharmaceutical prices to European levels ($116 billion). These savings would be enough to cover all of the 44 million uninsured (at the time of his study) and upgrade benefits for all other Americans, even including dental and long-term care. A single-payer public financing system would be established, similar to traditional (not privatized) Medicare, coupled with a private delivery system. Instead of having to pay the increasing costs of private health insurance, so often with unaffordable deductibles and other cost-sharing, patients would present their NHI cards at the point of service without cost-sharing or other out-of-pocket costs. Care would be based on medical need, not ability to pay. (2)

The current single-payer bill in the House of Representatives, H. R. 676, The Expanded and Improved Medicare for All Act, sponsored by Rep. John Conyers (D. MI), includes funding to absorb the costs of converting investor-owned facilities, such as hospitals, nursing homes and ambulatory surgery centers, to non-profit status over a 15-year transition period. Savings would also fund $51 billion in transition costs, such as retraining displaced workers. (3)

When we look at cost controls after NHI is enacted, the argument for it becomes even more compelling. Cost controls would include negotiated annual budgets with hospitals, nursing homes and other facilities, negotiated fees with physicians and other health care professionals, and bulk purchasing for prescription drugs, as the Veterans Administration has done for many years in getting 40 percent discounts.

Health care inflation advances relentlessly, except for some temporary slowing with the depressed economy, despite virtually all efforts to contain costs in recent decades. A growing part of our population is unable to afford necessary care. For those who say that the ACA will redress these problems if we just give it more time, these are some of the markers that show how unaffordable health care still is more than five years after the ACA was enacted:

  • According to the Milliman Medical Index (MMI), the typical family of four with employer-sponsored insurance paid $23,215 in 2014 for health care, including payroll deductions and out-of-pocket costs. The MMI grew by an average of 7.6 percent a year between 2004 and 2014, about three times the annual growth rate of the consumer price index (CPI) of 2.3 percent. (4)

  • The median household income in the US was $53,657 in 2014, down from $57,357 before the recession and its peak of $57,843 in 1999, according to the most recent Census data. (5)

  • Deductibles for private health insurance grew by 42 percent in 2013 to an average of $5,081 a year in 2014. (6)

  • According to a 2014 report from the Kaiser Family Foundation, one in three Americans have difficulty in paying their medical bills, even when insured, especially as a result of unaffordable premiums, increasing cost-sharing, and health plan coverage limits or exclusions. (7)

  • New cancer drugs are routinely priced above $100,000 a year, about twice the average annual household income. (8)

Back to the $15 trillion ten-year price tag for NHI - those are federal expenditures before almost $5 trillion in savings over ten years are deducted. As Gerald Friedman has written in an open letter to the Huffington Post:

[The Wall Street Journal article] correctly puts the additional federal spending for health care under H.R. 676 (a single-payer health plan) at $15 trillion over ten years. It neglects to add, however, that by spending these vast sums, we would, as a country, save nearly $5 trillion over ten years in reduced administrative waste, lower pharmaceutical and device prices, and by lowering the rate of medical inflation. These financial savings would be felt by businesses and by state and local governments who would no longer be paying for health insurance for their employees; and by retirees and working Americans who would no longer have to pay for their health insurance or for co-payments and deductibles. Beyond these financial savings, H.R. 676 would also save thousands of lives a year by expanding access to health care for the uninsured and underinsured. (9)

In addition to the federal government saving money with NHI, 95 percent of Americans would pay less than they now do for health insurance and medical care. NHI would be funded by a progressive system of taxation, mainly the payroll tax for those with annual incomes less than $225,000 - $900 for those with incomes less than $53,000 a year, $6,000 for those earning $100,000 a year, and $12,000 for those with incomes of $200,000. Employers would be relieved of their burden of paying for employer-sponsored health insurance, while gaining a healthier workforce and greater capacity to compete in a global marketplace.

So here's the bottom line - NHI would bring our entire population more protection against the costs of health care, at a lower cost than we now pay, with more efficiency and fairness, while eliminating today's narrow networks that restrict our choice of physicians, other health professionals, and hospitals. Opponents who decry its costs are distorting the issue as they try to perpetuate profit-driven markets at the expense of patients, their families, and taxpayers.

References:

1. Meckler, L. Price tag of Sanders proposals: $18 trillion. Wall Street Journal, September 15, 2015: A1.

2. Friedman, G. Funding H. R. 676: The Expanded and Improved Medicare for All Act. How We Can Afford a National Single-Payer Health Plan. Physicians for a National Health Program. Chicago, IL, July 31, 2013. Available at:

3. Ibid # 2.

4. Armour, S. Health costs hinge on Supreme Court's ruling. Wall Street Journal, May 25, 2015.

5. http://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-252.pdf

6. Scism, L, Martin, TW. Deductibles fuel new worries of health-law sticker shock. Wall Street Journal, December 9, 2013.

7. Pollitz, K, Cox, C, Lucia, K et al. Medical debt among people with health insurance. Kaiser Family Foundation, January 2014.

8. Szalso, Z. Skyrocketing drug prices leave cures out of reach for some patients. USA Today, June 15, 2015.

9. Friedman, G. An open letter to the Wall Street Journal on its Bernie Sanders hit piece. Huffington Post, September 15, 2015.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

John Geyman

John Geyman, MD, is the author of  The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans. Visit his website.


Hide Comments

blog comments powered by Disqus