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Single-Payer 'Medicare for All' Gets Boost From New Study

By Ken Terry
Medscape Medical News, Feb. 9, 2016

Presidential candidate Bernie Sanders' proposal to create a single-payer "Medicare for all" system has drawn criticism because, opponents say, it would lead to a big increase in taxes. But a new study estimates that the federal, state, and local governments paid for 64.3% of US health spending, or $1.877 trillion, in 2013 and that it would not take much higher taxes to finance a single-payer system.

According to David U. Himmelstein, MD, and Steffie Woolhandler, MD, MPH, from the City University of New York School of Public Health at Hunter College, who wrote the article, the government share of national health expenditures will rise to 67.1% by 2024. At that point, they argue, there will be only a 4-point spread between what the US government pays for in our public/private healthcare system and the 71% of Canadian health spending that that country's government spends on its single-payer system.

The article was published online January 21 in the American Journal of Public Health.

Physicians for a National Health Program (PNHP), a group that has long advocated for a single-payer system, seized on the study's findings to argue that now is the time to switch to single payer, which is not a surprise, as the study's authors are cofounders of the organization.

"We pay the world's highest health care taxes. But patients are still saddled with unaffordable premiums and deductibles," said Dr Woolhandler in a news release. "Meanwhile, billions are squandered on paperwork, and insurers and drug companies pocket huge profits at taxpayer expense."

Moreover, PNHP and Sen. Sanders argue, higher taxes for single-payer healthcare would be more than offset by the elimination of private insurance premiums and reduced administrative costs.

According to the Centers for Medicare & Medicaid Services, all levels of government together accounted for 43% of US health spending in 2013. The main reason for the difference between that figure and the higher number arrived at by Dr Himmelstein and Dr Woolhandler is that the latter includes the loss to the US Treasury caused by the tax exclusion for private health insurance.

In addition, the coauthors note, much of the insurance costs of public employees are accounted for as "private coverage" because the insurance claims are paid by private companies that administer the insurance for the government. But in actuality, the money is coming from the public purse in the form of benefits to the employees.

Hidden Costs

This is not the first time Dr Himmelstein and Dr Woolhandler have shown the gulf between the official estimate and what they regard as the real percentage of health costs paid by the government. In a 2002 paper published in Health Affairs, they calculated that in 1999, the government paid 59.8% of health costs compared with the Centers for Medicare & Medicaid Services estimate of 45.3%.

Mark V. Pauly, PhD, a professor of healthcare management at the Wharton School of the University of Pennsylvania, told Medscape Medical News that Dr Himmelstein's and Dr Woolhandler's methods are sound. As the coauthors point out in their article, most health economists, as well as the US Office of Management and Budget, regard the tax exclusion for private insurance as a form of healthcare spending. People who receive employer-sponsored health insurance do not have to pay taxes on the part of the insurance premium their company pays on their behalf. As a result, the government has to increase other taxes, Dr Woolhandler explained in an interview with Medscape Medical News.

She and Dr Himmelstein calculated that tax subsidies for private health spending totaled $295.9 billion in 2013. Federal income and payroll tax subsidies accounted for about 80% of that, they said.

Government employers made 28% of all employer payments for private health insurance in 2013; by 2014, the study projected, that will increase to 31%. More than 80% of those payments were made by state and local governments, which employ far more people than the federal government.

Overall, US tax-funded healthcare spending accounts for a larger share of GDP (11.2% in 2013) than does total health spending in any other country, the coauthors said, and they project that that figure will rise to 13.2% of GDP in 2024.

Meanwhile, private employers' spending for health insurance premiums as a share of national spending fell from a high of 18.5% in 2000 to 2001 to 16.7% in 2013 and is expected to drop to 14.5% in 2024, the study shows.

Dr Woolhandler attributed most of the decline in employer-sponsored insurance to two factors. First, fewer employers offered insurance and/or fewer people accepted it because of the expense. Second, Medicaid expansions before and after the passage of the Affordable Care Act led to more low-wage and part-time workers being covered by Medicaid. Dr Pauly also pointed to the shrinkage in the number of people employed by large firms, which are more likely to offer insurance than small ones.

Much Higher Taxes?

Dr Pauly was skeptical, however, of the claim that a relatively small tax hike would be sufficient to move the United States to a single-payer system. Most economists believe that the government pays for about half of healthcare spending, including costs for the National Institutes of Health and capital expenditures, which are not included in the Centers for Medicare & Medicaid Services estimate, he said. With the United States currently spending $3.3 trillion on healthcare, "Medicare for all" would require roughly $1.65 trillion in new taxes, he noted.

Even assuming that government pays for two thirds of healthcare spending, that does not mean that a single-payer system in which the government pays for everything would require only slightly higher taxes, he said. For one thing, the Canadian government does not pay for all healthcare services: it does not cover drugs, for example, although it does restrict their prices.

Also, he observed, the US government controls or influences more healthcare costs than it pays for. If an employee excludes $15,000 a year from taxable income as the value of private health insurance for his or her family, for example, the government is losing about a third of that amount. But the government influences the cost of that insurance, because its subsidy encourages that employee to buy more expensive coverage. "So the estimate of how much of healthcare is taxpayer funded is only a lower boundary estimate of how much control the government really exerts," he said.

Am J Public Health. Published online January 21, 2016. Abstract

http://www.medscape.com/viewarticle/858550

PNHP note: Physicians for a National Health Program (PNHP) is a nonpartisan educational organization. It neither supports nor opposes any candidates for public office.