Swapping Obamacare for a single-payer system?

August 19, 2013
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Here’s an interesting thought experiment: What would be the financial impact if we scrapped Obamacare and adopted single-payer national health insurance?

I don’t mean the fiscal impact, which has been studied to death, including in this report released last month. Most studies show an initial savings to the federal government.

Instead, I mean how much more or less would patients pay to health care providers?

It’s a relevant question, since some on both the right and the left of the political spectrum think Obamacare will not fix the deepest problems in American health care, and its inevitable failure will lead to renewed calls for a single-payer health system.

If that happens, hospitals, doctors, employers and patients will want to know how a national health insurance system would affect their own finances.

Tom Fischer, chief financial officer at Indianapolis-based Community Health Network, ran some numbers for how a single-payer system would affect Community’s eight hospitals and 500 physicians.

Here are his quick answers:

—Patients now covered by private insurance would pay 34 percent less.
—Patients covered by Medicare or Medicaid would, on average, pay 31 percent more.
—Uninsured patients would pay 855 percent more.

Those changes in payments would make it so that all patients paid Community exactly what it cost to provide care and no more—meaning no profit.

Those numbers clearly show the extent to which employers and privately insured individuals subsidize the uninsured and the government-sponsored health plans.

In health care lingo, this is called the cost shift.

Obamacare promised to limit the cost shift by decreasing the number of uninsured patients. But with Congress cutting Medicare payments to doctors and hospitals and with health insurers offering to cover the uninsured in Obamacare’s exchanges with plans that pay providers at near-Medicare rates, it looks like the cost shift is here to stay.

But a single-payer system would try to end the cost shift entirely.

National health insurance would essentially expand Medicare coverage to all Americans, turning all private health insurance companies, like Indianapolis-based WellPoint Inc., into low-margin government contractors for processing the medical claims of the national health insurance program.

Advocates of a single-payer system say the one-time administrative savings from getting rid of the health insurers’ profits, overhead and burden on health care providers would more than offset the additional costs of extending coverage to all Americans.

Employers and workers would stop paying premiums to health insurers and would instead pay more in taxes, according to one version of a single-payer plan described by Chicago-based Physicians for a National Health Program.

Instead of paying roughly 8 percent of each worker’s salary for health benefits, employers would pay a 7-percent payroll tax. And workers, instead of paying about 2 percent of their salary for health insurance premiums, as the works do now, they would instead pay an additional 2 percent income tax.

This Medicare-for-all program would negotiate with hospitals on proper payments to cover their costs, but the program would not allow hospitals to retain an operating surplus—just like Fischer assumed in his thought experiment.

And public boards would determine when new equipment and new facilities were justified by hospitals—much like the Indiana Utility Regulatory Commission does with electric and gas utilities.

Such measures would certainly reduce reimbursement rates to doctors and hospitals, but Physicians for a National Health Program argues that the higher volume of patients would keep overall incomes steady.

Physicians for a National Health Program would like to see Medicare overhaul the way it pays doctors—to bring specialist payments down and primary care physicians’ payments up—and not to lump hospitals’ capital costs in with their operating costs.

It’s hard to argue with the steady-state numbers on a single-payer system. My questions on this issue have always been about the dynamic reaction of American voters and consumers: Would individual patients accept the decisions of a local board as to what benefits are covered and what are not? Or would they launch a political backlash that led to richer and richer benefits?

Would workers prove more allergic to tax increases than they have been to premium rate increases, causing the national health insurance program to starve for revenue if health costs continue to rise?

Would hospitals and doctors accept no-margin business or would they find ways to serve more and more patients outside the national health insurance system?

If Obamacare doesn’t work as hoped, we might all start debating these questions again.

