California PNHP's President Dr. Jim Kahn’s testimony to the California Assembly Health Committee

James G. Kahn, MD, MPH
Testimony 29 June 2010
California Assembly Health Committee

Thank you for inviting me to speak before your committee. Health care reform is a timely and pressing issue, and I’m pleased to contribute to the discussion.

My name is James G. Kahn. I am a professor of health policy at UCSF, and President of the California chapter of Physicians for a National Health Program.

I want to thank Sen. Mark Leno for his inspirational leadership for universal health care, as well as his co-authors such as on this committee.

My perspective in assessing health care interventions is that of a hard-nosed, data-driven economist. My research at UCSF focuses on how to critically read evidence on intervention effectiveness, and how to shift resources to the most efficient uses. My assessments are intended to be pragmatic and realistic.

My pragmatic and realistic assessment of single payer health care – as encompassed in SB 810 – is that it would sharply reduce inefficiency and waste, while returning to medicine a focus on providing the best quality health care.

I will highlight two major points in my testimony – the huge savings realized by single payer due to increased efficiency, and the interest of physicians in single payer.

First I would like to establish an important fundamental concept: single payer is a financing intervention – how we pay for care – not a change in how health care is delivered. All monies are collected and disbursed by a trust fund. The provider system remains as it is today – mainly private hospitals, medical offices, and so on – with the same incentives to attract and retain patients, and even greater autonomy in medical decision making. Thus, single payer is a public-private partnership, adopting the best traits of both systems.

My particular expertise in health system research is in billing and insurance-related administrative costs. My colleagues and I have demonstrated that as much as 1 dollar in seven that goes into a medical office is used to collect payment – for contracting, billing, copayment collection, and repeated appeals of claim denials. Overall, for health care funded through the private insurance system, fully 38 cents of each dollar goes to administration and profits, leaving only 62 cents for clinical care. 20 cents is avoidable administration – which would mainly disappear with single payer. This translates to billions of dollars that become available to pay for health care – more than $200 billion per year in the United States, and $30 billion in California.

That’s why economists like single payer – it improves the technical efficiency of providing health care.

Why do physicians like single payer? In one national survey, published in the Annals of Internal Medicine, 59% said they support single payer reform.

There are several reasons:

* Doctors have long felt mistreated by insurers: unpayed or under-payed for delivered health care services. Private insurers have a far worse payment track record than Medicare.

* Doctors resent the time they have to spend on billing and insurance-related administration – an average of nearly 60 minutes per day. They’d rather provide health care.

* Doctors would like to see that all patients have quality insurance that assures access to needed services. In this way, care decisions can reflect clinical decisions which take into account what care is needed, rather than financial constraints.

When you put together administrative efficiency and doctors focused on providing care, you get lower costs and higher quality.

The other rich democracies (the countries in the OECD) spend approximately half as much per person as we do on health care. Much of that savings is in lower administrative costs.

And they have much better health care quality and outcomes. This was recently demonstrated again in a Commonwealth Fund multi-country study.

In economics, it is often said that people are willing to pay for quality. In health care, we have the remarkable situation of how paying less – reducing the system’s fat – is the route to improved quality.

The new federal health reform legislation, which expands private insurance, does not provide the benefits of single payer. It does, however, allow states to implement single payer. PNHP-California encourages you to do so.

Thank you.