How Single Payer Health Care Pays For Itself

This article is from Progress Illinois.

by Dr. Quentin Young M.D. And Nicholas Skala on October 07, 2008

The threat of large spending increases normally extinguishes any talk of expanded health coverage. In the wake of the financial system’s speculative collapse, Barack Obama told reporters that he would have to delay initiatives promised on the campaign trail. But international experience demonstrates that universal coverage need not be contingent upon high spending; indeed, the rest of the industrialized world provides comprehensive health benefits to all citizens for around half of the current U.S. outlay.

In fact, Illinoisans already pay enough to cover comprehensive, high-quality care for all – we just don’t get it. The reason we don’t is because insurance companies waste billions of our premium dollars on marketing, underwriting, denying coverage, and fighting claims. Eliminating this profit-focused paperwork would save at least $17 billion annually, enough to provide health care for all Illinoisans without paying more than we already spend. The Health Care for All Illinois Act (HB 311), introduced by Rep. Mary Flowers, is Illinois’ best option for fixing our broken health care system.

Illinois spent $6,714 per person on health care in 2006, compared with $3,678 in Canada, $3,371 in German, and $3,449 in France. While 1.8 million Illinoisans are uninsured and millions of the insured go without needed care due to cost, these countries provide universal care and their populations are healthier. So how is it possible that we spend more and get less?

The reason is we rely on private insurance companies to pay for care. The natural market behavior of insurance companies is to compete to sign up healthy, profitable patients while excluding the sick. To do this, they erect massive bureaucracies for the sole purpose of contesting claims, issuing denials, and screening out the sick.

The scope of the administrative waste is staggering: co-payment collection and processing, eligibility determinations, utilization reviews, sales, billing, collection, marketing. In 2003 Harvard University researchers totaled it up and found that nearly one-third (31 percent) of our health spending goes to administrative costs. Of Illinois’ estimated $87 billion in 2008 health spending, at least $17 billion could be saved simply by replacing private insurers with a single public payer like Medicare. The Government Accounting Office, Congressional Budget Office, and Navigant Consulting, the independent financial consulting firm hired by the state of Illinois, have all confirmed that single-payer financing could produce sufficient savings to cover everyone without additional spending.

Many progressives maintain hope that an Obama presidency will be the harbinger of universal coverage. But the Obama approach, as currently contemplated, has little hope of remedying our state’s health crisis.

The problem is that Obama, like John McCain, maintains faith that the market will assure quality health coverage is available once a few tweaks are made. Obama would offer tax subsides to help Americans buy private health insurance, and in return insurers would compete through a regulated “National Health Insurance Exchange.” A new public insurance plan would compete with private insurers. Many supporters of single-payer believe – wrongly – that such a system could naturally evolve into single-payer. Because administering public programs are inherently costs less, the argument goes, the public plan would out-compete the private insurers and gradually accrue all Americans into a comprehensive single-payer plan.

But this simplistic script ignores both international and domestic experience. In reality, profit-driven insurers have found myriad ways of skimming the cream — the healthy and profitable patients — while leaving the sick and costly to public programs. Private Medicare HMOs now receive 114 percent of what it would cost to treat their enrollees in traditional Medicare because of selective advertising and plan design. The private health insurer BUPA recently pulled out of the Irish market after the nation’s high court found it had selectively enrolled healthier patients and ordered it to make risk equalization payments. There is little reason to believe the experience in the U.S. would be any different.

Under the Obama plan, decent coverage would remain unaffordable for most Illinoisans while costs would continue to rise. Despite his promises of affordable insurance, the only way to get inexpensive policies is to strip them down with huge co-payments and deductibles. In Massachusetts, the first state to experiment with such a scheme, a 56-year-old making $30,000 annually will have to spend $7,164 in premium and deductible payments before insurance kicks in, and still pony up 20 percent of hospital costs after that.

Such skimpy plans are insurance in name only. Beleaguered Illinois families would remain unable to get care and as costs continue to rise, employers will push more and more middle-class families from relatively comprehensive plans towards new, paper-thin coverage. The only way to simultaneously expand coverage and lower costs is through a single-payer system: “Medicare for All Illinois.”

A single-payer system is the only economically viable reform option. Yet opposition from insurance and drug industry giants continues to intimidate lawmakers and even aspirants to the presidency. We need leaders committed to the health of all people of Illinois.

Dr. Quentin Young is national coordinator of Physicians for a National Health Program; Nicholas Skala is co-founder of Health Care for All Illinois.