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Commentary on “Health Spending Under Single-Payer Approaches”

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Commentary on “Health Spending Under Single-Payer Approaches” J Ambulatory Care Manage Vol. 00, No. 00, pp. 1–6 Copyright C 2020 The Author. Published by Wolters Kluwer Health, Inc. Commentary on “Health 05/12/2020 on BhDMf5ePHKav1zEoum1tQfN4a+kJLhEZgbsIHo4XMi0hCywCX1AWnYQp/IlQrHD3VFjldD2uL9of+E7ocjW6k5s8iQnUWf7VZm+hv+PwhWSF9qky+aD68g== by https://journals.lww.com/ambulatorycaremanagement from Downloaded Spending Under Single-Payer Downloaded Approaches” from https://journals.lww.com/ambulatorycaremanagement Paul B. Ginsburg, PhD Abstract: One of the most controversial areas in discussions of single-payer approaches for the United States, such as “Medicare for All,” concerns its implications for costs. Confusion over differences between federal and total spending and effects of lower patient cost sharing gets in by the way of “apples-to-apples” comparisons. Key areas with potential to lower costs are lower BhDMf5ePHKav1zEoum1tQfN4a+kJLhEZgbsIHo4XMi0hCywCX1AWnYQp/IlQrHD3VFjldD2uL9of+E7ocjW6k5s8iQnUWf7VZm+hv+PwhWSF9qky+aD68g== administrative costs and lower provider prices. But cost reduction would likely be smaller than some envision, especially in the price area because of the need for a long process to gradually allow providers to adjust to lower prices and Americans’ unique attitudes toward regulation. Key words: costs, prices, single-payer NE OF THE MORE controversial ques- costly it would be. The headline number that O tions related to the prospect of single- many refer to is the Urban Institute’s estimate payer health care in the United States is how that Senator Bernie Sanders’ Medicare-for-All plan would add $34 trillion to federal spend- ing over a decade (Blumberg et al., 2019). For a fully implemented plan, annual federal Author Affiliations: The Brookings Institution, Washington, DC; University of Southern California spending in 2020 would be more than triple (USC), Los Angeles; and USC-Brookings Schaeffer what it would be under current law—$4.1 Initiative for Health Policy, Washington, District of trillion instead of $1.3 trillion. Columbia. This work was funded by a gift from Leonard D. Schaef- fer to USC and The Brookings Institution to support the THE NEED TO COMPARE “APPLES TO USC-Brookings Schaeffer Initiative for Health Policy. I APPLES” am grateful to my Brookings colleagues, Matt Fiedler and Christen Linke Young, for helpful comments on an earlier draft. But federal spending is not the same as Conflict of Interest: Dr Ginsburg serves as a Public total spending, which also includes spending Trustee of the American Academy of Ophthalmology, by individuals, employers, and states. A large as an Advisory Board member at the National Insti- part of the increased federal spending for tute for Health Care Management, and as Vice Chair of the Medicare Payment Advisory Commission, which the Sanders plan reflects shifts in respon- on sibility from individuals (zero premiums, 05/12/2020 advises the Congress on Medicare issues. This is an open-access article distributed under zero cost sharing, and payment for services the terms of the Creative Commons Attribution-Non not covered today such as long-term care Commercial-No Derivatives License 4.0 (CCBY-NC-ND), where it is permissible to download and share the services and support) and from employers, work provided it is properly cited. The work cannot which would no longer be contributing be changed in any way or used commercially without to employer-sponsored insurance. For this permission from the journal. reason, it is instructive to also look at total Correspondence: Paul B. Ginsburg, PhD, The Brook- ings Institution, 1775 Massachusetts Ave NW, Washing- national spending. For 2020, according to ton, DC 20036 ([email protected]). the Urban Institute analysis, national health DOI: 10.1097/JAC.0000000000000338 spending would increase from $3.5 trillion to 1 2JOURNAL OF AMBULATORY CARE MANAGEMENT/00 2020 $4.2 trillion, an increase of 21%. While this is a claims processing, which presumably would much smaller increase than federal spending, continue. Cutler (2020) estimates that about the change in the latter would nevertheless $100 billion per year goes to the private be very important, since it would require very health insurance industry for administrative large tax increases, which, in turn, would sac- costs and profits. This is a substantial sum, rifice productivity in the national economy. butitislessthan3%ofnationalhealth Overall, this shift of burdens from individuals spending. And some of the spending by and employers to government could mean private insurers more than pays for itself by substantial redistribution of income, depend- reducing medical spending. For example, ing on how single payer was financed. prior