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What single payer is all about

ASK THIS | August 11, 2009

Polls show public opinion highly supportive of single payer health insurance, and one version has been introduced in the House of Representatives. But Republicans and influential Democrats like Senate Finance Committee chairman Max Baucus, with financial ties to insurers, are effectively blocking consideration of it.

By Rachel Nardin

Despite spending more than twice as much as the rest of the industrialized nations on health care ($7,129 per capita), the United States performs poorly in comparison on major health indicators such as life expectancy, infant mortality and immunization rates. Moreover, the other advanced nations provide comprehensive coverage to their entire populations, while the U.S. leaves 15 percent of its population completely uninsured and millions more inadequately covered. Congress is drafting health care reform legislation. Although single payer health care enjoys strong popular support, and President Obama has said in the past that it is the solution he’d like to see, Democrats with strong financial ties to the insurance industry, such as Senator Max Baucus, are blocking consideration of single payer. Here are some questions reporters need to ask about single payer health care reform.
What is “single payer?”
The term “single payer” describes a model of health care financing in which a single public or quasi-public agency organizes health financing, but delivery of care remains largely private. Most European countries, Canada, Australia and Taiwan have single payer systems. This is socialized insurance, in that public revenues are used to pay for the health care of all citizens, as we currently pay for other public services, such as the fire department.
“Single payer” is often conflated with “socialized medicine,” a term used to conjure up images of government bureaucratic interference in medical care. In countries with socialized medicine, such as Britain and Spain, the government controls the delivery of health care, as well as the payment for health care (i.e. all hospitals are public and all physicians are employed by the government). The Veterans Administration in the US is also a system of socialized medicine. Single payer is NOT socialized medicine; it is socialized insurance. Rather than more bureaucratic interference in medical care, there is more clinical freedom for doctors and patients in countries with single payer systems than in the US where insurance companies heavily constrain physician and patient behavior.
How would a single payer system work in the US?
The essential feature of single payer systems is that all funding for health care is public; however, there are a number of ways a single payer system could be constructed. Current single payer legislation in the House of Representatives, called The United States National Health Insurance Act, H.R. 676, provides one example.
HR 676 would create a public organization, the USNHI program, which would be publicly funded (as Medicare is now). Funding would come from several sources. Around 60 percent of all health care expenditures in the U.S. currently are public. This includes funding for Medicare and Medicaid, for the Veteran’s Administration, for insurance policies for government employees, and the tax subsidy for employer-based insurance (i.e. the tax break that employees receive when they use their pre-tax dollars to purchase health insurance). This money, already more than any other country spends on health care for its citizens, would be available to the USNHI program. Additional funding, if necessary, would come from a modest payroll and income tax and a surtax on very high-income groups. These are progressive ways of funding health care.
The USNHI program would disburse funds to regional offices, which would use them to cover operating and capital expenditure budgets. The operating budget would include simplified fee-for-service reimbursements to clinicians, global budgets for hospitals, other institutional providers, and capitated providers –doctors – who receive a set fee for each individual for whom they provide care. Global budgets are a way of constraining costs while allowing caregivers to decide how best to use available funds to maximize health. Under NHI, all providers must be non-profit and capital expenditures cannot come out of operating expenses; therefore, there is little incentive for providers to either underuse or overuse treatments.
With NHI, all Americans would be covered for all medically necessary services. Patients would have free choice of doctor and hospital, which they now often do not because of insurers’ provider networks. Patients would have no co-pays or deductibles, which have been shown to discourage some patients from seeking care.
Why would a single payer system be better than what Democratic lawmakers are proposing?
It will cost much less, cover absolutely everyone and provide accountability for quality. (See this report by my group, Physicians for a National Health Program.)
Currently, we spend nearly one-third of every health care dollar on the administrative costs that come from having a multiplicity of payers. Replacing multiple different insurers with a single payer will save more than $350 billion per year. None of the current proposals can achieve these savings. Adding a public program will only add administrative complexity and will not achieve much in the way of administrative savings.
Through global budgeting, negotiated fees and bulk purchasing, a single payer system will be able to constrain the growth of health care costs in a way that cannot be done by the over 1,000 insurers that currently make up our health care payment system. None of the current plans have any real mechanism for cost containment. Without cost containment, health care costs will continue to be a drag on individuals, municipalities and businesses.
