Sustainable Quality Health CareSingle Payer is not an Answer, it is the Answer

Gerald FriedmanProfessor of Economics

University of Massachusetts at AmherstJuly 29, 2013

gfriedma@econs.umass.eduTwitter: @gfriedma

Bottom Line: HR 676 (Improved Medicare-for-All) can be funded

• In 2014: – Saves $592 billion in wasteful administrative spending and

excessive drug prices– After $394 billion in system improvements, saves nearly $200

billion– Local and state governments save $283 billion in Medicaid and

employee health benefits– 95% would save money

• Over decade– Funding program for would produce $3 trillion in federal deficit

reduction– State and local governments save $5 trillion– Health care spending falls by over $8 trillion

Problem I: unsustainable increases in health care costs

19701972

19741976

19781980

19821984

19861988

19901992

19941996

19982000

20022004

20062008

20102012

20142016

20182020

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Total Health Care Expenditures

Year

Heal

th C

are

Expe

nditu

res i

n $b

illio

ns

7% of GDP in 1970; 18% in 2010; 20% in 2021

Rising Health Care burden on household budgets

19701972

19741976

19781980

19821984

19861988

19901992

19941996

19982000

20022004

20062008

20102012

20142016

20182020

100%

600%

1100%

1600%

2100%

2600%

3100%

3600%

4100%

Index of per capita health care spending Index of SSA average wages

Growing burden of excess health care costs

Health care spending 6% of average wage in 1970, 20% in 2010, 24% in 2021

Rising copays and deductibles

2006 2007 2008 2009 2010 2011 2012 $-

$100

$200

$300

$400

$500

$600

$700

$800

$900

Average deductible for all covered workers

Source: http://kff.org/health-costs/issue-brief/snapshots-the-prevalence-and-cost-of-deductibles-in-employer-sponsored-insurance/

Rising medical bankruptcy:More bankruptcies due to medical bills

2001 20070%

10%

20%

30%

40%

50%

60%

70%

80%

Solution: “To provide for comprehensive health insurance coverage for all United States residents, improved health care

delivery, and for other purposes” (HR 676)

Expanded and Improved Medicare for All! Introduced by Representative John Conyers and 52 co-sponsorsBuilds on success of Medicare Program

It works for Medicare. We would not have a health care financing crisis with Medicare for all

Private Insurance Medicare0%

500%

1000%

1500%

2000%

2500%

2165%

1562%

Price Increases 1970-2000

Savings from HR 676

$592 billion in savings from single payer

AdministrationDrug purchasing

$476 billion

$116 billion

Changes with HR 676Savings from single funding source

– Eliminates most administrative overhead in insurance industry

– Eliminates most billing and insurance related expenses for providers

– Can bargain to eliminate monopoly pricing of drugs and other medical supplies

Program Improvements with HR 676,) 2014 (Added costs)

$144

$110

$89

$31

$20

Increased utilization

Cost of expanded coverage and additional government admin-istration

Cost of Medicaid rate adjustment

Transition cost of unemployment insurance and retraining for dis-placed workers

Transition cost of capital buy-out of private health care facilities

$394 in extra spending

Added costs and system improvements

– Expanded coverage to all residents– Elimination of underinsurance leads to greater

utilization of health care services– Elimination of differential under-pricing for

Medicaid– Retraining costs for displaced insurance and billing

workers– Purchase of existing for-profit facilities

Savings grow over timeProjected Personal Health Care Spending ACA vs HR 676

Assuming growth rate of per capita expenditures would slow to rate of countries with single-payer systems, 10 year savings of over $8 trillion or 4% of GDP. Reduction in Federal deficit of nearly $2 trillion.

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $2,700

$3,200

$3,700

$4,200

$4,700

$5,200

$5,700

$6,200

ACA personal health expenditures Single payer

Can we pay for it?

Yes! HR 676 provides for a progressive tax program that would fund Improved Medicare for All while increasing economic efficiency• Progressive income taxes• Progressive payroll taxes• Financial transaction tax

Funding: we start with what we need, and what we already have

Total : Baseline spending plus HR 676 program improvements $ 3,556

Remaining revenue sources

Federal Medicare, Medicaid, and other health spending, and 20% of current out-of-pocket spending $ 1,454

Savings from administrative efficiencies and reduced monopolistic drug pricing $ 592

Tax expenditure savings (corporate taxes) $ 260

Net revenue needs $ 1,250

New, Progressive Revenues

Tobin tax of 0.5% on stock trades and 0.01% per year to maturity on transactions in bonds, swaps, and trades. $ 442

6% Surtax on household incomes over $225,000 $ 279

6% tax on property income from capital gains, dividends, interest, profits, and rents $ 310

6% payroll tax on top 60% with incomes over $53,000 $ 346

3% payroll tax on bottom 40% with incomes under $53,000 $ 27

Total additional revenues $ 1,404

Net surplus for deficit reduction $ 154

1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2013 SP0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

US Top Tax Rate, 1940-2013

$850 Billion spent on Health Insurance Premiums in 2010

Medical Mutual: US Healthcare Costs, 2010

Distributional Impact of HR 676Almost all save money

Note: Assumes current Federal Medicare taxes and spending remains

$25,723

$57,348

$87,733

$128,441

$216,922

$462,946

$2,994,817

$166,592,800

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Average household income in group

Perc

enta

ge c

hang

e in

inco

me

after

taxe

s and

hea

lth

care

spen

ding

10 year deficit reduction of $3 trillionMoney for education, infrastructure, training. Even for

tax cuts.

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

Cumulative Deficit Reduction

Deficit reduction will be greater because of faster economic growth

Instead of waste and administrative abuse, money for families and businesses

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

Cumulative health care savings vs ACA

Redu

ced

pers

onal

hea

lth ca

re e

xpen

ditu

res,

cum

ulati

ve $

billi

on

In 1965, our parents and grandparents created Medicare and began to create a healthier, more productive America.

Let’s finish their work.HR 676: costs less today, costs less tomorrow,

covers everyone