Single Payer 101 Kao-Ping Chua Jack Rutledge Fellow, 2005-2006 American Medical Student Association.

Single Payer 101Single Payer 101

Kao-Ping ChuaKao-Ping Chua

Jack Rutledge Fellow, 2005-2006Jack Rutledge Fellow, 2005-2006

American Medical Student American Medical Student AssociationAssociation

OutlineOutline

I. Financing health care and single payer I. Financing health care and single payer financingfinancing

II. What does single payer look like?II. What does single payer look like?

III. The argument for single payerIII. The argument for single payer

IV. The advantages of single payer toIV. The advantages of single payer todifferent groups of peopledifferent groups of people

V. The potential disadvantages of single V. The potential disadvantages of single payerpayer

The Financing of The Financing of HealthcareHealthcare Two essential functionsTwo essential functions

– Collection of fundsCollection of funds

– Reimbursement of providers Reimbursement of providers

Single payer is way of FINANCING Single payer is way of FINANCING HEALTH CAREHEALTH CARE

Financing healthcare Financing healthcare in the U.S.in the U.S.

Individuals / Businesses

Government [payer]

Health Service Providers

Private Insurers [payers]

Direct or Out-of-Pocket Payments

Medicare, Medicaid, etc.

Taxes

Premiums

Public employees’ premiums

Provider Payments

|------Collection of funds-------||---------Reimbursement--------|

Single payer financing: Single payer financing: simplifiedsimplified


Government [payer]



National health

insurance program

Taxes


Single payer financing: Single payer financing: realityreality


Government [payer]



National health

insurance program

Taxes


Private insurers (non-

covered services)

Premiums Provider Payments

Single payer specifies Single payer specifies FINANCING, not FINANCING, not DELIVERYDELIVERY

FinancinFinancingg

DeliveryDelivery

U.K. U.K. (socialized (socialized medicine)medicine)

Mostly Mostly publicpublic


U.S.U.S. Public and Public and privateprivate

Mostly Mostly privateprivate

Single Single payerpayer


Public and Public and privateprivate

““Single payer” vs. Single payer” vs. “universal health “universal health care”care”

Single payer is a way of Single payer is a way of achieving universal health achieving universal health care, but universal health care, but universal health

care is not necessarily care is not necessarily single payersingle payer

What does single What does single payer look like?payer look like? Eligibility/benefits: all residents of Eligibility/benefits: all residents of

U.S. enrolled; all medically U.S. enrolled; all medically necessary care coverednecessary care covered

Financing: Current sources of Financing: Current sources of government funding and adding government funding and adding new taxes (offset by premiums)new taxes (offset by premiums)

What does single What does single payer look like?payer look like? Hospitals: Global budget for operating Hospitals: Global budget for operating

expenses expenses

Physicians: remain in private practice. Physicians: remain in private practice. – Reimbursement schemes: fee-for-service, Reimbursement schemes: fee-for-service,

salarysalary

Medications/supplies: formulary and Medications/supplies: formulary and bulk negotiationbulk negotiation

The argument for The argument for single payersingle payer Philosophical argumentPhilosophical argument

Economic argumentEconomic argument

Philosophical argument: Philosophical argument: is for-profit health care is for-profit health care acceptable?acceptable? U.S.: market-based systemU.S.: market-based system

2000-2004: 2000-2004: – Profits for top 17 U.S. health insurance Profits for top 17 U.S. health insurance

companies rose 114% (compared to 5% companies rose 114% (compared to 5% for S&P 500)for S&P 500)

– Health insurance premiums rose 60%, 6 Health insurance premiums rose 60%, 6 million more uninsuredmillion more uninsured

Philosophical questionPhilosophical question

How much should the profit How much should the profit motive be involved with health motive be involved with health care?care?

Depends on whether universality Depends on whether universality in access is importantin access is important

Economic argumentEconomic argument

Administrative simplificationAdministrative simplification

Cost control Cost control mechanismsmechanisms

Economic argument: Economic argument: administrative administrative simplificationsimplification

Source: Kenneth Thorpe, 1992.

Single payer and Single payer and administrative costs…administrative costs… Woolhandler: $294.3 billion per Woolhandler: $294.3 billion per

year spent on administrative year spent on administrative costs in U.S.costs in U.S.– 31% of U.S. health expenditures, vs. 31% of U.S. health expenditures, vs.

16.7% for Canada.16.7% for Canada.

Conclusion: Single-payer system Conclusion: Single-payer system in America would save on in America would save on administrative costsadministrative costs

CaveatsCaveats

Important question is not whether Important question is not whether administrative costs are high, but administrative costs are high, but WHICH administrative costs are WHICH administrative costs are too hightoo high

CaveatsCaveats

Canada’s system doesn’t DO the Canada’s system doesn’t DO the same administrative functions as the same administrative functions as the U.S.U.S.

