Single payer: the only way to address the financial burden of Medicaid

The following statement was prepared for the NY Metro chapter of Physicians for a National Health Program and Single Payer New York by Leonard Rodberg, Ph.D., research director of the NY Metro chapter of PNHP, in response to Gov. Andrew Cuomo’s call for “Redesigning the Medicaid Program.”

By Leonard Rodberg

We all know that New York State’s health care system, like that of the rest of the nation, has serious problems, the large number of uninsured and the continually escalating costs being high among them. But it also has gross inequities in access, serious deficiencies in primary and preventive care, and wasteful inefficiencies in the use of our health care resources, making our health care among the most expensive in the nation. All of this can be traced to the fragmented, inefficient and wasteful way we pay for health care.

Driven in large part by the rising cost of health care, the nation has accepted the goal of universal coverage. The recently passed national legislation seeks to achieve this, but it is now widely recognized that, aside from some as-yet-undefined demonstration projects, it does little to contain the rising cost of care.

The truth is that the entire system of private insurance for the working population, supplemented by public programs for the poor and the elderly, has become unaffordable. It is incapable of assuring access for everyone or of stemming the mounting cost of care. Further, numerous studies have shown that it adds as much as 30 percent to the cost of care through unnecessary and duplicative billing, marketing, profit, and administrative costs of both insurers and providers.

New York State’s Medicaid program is both a cause and a victim of this bloated cost structure. It is often described as the most generous in the country. Coming out of the progressive tradition of this state, it has sought to remedy, within our state, a host of deficiencies in our national health care system: (1) we don’t discriminate on the basis of immigration status, (2) we have pushed the limits for coverage considerably above the poverty level for children and pregnant women, and (3) we cover a great deal of long-term care (about half of Medicaid spending in the state is for this most expensive form of care).

Pushed most recently by the impact of the recession, our Medicaid enrollment has grown from 2.8 million in 2001 to 4.7 million today. It now pays for the health care of nearly a quarter of our population – and a million more people are eligible for its coverage but have not enrolled. Medicaid spending rose from $29.6 billion in 2001 to more than $50 billion today, climbing at a rate exceeding 6 percent per year over the decade. This is twice the general rate of inflation and is similar to the rate at which all health care costs have been rising across the country.

Furthermore, today there are 2.6 million people without insurance of any kind in this state. Of these, about 1.1 million people are eligible today for Medicaid but have not enrolled. According to a study released several months ago by the NYS Health Foundation, the federal health reform will, by 2014, cause between 800,000 and 1.2 million additional people to become insured, partly under Medicaid and partly through access to subsidized private insurance. However, by their estimate, there will still be between 660,000 and 1 million people eligible for Medicaid but still not enrolled, along with 800,000 more (including undocumented immigrants) who could purchase insurance but will not, and thus will remain uninsured. These people will, however, continue to use health care services, albeit at a reduced rate – generally, the uninsured use about half the medical services that the insured do – but they will also not be paying into the system.

The leaders and citizens of our state need to think much more broadly if we want to address seriously our increasingly unaffordable health care system. Merely looking for savings within the Medicaid system will not halt the rising costs of the system in which it is embedded.

Numerous studies conducted over the last two decades have shown that a wide variety of substantial savings will accrue through implementation of a single-payer system. There will be savings in provider spending, in insurer administrative costs, and through improved coordination and more efficient purchasing of medical supplies and services. As just one example, the entire apparatus for determining who is eligible for Medicaid, Family Health Plus, and Child Health Plus would become unnecessary – everyone would be in the same pool as a right of residency in the state.

The Primary Care Coalition, a grouping of the principal organized primary care providers in the state, has estimated that overall state spending on health care could be reduced by $10 billion (or 6 percent of the total bill) through enhanced access to modern, coordinated primary care. Much of the spending on expensive in-patient care and medical treatments could be reduced or eliminated if robust primary care to be were available in every community. Achieving this can best be accomplished in the kind of coordinated planning environment that a unified single-payer system would make possible.

All of the studies indicate that all of these savings will more than offset the cost of the additional health care services provided in a unified system where everyone is covered. In fact, a study just completed in Vermont has found that nearly a quarter of current expenditures in that state could be saved through adoption of a single-payer plan, coupled with reforms to the health care delivery system.

What, then, would happen if we were to adopt in New York a publicly funded single-payer system, similar to what the state of Vermont is considering today? First, we assume that the federal government would continue to contribute what it has been spending on Medicare and Medicaid in New York State (all of Medicare and half of Medicaid spending). The state would continue to contribute sums comparable with what it now spends on Medicaid, but for reasons suggested below, these would grow much more slowly. Then, because everyone who is working or has an income would be paying, via taxes, into the system, there would be billions of dollars that are unavailable today, when so many businesses and individuals opt out of purchasing health insurance. So there would be more sources of revenue in the system, but also very substantial savings as well.

Most important, cost growth could be contained within such a system through a unified budgeting and expenditure system. If, as some have suggested, costs were to be constrained to rise at no more than 1 percent above the general rate of inflation, this would lead to billions of dollars in savings for New York State within a few years.

Following the example of our neighboring state in Vermont, New York State should fund a detailed study of the alternatives for achieving universal coverage, including alternatives embodying single-payer principles. (Everyone recognizes that the “Analysis of Reform Options” conducted under a legislative mandate and published in July 2009 failed to look in sufficient depth at the alternatives for achieving universal coverage and did not provide enough information to be useful for policy decisions.) The state should commission a study similar to the one just completed in Vermont, giving detailed specifications on the types of financing systems that might be introduced, together with comprehensive and explicit computations of their costs and savings.

Trying to solve Medicaid's problems by looking only at the Medicaid program will not work. Only a re-examination of the way we pay for our entire health care system will provide the answers to the financial dilemmas facing New York State.