The Single Payer Movement Expands

From Healthcare Finance News

Even as the Affordable Care Act is in its nascent stages, some states are already looking toward 2017 when they can request waivers to opt out of the healthcare exchanges. And a small, but persistent, movement has popped up toward a single payer system as an alternative to participating in the exchanges.

That grassroots movement is taking place in Pennsylvania.

In March, a report exploring the single payer system was created for the state by Gerald Friedman, professor of economics at the University of Massachusetts at Amherst. He found that a single payer system would cost $128 billion in 2014 as opposed to the current system, which costs $144 billion. It would save 11 percent ($16 billion) of healthcare costs in 2014, mainly by lowering spending on administration and reducing drug costs.

But adopting a single payer system would dramatically change the business of healthcare. And the examples to follow are nearly non-existent.

While rumblings of moving to a single payer system have been heard in states such Hawaii, Oregon and New York, only one state – Vermont – has passed legislation to move toward actually creating a single payer system.

Vermont, which already has 93 percent of its population insured, passed Act 48, which allows the state to begin preparing a single payer system. It requires the state to set parameters for minimum benefits, create a finance plan and put out a contract for an administrator of the program, and allows the state’s current insurance regulatory body to create a benefit package.

Robin Lunge, Vermont’s director of healthcare reform, said that Vermont’s goal is to move the issue of healthcare completely away from the employer. Vermont’s single payer system, she said, would be similar to the one state employees are already on. It would be financed through an employer and individual tax as well as the premium tax credits and subsidies provided through the exchanges.

In Pennsylvania, the single payer system Friedman based his report on would be funded through a variety of means, including a 3 percent income tax on individuals, a 10 percent payroll tax for employers and various federal and state funds.

The state’s Medicare, Medicaid and Veteran’s Administration programs would continue to operate as usual under a plan similar to Vermont’s. In Vermont’s potential single payer system, the system would act as a supplement to government insurance and cover everyone who is uninsured or part of the current state health exchanges.

The big losers in a Pennsylvania’s potential single payer system would be insurance companies, Friedman said. They would lose a big chunk of their business and profit.

“Insurance companies are the victims there,” he said.

Drug companies may also stand to lose profits, Friedman said. One of the biggest savings in the Pennsylvania estimate is $8 billion from reduced medication spending. This would happen because there would be one large pool that would have greater negotiating power (much like the VA, which Friedman said spends 41 percent less on medications than other providers).

Some of the bigger hospitals that can now charge monopoly prices in a market would also have a more difficult time doing so under a single payer system.

Primary care providers would come out better in a single payer system, but specialists might fare worse as payments are leveled out among providers.

The biggest winners under a single payer system in Pennsylvania would be employers, said Friedman. Employer-provided insurance currently costs about 13 percent of payroll in Pennsylvania, he noted.

David Steil, president emeritus of HealthCare4AllPA, the nonprofit organization advocating for a single payer system in Pennsylvania, and a business owner, agrees with Friedman’s assessment of the benefits to employers. “Businesses shouldn’t be in healthcare,” he said.

But Steil doesn’t take quite as negative a view of the impact a single payer system would have on insurance companies as Friedman does. Steil, a former Republican house representative in Pennsylvania, said insurers would more likely have to change the way they do business.

There are many services that wouldn’t be covered under a single payer plan, like elective plastic surgeries or private rooms, home health visits and ambulance services. Insurers, Steil said, could move to providing supplemental coverage for these kinds of services.

“I think they will have to look at changing their business model, but they won’t go out of business,” he said.