By: Congressional Budget Office
Author: Jaeger Nelson
Published: February 2022
Financed by: Congress of the United States
Legislation analyzed: No exact legislation. It uses a general-equilibrium, overlapping-generations model to analyze the economic and distributional implications of five illustrative single-payer health care systems.
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This paper builds on previous studies published by the Congressional Budget Office about single-payer health care systems. It uses a general-equilibrium, overlapping-generations model to analyze the economic and distributional implications of five illustrative single-payer health care systems. The systems vary by their payment rates to providers, degree of cost sharing, and inclusion of benefits for long-term services and supports (LTSS). The economic effects of financing a single-payer system are beyond the scope of this paper. However, the results can be paired with some of CBO’s previously published estimates of the economic effects of financing a large and permanent increase in government spending. We analyze six channels through which a single-payer system would affect the economy:
- The composition of workers’ labor compensation would change because employers would no
longer provide health care benefits and would pass along the savings to employees,
increasing their taxable wages.
- Households’ health insurance premiums would be eliminated, and their out-of-pocket (OOP)
health care costs would decline.
- Administrative expenses in the health care sector would decline, freeing up productive
resources for other sectors and ultimately increasing economy wide productivity.
- Reduced payment rates to providers would increase productivity and efficiency in providing
health care; however, some of the reduction in payment rates would be passed through to
workers’ wages in the health care sector and throughout the supply chain.
- Longevity and labor productivity would increase as people’s health outcomes improved.
- LTSS benefits would further reduce OOP spending, provide payments for care that is
currently unpaid, increase wages among workers providing care, and allow some unpaid caregivers to increase their hours worked at their primary occupation.