Single Payer Explained

7/27/2019 Single Payer Explained

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Single Payer 101Kao-Ping Chua

Jack Rutledge Fellow, 2005-2006American Medical Student Association


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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 singlepayer


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The Financing of

Healthcare Two essential functions

Collection of funds

Reimbursement of providers

Single payer is way of FINANCINGHEALTH CARE


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Financing healthcare in

the U.S.Individuals /Businesses

Government[payer]

Health ServiceProviders

PrivateInsurers[payers]

Direct or Out-of-Pocket Payments

Medicare,Medicaid, etc.

Taxes

Premiums

Public employeespremiums

ProviderPayments

|------Collection of funds-------||---------Reimbursement--------|


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Single payer financing:

simplifiedIndividuals /Businesses

Government[payer]



National

healthinsuranceprogram

Taxes



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Single payer financing:

realityIndividuals /Businesses

Government[payer]



National

healthinsuranceprogram

Taxes


Privateinsurers (non-

coveredservices)

Premiums ProviderPayments


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Single payer specifies

FINANCING, not DELIVERYFinancing Delivery

U.K.(socializedmedicine)

Mostlypublic

Mostlypublic

U.S. Public andprivate

Mostlyprivate

Singlepayer

Mostlypublic

Public andprivate


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Single payer vs.

universal health care

Single payer is a way ofachieving universal health

care, but universal health careis not necessarily single payer


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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 newtaxes (offset by premiums)


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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 bulknegotiation


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The argument for single

payer Philosophical argument

Economic argument


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Philosophical argument: isfor-profit health care

acceptable? U.S.: market-based system

2000-2004:

Profits for top 17 U.S. health insurancecompanies rose 114% (compared to 5% for S&P500)

Health insurance premiums rose 60%, 6 millionmore uninsured


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Philosophical question

How much should the profit motive beinvolved with health care?

Depends on whether universality inaccess is important


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Economic argument

Administrative simplification

Cost controlmechanisms


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Economic argument:

administrative simplification

Source: Kenneth Thorpe, 1992.


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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 inAmerica would save on administrativecosts


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Caveats

Important question is not whetheradministrative costs are high, but

WHICH administrative costs are toohigh


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Caveats

Canadas system doesnt DO the sameadministrative functions as the U.S.

If we adopted single payer, oursystem would DO differentadministrative functions than Canada


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Stillsingle payer would

decrease MANY costs

Source: Kenneth Thorpe, 1992.


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The best economicargument?

Administrative costs have really been the rallying cryfor many single payer advocates, but they are not

the best economic argument for single payer.

WHY?

Administrative costs are not a primary driver of healthcare costs.

Reducing unnecessary administrative costs willgenerate a one-time savings it wont do much

toslow health expenditure growth.


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A better economic

argument: cost controlsCentral take-home point:

When you have a fragmented, non-centrally coordinated system in whichall the payers play by different rules,its very difficult to institute effective

systemic cost controls.

You can institute cost controls in someareas, but not others.


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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


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STRONG (and thereforecontroversial) cost controls

Global budgeting

Price controls

Supply controls

Reimbursement caps for providers

Expenditure targets


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STRONG (and thereforecontroversial) cost controls

Other countries have all used these cost

control mechanisms with great success.

But there is always the danger of beingtoo aggressive about controlling costs.


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Caveat, again

None of these cost controls are inherent tosingle payer systems

The point is that policy makers have theOPTION of instituting cost controls

And whether that OPTION is exerciseddepends on public opinion!


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Advantages of single

payer to Patients:

Improved health

Free choice of provider

Portability of coverage


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payer to Physicians

Restoration of clinical autonomy

Lower malpractice premiums

Improved patient care

Simplified billing


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payer to Businesses

Decreased health care costs (for most)

Level the playing field

Improved global competitiveness


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Potential disadvantages

Threat of underfunding by hostilegovernment

Strength of special interests thatwould seek to undermine the system

Potential imbalance between qualitycontrolling expenditure growth


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Potential disadvantages

Transition from current system will be difficult

Important tradeoffs: will America make them? You cant give every health care intervention to every

person

Less choice in insurance plan

More government control for less private control


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Conclusion: How do you

evaluate a system? Every system has disadvantages, no matter

what. Based on your values, you can

select which disadvantages are outweighedby the advantages.

If you value universality and equity,

single payer is a wonderful option, despiteits potential disadvantages.

Single Payer Explained

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Single Payer Explained