Selected Resources:

A. P. Galvani PhD, et al., The Lancet, 2020: Improving the prognosis of health care in the USA

Christopher Cai, et al., PLOS Medicine, 2020: Projected costs of single-payer healthcare financing in the United States: A systematic review of economic analyses

Congressional Budget Office, 2019: Key Design Components and Considerations for Establishing a Single-Payer Health Care System

Political Economy Research Institute, 2018: Economic Analysis of Medicare for All

“Through the mechanisms detailed previously, we predict that a single-payer health-care system would require $3·034 trillion annually (figure 3; appendix p 5), $458 billion less than national health-care expenditure in 2017.⁴⁰ Even after accounting for the increased costs of coverage expansion, our data-driven base case includes $59 billion savings on hospital care, $23 billion on physician and clinical services, $217 billion on overheads, and $177 billion on prescription drugs (figure 3; appendix p 11). Consequently, annual expenditure per capita would decrease from $10,739⁶ to $9330, equivalent to a 13·1% reduction. The expectation of savings is robust and remains following variation in the input parameters. For example, if overhead costs only dropped to 6% of total health expenditure—rather than Medicare’s current 2·2%—the Medicare for All Act would still reduce costs by 10·3%. Conversely, savings would increase beyond our base case if our model overestimates the unfulfilled demand in people who do not have insurance or are underinsured. Given that $2261 billion is already allocated to health care by existing governmental and philanthropic sources (appendix p 5), a further $773 billion must be collected by the government to fully fund the Medicare for All Act.”

Source: Alison P Galvani, Alyssa S Parpia, Eric M Foster, Burton H Singer, Meagan C Fitzpatrick, Improving the prognosis of health care in the USA, The Lancet, Volume 395, Issue 10223, 2020, Pages 524-533, ISSN 0140-6736, https://doi.org/10.1016/S0140-6736(19)33019-3.

“For families, our results show that Medicare for All can promote both lower average costs and greater equity in financing health care. For example, we find that for middle-income families, the net costs of health care will fall sharply under Medicare for All, by between 2.6 and 14.0 percent of income. By contrast, with high-income families, health care costs will rise, but still only to an average of 3.7 percent of income for those in the top 20 percent income grouping and to 4.7 percent of income for the top 5 percent income group.”

Source: Pollin R, Heintz J, Arno P, Wicks-Lim J, Ash M. Economic analysis of Medicare for All. Research report. Political Economics Research Institute. 30 November 2018. 

“Studies identified
“We reviewed 90 studies and included primary analyses of 22 single-payer plans from 18 studies, published between 1991 and 2018, including 8 national and 14 state-level plans (Massachusetts, California, Maryland, Vermont, Minnesota, Pennsylvania, New York, and Oregon). Included studies are listed in Table F in S1 Appendix. Analysis teams included US government agencies, business consultants and research organizations, and academics. Nine single-payer plans (from 6 studies) were excluded for the following reasons: age limits on single-payer, varied benefits across individuals, balance billing, inclusion of private insurers or intermediaries in the plan or analysis, and lack of specification of assumptions regarding utilization and savings. Twelve studies were not reviewed because of duplication (same author, different state, earlier, n = 11) and age (1971, n = 1).

“Projected costs and savings
“Net cost or savings in the first year of single-payer operation varies from an increase of 7.2% of system costs to a reduction of 15.5% (Fig 2). The median finding was a net savings of 3.5% of system costs, and analyses of 19 of 22 plans found net savings. Net costs reflect the balance of added costs due to higher utilization (by eliminating uninsurance and in some studies also capturing the increase due to ending underinsurance) and savings (via payment simplification, lower drug prices, and other factors). Higher utilization increases costs by 2.0% to 19.3% (median 9.3%).

“Total savings range from 3.3% to 26.5% (median 12.1%). The cost increase due to expansion of insurance coverage varies due to the number of newly covered individuals and generosity of coverage benefits, but also reflects policy components and expert assessment. For example, study estimates of increased utilization by newly covered individuals range from 25% to 80% of the costs for those already insured, reflecting varied assessments of uninsured individuals’ healthcare access and health status. Additionally, cost-control choices such as copays vary across plans.

“The mix of projected savings from single-payer shows both consistent and variable elements across studies (Fig 3). All studies estimate lower costs due to simplified payment administration, but vary in the size of these savings and in the inclusion and magnitude of other savings. Administrative savings vary from 1.2% to 16.4% (median 8.8%) of healthcare spending. Savings from lowered prices for medications and durable medical equipment are included in 12 models and range from 0.2% to 7.9%. Savings from reduced fraud and waste are included in 10 models and range from 0.4% to 5.0%. Savings due to a shift to Medicare payment rates are included in 8 models and range from 1.4% to 10.0%. Over time, utilization increases are stable and projected savings grow, leading to larger estimates for potential savings.”