authorization, which is not done by But comparisons of total or federal spend- traditional Medicare, likely is critical in a ing still mask other key elements in under- delivery system that does not constrain the standing costs. For example, the Sanders pro- purchase of medical technology, such as posal would eliminate the cost sharing that magnetic resonance imaging equipment, as patients are responsible for in both private in- is done by many single-payer systems. The surance and in Medicare itself. For services Governmental Accountability Office (GAO) that enrollees have already been getting, the estimates that Medicare demonstrations of cost burden would shift from patients to the prior authorization have saved substantial taxpayers. But lower cost sharing would also amounts (GAO, 2018). Medicare has often increase service use, some of it valuable and been criticized for spending too little on some of it not, so this would be a net cost in- administration, with numerous analyses crease from the single-payer approach. The by the GAO showing very high rates of same logic applies to payment for services return for increased Medicare administrative that are not typically covered by either Medi- spending (GAO, 2016). A single-payer system care or private insurance. Covering these ad- could substantially reduce the cost of billing ditional services would transfer responsibility providers and patients, but the magnitude from the individuals who pay for the services would depend on the details of its patient but would lead those individuals—and others cost sharing and whether it abandoned fee for who do not currently use the services because service in favor of a budgeted system like that of the expense—to use more of the services. of the Veterans Health Administration. But So the increased costs would come from the regardless of details, having one payer instead higher use of services. Although the Sanders of many, with that payer having the authority plan includes dental, vision, and long-term to specify provider billing mechanisms, care services and supports, other conceivable would reduce administrative costs. single-payer plans, such as an option offered But there are opportunities to substantially by the Urban Institute, leave the list of cov- reduce administrative costs in health care ered services unchanged from current law. in a multipayer system, some of which are being pursued. Cutler (2020) believes ADMINISTRATIVE COSTS that administrative tools that are common in other industries could be created for Focusing on “apples-to-apples” compar- health care and save substantial amounts. For isons, single-payer advocates focus on savings example, health care providers and payers in administrative costs from the elimination could follow the banking industry and set of private insurers and lower provider prices up a clearinghouse for bill submission and through the single payer’s administered payment. Prior authorization, which also prices. If traditional Medicare became the leads to substantial administrative costs for only payer, it would eliminate most of the providers, could be substantially streamlined private insurance industry, which would lead through federal legislation to create a uni- to administrative cost reductions. Medicare form process. And quality reporting could does contract with private insurers for its be standardized, with private insurers and Health Spending Under Single-Payer Approaches 3 Medicare agreeing on common requirements. The key questions concern the economic The last 2 are discussed with increasing feasibility and political feasibility of revenue frequency at the federal level and are biparti- reductions anywhere close to this magnitude. san, suggesting that such advances might be Would rates this much lower than under cur- realistic over the next few years. Making data rent policies be possible without bankrupting interoperable, a goal that appears only a few many providers? Would the US political sys- years from becoming a reality in the United tem support rates under a single-payer system States, would also reduce administrative costs that are substantially lower than today? substantially—regardless of whether payment Analysts have more visibility into hospi- is under a single- or multipayer system. Cutler tal finances than into those of some other estimates that these 4 changes together could providers due to Medicare cost reporting. lead to annual administrative savings of $50 The Medicare Payment Advisory Commission billion to $75 billion per year, as well as (MedPAC), which advises the Congress on making providers’ and patients’ lives better. Medicare payment, estimates that in 2018, hospitals’ all-payer operating margins were 6%, which is somewhat higher than has been LOWER HEALTH CARE PRICES typical in the recent past (MedPAC, 2020). An implication of this is
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