Maryland Lewin Group 2000

Analysis of the Costs and Impact of Universal Health Care Models for the State of Maryland: The Single-Payer and Multi-Payer Models

By: The Lewin Group, Inc
Authors: John F. Sheils, Randall A. Haught
Published: May 2, 2000
Financed by: The Aaron Straus and Lillie Straus Foundation and The Jacob and Hilda Blaustein Foundation
Legislation analyzed: none. Single-payer proposal analyzed developed by authors.

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The purpose of this analysis was to explore the expected costs and impacts of two alternative universal health reform plans for Maryland. We analyzed a single-payer model in which all state residents are covered under a single public program funded primarily with an employer payroll tax. The second approach is similar to the single-payer program with the exception that employers have the option of opting-out of the government program and providing coverage to their workforce on their own. We call this second alternative the multi-payer model.

Our analysis indicates that the single payer model would cover all Marylanders, including the estimated 760,000 uninsured persons in the state, while actually reducing total health spending in Maryland by about $345.8 million (i.e., 1.7 percent). These savings are attributed primarily to the lower cost of administering coverage through a single government program with uniform coverage and payment rules. The multi-employer scenario would achieve less administrative savings because many employers are likely to continue to provide coverage through their own health plans. However, enough administrative savings are realized under this approach that the program would achieve universal coverage with an increase in statewide health spending of only about $207 million (about a 1.1 percent increase in spending) in 2001.

Both of these reform scenarios would greatly redistribute health care costs across families in various income groups by shifting from today’s premium based system to a tax based system where individual payments for health coverage increase in proportion to income. For example, under the single-payer scenario, families with incomes below $100,000 would on average find that their new tax payments under the program are more than offset by the elimination of premium payments and reductions in out-of-pocket spending under the plan. However, under the tax based system, families with incomes of $100,000 or more will, on average, see a net increase in spending for health care.

In this report, we present our analyses of the financial impact of these health reform models on various payers for health care including state, local, and federal governments. We also estimate the financial impact of the proposal on employers by industry and firm size. In addition, we estimate the impact of the plan on household health spending by age, income level, and other characteristics.