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Adam Gaffney responds to NYT’s Margot Sanger-Katz on cost of single payer

A Single-Payer Plan From Bernie Sanders Would Probably Still Be Expensive

By Margot Sanger-Katz
The New York Times, May 16, 2016

Bernie Sanders’s chances at enacting a “political revolution” are all but gone. But that doesn’t mean his policy agenda won’t continue to be felt in this election or future Democratic platforms.

One of his signature proposals is to move the country’s health care system to a government-run, single-payer system.

But also last week, a detailed analysis of the Sanders health care plan from researchers at the Urban Institute showed that it would probably cost the government double what the campaign proposed. It is the second credible analysis to suggest that the Sanders plan costs more than advertised. (The other comes from the Emory health policy professor Kenneth Thorpe.)

The Sanders campaign and its academic allies dispute some of the Urban Institute’s assumptions. A critique of the Urban analysis from David Himmelstein and Steffie Woolhandler, professors of public health at the City University of New York, argues, for example, that drug prices could be pushed even lower. And the Sanders team says that the researchers overestimated the costs associated with administering the government program. But it doesn’t argue that the prices paid to medical providers could be cut more sharply.

http://www.nytimes.com/2016/05/17/upshot/why-single-payer-health-care-would-probably-still-be-expensive.html

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Blog Post: What’s Wrong with Margot Sanger-Katz’s Single Payer Analysis

By Adam Gaffney
The Progressive Physician, May 17, 2016

Yesterday, New York Times health care reporter Margot Sanger-Katz, whose work I very much respect, entered the debate on the costs of Sanders’ single payer plan in a piece I find problematic, headlined “A Single-Payer Plan From Bernie Sanders Would Probably Still Be Expensive.” I should first concede, however, the central argument of her article: it is true that a US single payer system would still be relatively expensive as compared to other single payer systems. We would, that is to say, continue to spend more than the United Kingdom or Canada if we transitioned to single payer. At the same time, there would nonetheless be enormous savings from such a transition, and these savings would allow us to affordably achieve real universal health care. This, in my opinion, would still be an excellent deal.

The background to this debate are two analyses of the Sanders’ single payer proposal—the first by economist Kenneth Thorpe and the second by the Urban Institute—both of which claimed that the actual costs of Sanders’ single payer plan would be significantly higher than what his campaign has predicted. The assumptions of each have been convincingly contested by colleagues David Himmelstein and Steffie Woolhandler: among other points, they argue that both analyses underestimate administrative savings and overestimate the cost of increased health care use resulting from a coverage expansion.

Anyway, without delving into the details, there is something rather puzzling when looking at the analyses of Thorpe and the Urban Institute from a broader perspective. How is it that single payer would massively increase costs in the United States, as these reports contend, even while countries with single payer-type systems—like Canada and the United Kingdom—have much, much lower health care costs than we do?

To answer, a quick side note: our total health spending is, by definition, equal to the quantity of health services delivered multiplied by their price. The US does not consistently use more health services than other high-income nations. Therefore, the fact that we have higher health care costs is mostly explained by higher unit prices for services, as Sanger-Katz and others note. Now us single payer advocates cite lower administrative costs (and lower drug spending) as the major sources of savings under US single payer (effectively lowering the “price” side of the equation). But Sanger-Katz argues that this would be insufficient: prices would have to be slashed across the board, and some services would have to be cut:

Making the American health care system significantly cheaper would mean more than just cutting the insurance companies out of the game and reducing the high administrative costs of the American system. It would also require paying doctors and nurses substantially lower salaries, using fewer new and high-tech treatments, and probably eliminating some of the perks of American hospital stays, like private patient rooms.

Such a transition would, she notes, have some scary sounding downstream consequences: “…making big cuts all at once to doctors and hospitals could cause substantial disruptions in care. Some hospitals would go out of business. Some doctors would default on their mortgages and student loans.” My understanding is that we aren’t really allowed to effectively default on student loans, but admittedly this all sounds rather dicey.