If we adopted single payer, our If we adopted single payer, our system would DO different system would DO different administrative functions than Canadaadministrative functions than Canada

Still…single payer Still…single payer would decrease MANY would decrease MANY costscosts

Source: Kenneth Thorpe, 1992.

The best economic The best economic argument?argument?Administrative costs have really been the rallying Administrative costs have really been the rallying

cry for many single payer advocates, but they cry for many single payer advocates, but they are not the best economic argument for single are not the best economic argument for single

payer.payer.

WHY?WHY?

Administrative costs are not a primary driver of Administrative costs are not a primary driver of health care costs. health care costs.

Reducing unnecessary administrative costs will Reducing unnecessary administrative costs will generate a one-time savings – generate a one-time savings – it won’t do it won’t do

much tomuch to slow health expenditure growth.slow health expenditure growth.

A better economic A better economic argument: cost argument: cost controlscontrols

Central take-home point:Central take-home point:

When you have a fragmented, non-When you have a fragmented, non-centrally coordinated system in centrally coordinated system in

which all the payers play by which all the payers play by different rules, it’s very difficult to different rules, it’s very difficult to

institute effective systemic cost institute effective systemic cost controls. controls.

You can institute cost controls in You can institute cost controls in some areas, but not others.some areas, but not others.

Cost controls in Cost controls in centrally administered centrally administered systemssystems Limits on use of ineffective technologyLimits on use of ineffective technology

Bulk purchasingBulk purchasing

Screen for fraudulent billing (e.g. Taiwan) Screen for fraudulent billing (e.g. Taiwan)

Improvements in quality that save Improvements in quality that save money:money:– Increased primary careIncreased primary care– Electronic medical recordsElectronic medical records

STRONG (and therefore STRONG (and therefore controversial) cost controversial) cost controlscontrols Global budgetingGlobal budgeting Price controlsPrice controls Supply controlsSupply controls Reimbursement caps for Reimbursement caps for

providersproviders Expenditure targetsExpenditure targets

STRONG (and therefore STRONG (and therefore controversial) cost controversial) cost controlscontrolsOther countries have all used these Other countries have all used these

costcost

control mechanisms with great control mechanisms with great success.success.

But there is always the danger of But there is always the danger of being too aggressive about being too aggressive about

controlling costs.controlling costs.

Caveat, againCaveat, again

None of these cost controls are inherent None of these cost controls are inherent to single payer systemsto single payer systems

The point is that policy makers have the The point is that policy makers have the OPTION of instituting cost controls…OPTION of instituting cost controls…

And whether that OPTION is exercised And whether that OPTION is exercised depends on public opinion!depends on public opinion!

Advantages of single Advantages of single payer to…payer to… Patients:Patients:

– Improved healthImproved health

– Free choice of providerFree choice of provider

– Portability of coveragePortability of coverage

Advantages of single Advantages of single payer to…payer to… PhysiciansPhysicians

– Restoration of clinical autonomyRestoration of clinical autonomy

– Lower malpractice premiumsLower malpractice premiums

– Improved patient careImproved patient care

– Simplified billingSimplified billing

Advantages of single Advantages of single payer to…payer to… BusinessesBusinesses

– Decreased health care costs (for Decreased health care costs (for most)most)

– Level the playing fieldLevel the playing field

– Improved global competitivenessImproved global competitiveness

Potential Potential disadvantages disadvantages Threat of underfunding by Threat of underfunding by

hostile governmenthostile government

Strength of special interests that Strength of special interests that would seek to undermine the systemwould seek to undermine the system

Potential imbalance between quality Potential imbalance between quality controlling expenditure growthcontrolling expenditure growth

Potential Potential disadvantagesdisadvantages Transition from current system will be difficultTransition from current system will be difficult

Important tradeoffs: will America make them?Important tradeoffs: will America make them?– You can’t give every health care intervention to You can’t give every health care intervention to

every person every person

– Less choice in insurance planLess choice in insurance plan

– More government control for less private controlMore government control for less private control

Conclusion: How do Conclusion: How do you evaluate a you evaluate a system?system? Every system has disadvantages, no Every system has disadvantages, no

matter what. matter what. Based on your valuesBased on your values, , you can select which disadvantages you can select which disadvantages are outweighed by the advantages.are outweighed by the advantages.

If you value universality and If you value universality and equityequity, single payer is a wonderful , single payer is a wonderful option, despite its potential option, despite its potential disadvantages.disadvantages.

Single Payer 101 Kao-Ping Chua Jack Rutledge Fellow, 2005-2006 American Medical Student Association.

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Transcript of Single Payer 101 Kao-Ping Chua Jack Rutledge Fellow, 2005-2006 American Medical Student Association.