Source: Cai C, Runte J, Ostrer I, Berry K, Ponce N, Rodriguez M, et al. (2020) Projected costs of single-payer healthcare financing in the United States: A systematic review of economic analyses. PLoS Med 17(1): e1003013. doi.org/ 10.1371/journal.pmed.1003013

“Utilization increases due to new and improved insurance drive the cost growth effects of single-payer. There is strong evidence over decades that the newly insured roughly double their healthcare utilization [25–27]. Medicaid expansion under the Affordable Care Act appears to demonstrate a mix of utilization effects [28,29]. Moreover, in a single-payer system, the newly insured may be younger and healthier than the already insured, meaning that utilization may not increase to the levels of the already insured. Evidence on utilization increases for the underinsured are mixed [30–32]. Importantly, there is evidence that when uninsured individuals gain insurance, increases in utilization for the newly insured are balanced by slightly lower utilization for the already insured, due to supply-side constraints [33–35]. However, with a decrease in billing-related administrative burden for clinicians, a 10% or greater rise in physician clinical capacity may occur, which would accommodate additional care utilization. Finally, increases in utilization for the uninsured and underinsured are likely to result in increased use of preventive services, which should lead to some future cost saving [25,36].

“Simplified payment administration represents the largest type of savings from single-payer. There is very strong evidence that billing and insurance-related administrative burden is higher in the US than in Canada (which has single-payer) by 12%–15% of total healthcare costs [13]. The excess administrative costs are split roughly 50% at insurers and 50% at providers. Studies of hospitals find consistent large differences in administrative costs between the US and single-payer systems in Europe [37]. There is no direct evidence of ability to capture all of this excess, but solid empirical data from Canada and other Organisation for Economic Co-operation and Development (OECD) countries support the intuition that administrative costs would sharply decrease with elimination or streamlining of existing onerous payment processes.

“Lower drug spending is typically the second largest source of savings with single-payer, and predicts large net savings. The US Veterans Administration (VA) gets a 30% discount on prescription medications compared to private Medicare Advantage Plans [38,39]. US per-capita drug spending exceeds that of any other country [38,39]. Drug prices are the primary driver of higher cost, with the US spending $1,011 annually per capita on prescription drugs compared to the OECD average of $422 [11].”

“Utilization increases due to new and improved insurance drive the cost growth effects of single-payer. There is strong evidence over decades that the newly insured roughly double their healthcare utilization [25–27]. Medicaid expansion under the Affordable Care Act appears to demonstrate a mix of utilization effects [28,29]. Moreover, in a single-payer system, the newly insured may be younger and healthier than the already insured, meaning that utilization may not increase to the levels of the already insured. Evidence on utilization increases for the underinsured are mixed [30–32]. Importantly, there is evidence that when uninsured individuals gain insurance, increases in utilization for the newly insured are balanced by slightly lower utilization for the already insured, due to supply-side constraints [33–35]. However, with a decrease in billing-related administrative burden for clinicians, a 10% or greater rise in physician clinical capacity may occur, which would accommodate additional care utilization. Finally, increases in utilization for the uninsured and underinsured are likely to result in increased use of preventive services, which should lead to some future cost saving [25,36].

“Simplified payment administration represents the largest type of savings from single-payer. There is very strong evidence that billing and insurance-related administrative burden is higher in the US than in Canada (which has single-payer) by 12%–15% of total healthcare costs [13]. The excess administrative costs are split roughly 50% at insurers and 50% at providers. Studies of hospitals find consistent large differences in administrative costs between the US and single-payer systems in Europe [37]. There is no direct evidence of ability to capture all of this excess, but solid empirical data from Canada and other Organisation for Economic Co-operation and Development (OECD) countries support the intuition that administrative costs would sharply decrease with elimination or streamlining of existing onerous payment processes.

“Lower drug spending is typically the second largest source of savings with single-payer, and predicts large net savings. The US Veterans Administration (VA) gets a 30% discount on prescription medications compared to private Medicare Advantage Plans [38,39]. US per-capita drug spending exceeds that of any other country [38,39]. Drug prices are the primary driver of higher cost, with the US spending $1,011 annually per capita on prescription drugs compared to the OECD average of $422 [11].”

Source: Cai C, Runte J, Ostrer I, Berry K, Ponce N, Rodriguez M, et al. (2020) Projected costs of single-payer healthcare financing in the United States: A systematic review of economic analyses. PLoS Med 17(1): e1003013. doi.org/ 10.1371/journal.pmed.1003013

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Page last updated March 16, 2021 by Doug McVay, Editor.