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Economist: North Carolina could save $18.7B by adopting single-payer model for health care

The U.S. health-care payment system is unsustainable, Gerald Friedman, a professor of economics at the University of Massachusetts at Amherst, said Thursday night in Charlotte

By Jennifer Thomas
Charlotte (N.C.) Business Journal, May 24, 2013

North Carolina could save as much as $18.7 billion next year on health-care costs if it changed the way it finances health care.

The catch? That change would require a switch to a single-payer system in which one entity collects all health-care fees and pay related costs, says Gerald Friedman, a professor of economics at the University of Massachusetts at Amherst.

“We have a system that was broken 10 years ago, and it’s getting worse,” he says. “You can’t fix it unless you change its fundamental basis.”

Friedman spoke Thursday night in Charlotte at the Health Care Justice meeting. That organization wants everyone in the community to have access to health care. It is a chapter of the Physicians for a National Health Program, which supports single-payer national health insurance.

Friedman has drafted financing plans for single-payer health systems for Maryland, Massachusetts and the United States. If adopted, he estimates such a payment model could result in $2 trillion in savings nationwide over the next decade mainly by cutting administrative costs and controlling prescription drug prices.

On Thursday night at the Midwood International and Cultural Center, he touted the need for universal-comprehensive coverage, in which everyone would have access to care. Individuals, businesses and the government stand to benefit, Friedman said.

Universal coverage would minimize billing expenses, avoid wasteful competition among insurers and eliminate adverse selection against people who are sickest, he said.

Friedman estimates that nationwide there is $1.5 trillion in waste annually when it comes to health-care spending. Such spending now accounts for roughly 18 percent of the gross domestic product. And it is expected to rise to 22 percent of the GDP within five years.

In North Carolina, health-care spending has risen more than 400 percent in North Carolina since 1990, Friedman said.

At the same time, per capita income has barely doubled, which puts increased pressure on a family’s income. In 1960, health-care spending accounted for just 7 percent of a family’s take home pay. That rose to 39 percent in 2010.

“More and more money is going to health care,” he said.

The current health-care payment system is unsustainable because it is focused on making profits, Friedman said. That results in waste, fragmented care delivery and significant administrative costs and monopolistic pricing, he added.

For example, he said drug prices are 60 percent higher in the U.S. than elsewhere.

Health insurers will spend nearly $200 billion on administrative costs in 2013, he noted.

Friedman expects the current payment system will collapse. He notes expanded access through federal health-care reform will fall short of providing universal coverage and does not do enough to stem rising health-care costs.

That means health insurance premiums will continue to rise, making it unaffordable for more individuals.

“Right now health-care is a lump-sum tax on individuals, especially sick individuals,” he said.

Jennifer Thomas covers health care, biotech, education and retail for the Charlotte Business Journal.

http://www.bizjournals.com/charlotte/news/2013/05/24/economist-nc-could-...