  • Other possibilities
    The system used in Germany provides coverage for all, is government regulated and subsidized, but relies on a plethora of private insurance plans (Krankenkassen). It is not without problems, even with recent reforms that require individuals and employers to contribute more, however, it works generally very well, is less costly, is portable (stays with the individual regardless of employment) and helps Germans to better health stats than most anywhere else. The one-payer systems in Britain and Canada have definite problems that make them less of a model for us.
    • Here's my twist
      As part of "medicare for all" instead of a one payer system, let the private companies compete for the business as they do with Medicare Advantage plans. Citizens could choose Medicare or an offering from Humana, Wellpoint, UHC etc. Plans would compete on service and customer satisfaction with perhaps a price difference.
      • Questions???
        OK, first how will currently unisured people pay 855% more, of what(if they have no insurance, they are paying nothing)? 2nd, if it's to be a payroll tax, what about the unemployed? Would the employer have to "match" the 7%? Maybe this was Obama's goal all along - Socialist State?
      • Those quick numbers are deceiving
        The "quick" calculations were most likely based on the "charges" that were billed by Community Health Network rather than on the actual costs of providing care, which would make these numbers completely inaccurate. With Medicare for all we would provide equal access to everyone. And by allowing the government to negotiate reasonable payment rates for ALL services, and especially for pharmaceuticals, our country's overall healthcare expenses would be dramatically reduced. Our system has too many players in it purely for profit and is far more complicated than it should be. Too many employed citizens are forced to pay taxes to subsidize Medicare and Medicaid while they can not afford health insurance for themselves. Our current system is criminal.
        Community Hospital, or any other hospital, have no idea what their costs are for care, so the initial calculation is irrelevant. I would hope when we do get to have this discussion on single payer, you are not the one moderating it. Nothing here even touches on the core of this issue. Which is why we never have a "discussion" about it. No question gets asked that doesnt have a designed answer. The pre-emptive lie always gets said first. And even "experts" in healthcare like yourself dont understand this business. And there never has been competition in healthcare, and there will never will be. The system operates like a public utility, not a "free" market. It cant be a free market system because 60% of its payments are already paid for by the government, and over 25% of its total operational costs provide no services or products. It makes much more sense to fund the remaining 40% of its payments by the government, and offset that with about a 20% reduction in administrative costs, and offest the majority of the costs with a specific tax. There is no public commission now that informs what hospitals and services can be offered- there wont we even with a single payer system. And NO ONE denies you more care than your for profit insurance company. No one.
      • A Different View on Britain & Canada
        Based on experience friends of mine have had on Britain, would indicate that costs here would plummet if we had a health care system like that in the UK. One huge difference is the lack of paperwork and the accompanying bureaucracy. As for Canada, a friend of mine, a Canadian citizen, who trained in the US as a plastic surgeon, strongly considered staying here to practice, where he would make for more money, went back to Canada, where he treated patients without having to do battle with insurance companies. He has had no regrets.
      • Yep
        The only solution that makes any sense, the silly socialist comment aside. I'm not sure why, however, a transition yields only a "one time administrative savings" by utilizing insurers as paper pushers. The new law now mandates a return of premiums if insurers don't spend 85% on care, and many studies I've seen attribute 20% of our current costs to insurers marketing, overhead, and healthy profits. Also, I would think employers would much rather be just a funder, rather than also bearing the expense and hassle of administration of this benefit. I must say, though, if the 2% employee contribution is supposed to be some kind of national average, I've got a bone to pick with my employer (as I've suspected for a long time).
      • No savings with Medicare Advantage
        To convert the insurance system to an all Medicare-Advantage system, as Don Stumpp suggests, would obliterate the savings that would accrue through a true single-payer plan. The Medicare Advantage plans have consistently driven costs up. The savings from single-payer come from the billing simplicity--doctors and hospitals don't have to maintain massive billing staffs to bill multiple insurance and rebargain contracts-- and consolidation of market power. A unified payment system can bargain lower prices for drugs and devices.
      • Fee for Service
        All the plans and Rube Goldberg inventions and discussions -including single payer - are based on fee for service and continued ambulance chasing. This means a) motive to treat and test and increase volume to compensate for lower reimbursement. It means fraudulent submissions and b) CYA medicine. Costs will never decrease with these unchanged paradigms. Salaried providers paid thru a sales tax and income tax with elimination of all third parties and regional ombudsmen to investigate untoward outcomes with medmal removed from the tort system. It will eventually come when health care reaches 25+% of GNP. Perhaps 50%. But it shall have to come in my grandchildrens' lifetime.
      • SIngle payer is the only way to save our economy
        I am on the board of directors of PNHP, the physician group that JK cites (full disclosure). We already have a single payer plan in this country taking care of the sickest and most expensive patients - everyone over 65. Medicare is not perfect, but runs at under 2% overhead, while WellPoint runs closer to 20% overhead, and they cover mostly healthy people. JK and the hospital sources also neglect to mention the huge savings hospitals would realized only having to bill Medicare. Canadian hospitals essentially have no billing costs compared to US hospitals. I could go on and on. I hope one day to be able to practice medicine in a Medicare for all system.
        • Medicare for all
          It seems to me that all professionals working in patient care should be on salary - appropriate to his or her level of education and experience. Fee for service is a big problem.
        • No Single Payer
          The US has an extra 288 million people than Germany and nearly half the pop in US are receiving handouts now. Germany has a higher population of working people who pay 45% federal tax rate. Oh Boy, do you want your taxes to go from 28% to 45% not including State taxes and other taxes on top of that? Do you want to work 7 months out of the year for the Government handouts? Most people can not make their bills on just 5 months of income. Single payer healthcare will result in rationing, over use of services, less drug research, less drugs to market to list just a few. The fact is we do not have a free market in health care in the U.S. Ask yourself: How many markets in the U.S. do you get a tax break for buying a product, but only if you buy it through your employer, as we do with health insurance? In how many markets are you prohibited from purchasing a product out of state, as we are with health insurance? In how many markets are employers prohibited from providing bonuses to employees for improving quality and productivity, as hospitals are prevented from doing with doctors? If government policy inhibited other markets that way, those markets would be dysfunctional too. The solution to our health care problems is to reduce the role of government, not increase it by switching to a single-payer system.

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