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.