But this frightful health care meltdown isn’t even in the cards. She is correct in a narrow sense: it’s true that immediately lowering US health care expenditures to, say, that of the United Kingdom — i.e. from 16.4% to 8.5% of gross domestic product — would require major, disruptive reductions in spending across the board. However, nobody is contending that we do that. The central claim for US single payer is more modest. Use the enormous administrative savings generated under single payer financing in combination with pharmaceutical savings to cover everybody with comprehensive benefits and no cost-sharing. Overall national health spending would, it is true, remain roughly the same (though we could better control cost growth moving forward). But this scenario of widespread hospital bankruptcies and the end of private (or semiprivate?) hospital rooms is a fantasy: nobody wants it to happen, and it’s not happening.

It’s worth noting that there is also a jarringly inconsistent aspect to single-payer critiques that warn of the threat to health care workers’ income. As Woolhandler and Himmelstein note in an article in the Huffington Post, the Urban Institute simultaneously asserted that the coverage expansion under single payer would lead to an enormous increase in spending on physician services — by $1.6 trillion over a decade!—while simultaneously asserting that physician salaries would be “squeezed.” Whatever one thinks of how much physicians should be paid, it’s hard how these would both happen at the same time.

Transitioning to single payer will not mean reducing our health care expenses to British levels: that is probably not possible, and is certainly not desirable. But that’s not to say that the savings from adopting a single payer financing system wouldn’t be substantial—we’re talking hundreds of billions annually on administrative savings alone, plus more by reducing drug prices to European levels. With that money, we’ll build a much more decent health care system for all to use without having to worry about the cost of being sick, of being pregnant, or simply of obtaining preventive care. No wonder a majority of the country wants it.

Dr. Adam Gaffney is a clinical and research fellow in pulmonary and critical care medicine at Massachusetts General Hospital. His writing has appeared in the New Republic, Los Angeles Review of Books, USA Today, Salon, CNN.com, Dissent, US News & World Report, Jacobin, In These Times, and elsewhere.

https://theprogressivephysician.net/2016/05/17/blog-post-whats-wrong-with-margot-sanger-katzs-single-payer-analysis/

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Comment:

By Don McCanne, M.D.

There have been a multitude of recent media reports indicating that a single payer program, as proposed by Bernie Sanders, would cost much more than previous estimates have shown. These reports rely on recent analyses by the Urban Institute and by Emory Professor Kenneth Thorpe. Unfortunately, these analyses are being given more credibility than the contrasting conclusions of the nation’s two leading experts on single payer - Professors David Himmelstein and Steffie Woolhandler.

NYT’s Margot Sanger-Katz reiterated the conclusion that “the Sanders plan costs more than advertised.” She is highly credible, and, in fact, she did link to an article on the topic by Himmelstein and Woolhandler. But she suggests that prices paid to medical providers must be cut more sharply than proposed, and, by this, seems to accept the fact that Sanders’ single payer proposal is more expensive than anticipated. You may want to read her full article (link above) to better understand Adam Gaffney’s response.

Adam Gaffney’s full blog response is reproduced here, along with the live links, because it is imperative that we not allow the sometimes blind acceptance by the media of the two recent analyses that use dubious assumptions to refute the great body of policy literature that confirms the efficiency and effectiveness of the single payer model. Gaffney sets the record straight.

Study Gaffney’s response and also the prior responses of Himmelstein and Woolhandler (live links in article) so that you will be prepared to refute the claims that single payer is unaffordable. It’s our current highly dysfunctional system that is not affordable.

(Keep in mind that some of the misunderstanding is due to the fact that one view is referring only to federal spending and the taxes to pay for it whereas another view is referring to our total national health expenditures, public and private combined. Obviously transferring private health care spending to the federal government would cause federal spending and taxes to increase - the claim being made - but total spending under a well designed single payer system would remain about the same, with administrative and price savings being used for expanded benefits and coverage.)