Liberal Benefits, Conservative Spending


To summarize, the NHP would fund approximately 38% of health expenditures from a payroll tax similar to current payroll expenses for Medicare and health insurance premiums; 26% from existing federal, state, and local revenues; and 21% from new, healthy federal tax revenues that would largely supplant current out-of-pocket expenditures. Fifteen percent of expenditures would remain out-of-pocket (Figure).

A majority of Americans would accept this type of tax package if it were earmarked for health care and placed in a health care trust fund. A 1990 poll found that 72% would support an NHP even if it required a tax increase; however, only 22% would pay more than $200 extra per year.36 Our proposal would not increase the sums paid for health care by low- and middle-income groups. It is designed to minimize winners and losers, aside from the private health insurance industry.

Two additional principles should be incorporated in NHP funding. Per capita health spending should be equalized throughout the nation, with federal funds transferred to states under formulas adjusted for age, income levels, health status, wage, and other input costs. Finally, to protect the NHP from annual budgetary debacles in Washington, DC, it must be an entitlement program with a statutory expenditure floor as well as a ceiling. In contrast to entitlement programs restricted to poor families, the NHP would embrace the entire population and could thus command the level of support enjoyed by Social Security. Adequate increases in NHP funding (based on such factors as aging of the population, epidemics, advances in medical technology, and inflation) must be mandated by law. As suggested in our original NHP proposal,7 an expanded program of technology assessment would help guide budgetary allocations.


In health insurance, as in many things in life, simplicity is a virtue. The NHP's approach to universal access is simple: every American automatically qualifies for equal, comprehensive health insurance under a unitary public plan. The economic premises of the NHP are also simple: funnel all third-party payments through a single payer, thereby saving billions of dollars in administrative costs and achieving cost containment through global controls rather than minute bureaucratic scrutiny.

The administrative cost reductions during the NHP's initial phase are not, as some have argued, only a one-time saving.37 Whether in Canada or New Zealand, Sweden or Britain, single-payer systems have stabilized costs in the past decade, while US health care inflation has been impervious to the most earnest attempts to control costs.38-40 Economist Robert Evans41 has concluded that "universality of coverage and sole-source funding are, as far as we know now, preconditions for cost control."

Global expenditure control can also enhance clinical freedom. Under the micromanagement model of cost containment, each of the multiple payers, lacking global budgetary levers, resorts to intrusive patient-by-patient utilization review.24 Such day-to-day interference in medical practice is minimized in single-payer systems.40 As John Wennberg16 recently observed:

The key to the preservation of fee-for-service markets, as the Canadians seem to recognize, is not the micromanagement of the doctor-patient relationship but the management of capacity and budget. The American problem is to find the will to set the supply thermostat somewhere within reason.

The NHP would benefit most Americans, though a few powerful interest groups would suffer. It would virtually eliminate financial barriers to care for those who are currently uninsured and underinsured, ensure patients a free choice of providers, ensure physicians a free choice of practice settings, diminish bureaucratic interference in clinical decision making, stabilize health spending, and reduce the growing burden of health care costs for many individuals and employers. Small-business owners who do not currently cover their employees would face modest cost increases, though far less than mandated by most alternative proposals. The health insurance industry would feel the greatest impact. Indeed, most of the extra funds needed to expand care would come from eliminating the overhead and profits of insurance companies and from abolishing the billing apparatus necessary to apportion costs among the various plans. Job retraining programs for displaced administrative and clerical personnel would be essential.

Although few dispute the ability of the NHP to provide universal coverage and control costs, critics have raised the specter of rationing, pointing to queues for some high technology services in Canada.42 We do not advocate cutting US health spending to Canadian levels. Even with a slower rate of growth under the NHP, US health expenditures will remain well above those of any other nation. Deploying our greater resources with Canadian efficiency would permit increases in utilization and improvements in technology without skyrocketing costs. Compared with Americans, Canadians do, in fact, get more health care for their health care dollar. About half of the cost differential between the two nations is squandered on insurance overhead and paper pushing.18, 43 Stanford economist Victor Fuchs44 has concluded that "the quantity of [physician] services per capita is much higher in Canada than in the United States . . . the data firmly reject the view that Canadians save money by delivering fewer services."

Health financing reforms unable to extract administrative savings inevitably impose added costs for expanded services. Employer mandate proposals (eg, the Pepper Commission Plan,1 the American Medical Association's Health Access America plan,3 the National Leadership Commission's proposal,2 and Massachusetts' Universal Health Care Law [New York Times. April 11, 1991:Al]) would leave existing insurance in place while expanding public programs for the unemployed and requiring employers to insure their workers. None of these plans offer improved coverage for those currently insured, nor do they offer new cost control mechanisms. Hence high initial costs presage continuing inflation or far more stringent and intrusive micromanagement - probably both. Modifications of the employer mandate approach (eg, the UNYCare proposal in New York State)45 that attempt to meld the cost containment features of a single-payer system with a continuing role for private insurance also eschew most administrative savings, compromising the ability of such measures to expand access without raising costs.

There is slim evidence that Enthoven and Kronick's46 "managed competition" plan - featuring competing managed care insurers and higher patient copayments - can hold costs in check.47 Does forcing consumers to bear premium costs for higher-priced plans hold down overall costs or simply segregate the market based on ability to pay? Do low-cost plans provide care more efficiently or simply market themselves more effectively to lower-risk subscribers? Is the rubric "Consumer Choice Health Plan" appropriate for a system likely to lock the vast majority of patients and physicians into closed panel health maintenance organizations run by insurance companies? The ultimate vision of managed competition - a landscape dominated by a limited number of huge health maintenance organizations managing salaried physicians-is a more radical departure from the current health care scene than the NHP.

The objectives of the NHP are simple: (1) to minimize financial barriers to appropriate medical care, (2) to distribute costs fairly, and (3) to contain costs at a reasonable level. Once a structure is in place for meeting these basic concerns, the medical profession and society as a whole can move on to the more complicated questions: Which health services truly improve the quality of life? What share of our human and material re sources should we devote to health care? How shall we reduce the toll now extracted by poverty, ignorance, and addictions? By implementing a national health program, we can turn and face the challenges ahead.



1. US Bipartisan Commission on Comprehensive Health Care. A Call for Action. Washington, DC: The Pepper Commission on Comprehensive Health Care; 1990.

2. National Leadership Commission on Health Care. For the Health of a Nation. Ann Arbor, Mich: Health Administration Press; 1989.

3. Health Access America. Chicago, Ill: American Medical Association; 1990.

4. Kennedy E. Senate Bill S.768. November 20, 1989.