Currently, no one is held accountable for the inadequacies and inequities in our health care; nothing in any current legislative proposals changes this. With USNHI, nationwide quality assessment of our medical system will be possible. USNHI will give us the leverage to reduce medical errors, streamline administration, and promote best practices; it has proven very difficult to do this in our current, fragmented system.
Won’t single payer lead to rationing of care?
We currently spend 17 percent of GDP on health care and health care costs continue to rise faster than wages and the overall economy. This spending trajectory is unsustainable; we must contain costs. We want a system that uses the resources we have in the way that best promotes health for all. Currently, some people get almost no care and others get excess care. There is significant data showing that there are parts of the U.S. where patients get more care not because they are sicker, but because there are more doctors with a vested interest in providing treatments; health outcomes for these patients are often worse. Given the reality that we can’t, and shouldn’t, be paying for absolutely every new drug or technology, we must have a way to decide what is worth our health care dollars. Under a single payer system, regional offices would decide, with the input of the community and physicians, how best to use available health care dollars. Single payer makes the currently hidden process of allocating fixed resources transparent and publically accountable.
How will single payer change things for doctors and patients?
Single payer is a payment mechanism that collects and disburses health care dollars in a much more efficient way than our current, multi-payer system. As a payment mechanism, single payer is compatible with many different types of care delivery. There is nothing inherent in single payer that will change what happens betweens doctors and patients currently, except that private insurance companies will no longer dictate which doctors patients may see and which treatments will be covered. Single payer systems tend to have better functioning mechanisms than the current U.S. system for directing health care dollars to proven and cost effective interventions; thus they tend to promote primary care over specialist care and to adopt unproven technologies less quickly. Adoption of a single payer system in the U.S. might, but would not necessarily, be accompanied by changes in national policy and payment guidelines that would promote similar goals.
Why is a single payer system better than allowing the market to control health care costs?
Advocates of the “free market” approach to health care claim that competition will streamline the costs of health care and make it more efficient. What is overlooked is that past competitive activities in health care under a free market system have been wasteful and expensive, and are the major cause of rising costs. There are two main areas where competition exists in health care: among the providers and among the insurers. When, for example, hospitals compete they often duplicate expensive equipment in order to corner more of the market for lucrative procedure-oriented care. This drives up overall medical costs to pay for the equipment and encourages overtreatment. They also waste money on advertising and marketing. The preferred scenario has hospitals coordinating services and cooperating to meet the needs of their communities.
Competition among insurers (the payers) is not effective in containing costs either. Rather, it results in competitive practices such as avoiding the sick, cherry-picking, denial of payment for expensive procedures, etc. An insurance firm that engages in these practices may reduce its own outlays, but at the expense of other payers and patients.
Is single payer realistic?
Yes. It is the current Democratic reform proposals that are unrealistic, in that they will neither control the health care costs crippling municipal budgets and American businesses, nor help more than a fraction of the 40 percent of Americans currently uninsured or underinsured.
H.R. 676 makes provision for the two major changes a single payer system requires: conversion of for-profit health care institutions to non-profit status and the replacement of private insurers by the USNHI program. Investor-owned, for-profit health care institutions are those that do not just collect payment for services rendered to cover operating and capital expenses, as private physicians do, but which also make profits for investors. These for-profit institutions, which studies show have a lower quality of care and worse medical outcomes than their not-for-profit counterparts, would be converted to not-for-profit institutions over a 15-year period through the sale of U.S. Treasury bonds. Payment would be made for real estate, buildings and equipment, not for loss of business profits. Private health insurers would be prohibited from selling coverage that duplicates the benefits of the USNHI program. They would not be prohibited from covering any additional benefits not covered by H.R. 676, such as cosmetic surgery and other medically unnecessary treatments. Those health insurance company employees who are displaced as a result of the transition would be the first to be hired and retrained under H.R. 676. Those not rehired would receive two years’ unemployment benefits and retraining.
Why has Congress shut the door on single payer?
Single payer would reduce the huge profits currently being made by for-profit insurers and providers and by the pharmaceutical and device manufacturers. These vested interests have strong and well-funded lobbies. Many legislators currently drafting national health care reform policies receive large amounts of money from these groups .
Single payer legislation (H.R. 676 in the House and companion legislation, S 703, in the Senate) should be subject to the same analysis by the Congressional Budget Office as other proposed reform legislation. Only then will we have the facts on costs and benefits that we need to make the best health care reform choice for the nation.

Fellow physician
Posted by Jim Recht
08/30/2009, 11:09 AM

Excellent piece of writing. Thank you, Rachel!

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