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Economic Analysis of the New York Health Act

Economic Analysis of the New York Health Act

By Gerald Friedman, PhD
March 6, 2015

This report analyzes the economic effects of the New York Health Act (the “Act”), which would establish a comprehensive, universal health insurance program for all New Yorkers.  The Act would replace the current multi-payer system of employer-based insurance, individually acquired insurance, and federally sponsored programs (e.g., Medicare and Medicaid) with a single billing pipeline funded by broad-based progressively graduated assessments collected by the State and based on income and ability to pay, thereby reducing administrative bloat and monopolistic pricing and dramatically reducing the cost of health care to New Yorkers even while extending and improving the provision of care.

The New York Health Act would finance medical care with substantial savings compared with the existing multi-payer system of public and private insurers.  By reducing administrative and other waste and eliminating health insurance company profits and excessive prices for drugs and medical devices, the New York Health Act would increase real disposable income for the vast majority of residents.  It would simultaneously increase employment by reducing the burden of health insurance on business.  Some of these savings would be used to extend coverage to the 7% of New York residents still without insurance under the Affordable Care Act; other savings would be reinvested in the health-care system to improve coverage for the growing number with inadequate coverage.  In addition to improving New Yorkers’ health by reducing barriers to access to health care, the Plan would eliminate the financial penalty associated with health problems.  It would also reduce economic inequality by replacing the current regressive system of health insurance finance with contributions proportional to income and ability to pay.

Conclusion: Better Health Care, Found Money, and Fairness

The New York Health Act would produce substantial health and economic gains for New York. The new system would create such large economies in the administration of health care that all of those currently uninsured could be given access to health care with money left over.  Furthermore, by financing health care with assessments based on ability to pay, the New York Health Act would produce large savings for the great majority of New York residents.  Finally, by reducing business costs, it would also lead to expansion in employment.

Professor Friedman is Chair of the University of Massachusetts at Amherst Economics Department. 

Economic Analysis - Gerald Friedman, PhD: http://www.dickgottfried.org/wp-content/uploads/2015/03/Friedman-Fiscal-...

Bill A5062-2015,Gottfried/S5062-2015,Perkins - Provides for establishment of the New York Health plan
Sponsor - Richard Gottfried, Assembly/Bill Perkins, Senate: http://open.nysenate.gov/legislation/bill/A5062-2015

Press Release – Economic Study Shows Benefits of Universal Healthcare Bill - 3/10/15: http://www.dickgottfried.org/press-release-economic-study-shows-benefits...

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Comment:

By Don McCanne, MD

The New York Health Act, introduced by New York Assembly Health Chair Richard Gottfried and in the Senate by Sen. Bill Perkins, and supported by the economic analysis of Prof. Gerald Friedman, is important because it demonstrates how much health care reform can be accomplished on a state level, especially when we have a Congress that is dominated by obstructionists.

Is this a single payer bill? The study refers to a “single billing pipeline.” Rather than being limited by labels, states wishing to go ahead with reform now and not wait for a receptive Congress should support any and all beneficial policy measures possible, including whatever can be accomplished with existing waivers and through negotiations with the U.S. Department of Health and Human Services.

In this analysis, Prof. Friedman estimates that through this legislation, New York can achieve the goals of universality, comprehensiveness, equity, free choice of providers, and removal of cost-sharing barriers to care, while achieving a net savings of $45 billion in the first year alone - funds that could be used for much better purposes than administrative waste.

For any given state, the economic advantage would depend on the specifics of the state legislation and might vary based on the economic assumptions used in the analysis. The important point is not the specific details of this particular analysis but rather that introducing as many single payer policies as possible does result in major improvements of the functioning of the financing infrastructure while significantly reducing the profound waste inherent in our current dysfunctional system.

Our primary goal remains to bring health care justice to everyone in the nation by enactment of a federal single payer system - an improved Medicare for all. In our state efforts we cannot set aside this goal since it is our prime goal. But Richard Gottfried and his colleagues have demonstrated the types of policies that we can apply on a state level as a transition until we can enact reform for the entire nation.