Single Payer 101

1. Single Payer 101 Kao-Ping Chua Jack Rutledge Fellow, 2005-2006 American Medical Student Association

2. Outline I. Financing health care and single payer financing II. What does single payer look like? III. The argument for single payer IV. The advantages of single payer to different groups of people V. The potential disadvantages of single payer

3. The Financing of Healthcare • Two essential functions • Collection of funds • Reimbursement of providers • Single payer is way of FINANCING HEALTH CARE

4. Financing healthcare in the U.S. Individuals / Businesses Direct or Out-of-Pocket Payments Health Service Providers Taxes Medicare, Medicaid, etc. Provider Payments Premiums Government [payer] Public employees’ premiums Private Insurers [payers] |------Collection of funds-------||---------Reimbursement--------|

5. Single payer financing: simplified Individuals / Businesses Direct or Out-of-Pocket Payments Health Service Providers National health insurance program Taxes Government [payer] |------Collection of funds-------||---------Reimbursement--------|

6. Single payer financing: reality Individuals / Businesses Direct or Out-of-Pocket Payments Health Service Providers National health insurance program Taxes Provider Payments Premiums Government [payer] Private insurers (non-covered services) |------Collection of funds-------||---------Reimbursement--------|

7. Single payer specifies FINANCING, not DELIVERY

8. “Single payer” vs. “universal health care” Single payer is a way of achieving universal health care, but universal health care is not necessarily single payer

9. What does single payer look like? • Eligibility/benefits: all residents of U.S. enrolled; all medically necessary care covered • Financing: Current sources of government funding and adding new taxes (offset by premiums)

10. What does single payer look like? • Hospitals: Global budget for operating expenses • Physicians: remain in private practice. • Reimbursement schemes: fee-for-service, salary • Medications/supplies: formulary and bulk negotiation

11. The argument for single payer • Philosophical argument • Economic argument

12. Philosophical argument: is for-profit health care acceptable? • U.S.: market-based system • 2000-2004: • Profits for top 17 U.S. health insurance companies rose 114% (compared to 5% for S&P 500) • Health insurance premiums rose 60%, 6 million more uninsured

13. Philosophical question • How much should the profit motive be involved with health care? • Depends on whether universality in access is important

14. Economic argument Administrative simplification Cost control mechanisms

15. Economic argument: administrative simplification Source: Kenneth Thorpe, 1992.

16. Single payer and administrative costs… • Woolhandler: $294.3 billion per year spent on administrative costs in U.S. • 31% of U.S. health expenditures, vs. 16.7% for Canada. • Conclusion: Single-payer system in America would save on administrative costs

17. Caveats • Important question is not whether administrative costs are high, but WHICH administrative costs are too high

18. Caveats • Canada’s system doesn’t DO the same administrative functions as the U.S. • If we adopted single payer, our system would DO different administrative functions than Canada

19. Still…single payer would decrease MANY costs Source: Kenneth Thorpe, 1992.

20. The best economic argument? Administrative costs have really been the rallying cry for many single payer advocates, but they are not the best economic argument for single payer. WHY? Administrative costs are not a primary driver of health care costs. Reducing unnecessary administrative costs will generate a one-time savings – it won’t do much toslow health expenditure growth.

21. A better economic argument: cost controls Central take-home point: When you have a fragmented, non-centrally coordinated system in which all the payers play by different rules, it’s very difficult to institute effective systemic cost controls. You can institute cost controls in some areas, but not others.

22. Cost controls in centrally administered systems • Limits on use of ineffective technology • Bulk purchasing • Screen for fraudulent billing (e.g. Taiwan) • Improvements in quality that save money: • Increased primary care • Electronic medical records

23. STRONG (and therefore controversial) cost controls • Global budgeting • Price controls • Supply controls • Reimbursement caps for providers • Expenditure targets

24. STRONG (and therefore controversial) cost controls Other countries have all used these cost control mechanisms with great success. But there is always the danger of being too aggressive about controlling costs.

25. Caveat, again • None of these cost controls are inherent to single payer systems • The point is that policy makers have the OPTION of instituting cost controls… • And whether that OPTION is exercised depends on public opinion!

26. Advantages of single payer to… • Patients: • Improved health • Free choice of provider • Portability of coverage

27. Advantages of single payer to… • Physicians • Restoration of clinical autonomy • Lower malpractice premiums • Improved patient care • Simplified billing

28. Advantages of single payer to… • Businesses • Decreased health care costs (for most) • Level the playing field • Improved global competitiveness

29. Potential disadvantages • Threat of underfunding by hostile government • Strength of special interests that would seek to undermine the system • Potential imbalance between quality controlling expenditure growth

30. Potential disadvantages • Transition from current system will be difficult • Important tradeoffs: will America make them? • You can’t give every health care intervention to every person • Less choice in insurance plan • More government control for less private control

31. Conclusion: How do you evaluate a system? • Every system has disadvantages, no matter what. Based on your values, you can select which disadvantages are outweighed by the advantages. • If you value universality and equity, single payer is a wonderful option, despite its potential disadvantages.