Local researchers weigh in on the viability of single payer healthcare

  • Robert Pollin, economics professor at the University of Massachusetts Amherst. Staff Photo/Andy Castillo

  • Zinkevych—Getty Images/iStockphoto

Published: 1/8/2019 10:19:10 AM

A team of economists at the University of Massachusetts Amherst say implementing a single payer healthcare system could reduce the nation’s healthcare costs by nearly 10 percent while providing medical coverage for everyone.

Those findings were released recently in a nearly 200-page report by the university’s independent Political Economy Research Institute (PERI). The report, titled “Economic Analysis of Medicare for All,” was sponsored by the California Nurses Association and National Nurses United.

“(Single payer healthcare) is a way to restructure our healthcare system such that everyone is guaranteed good quality care without having to worry about making any kind of cost sharing contributions,” said Robert Pollin, distinguished professor of economics and the study’s lead author, about the findings. The paper’s other authors are PERI researchers James Heintz, Peter Arno, Jeannette Wicks-Lim and Michael Ash.

Pollin said the research was based on the Medicare for All Act of 2017, which was introduced to the United States Senate by Senator Bernie Sanders. Researchers came to their conclusion after analyzing hundreds of other research papers covering topics such as Taiwan’s successful implementation of a single payer system in 1995. Another paper they looked at found patients go to the doctors more often when they have a lower co-pay, he said.

Essentially, the Medicare for All Act of 2017 proposes eliminating private insurance companies entirely and creating a fund overseen by a committee that would pay for things like medical appointments, ambulance rides, and visits to the dentist. Money for the fund would come from revenue streams like a federal sales tax on non-essential items like cars and a tax on wealth equaling more than $1 million.

As it is now, Pollin said about 9 percent of Americans, or roughly 39 million people, don’t have insurance at all, even though it’s required by the Affordable Care Act, which was passed by President Barack Obama and enacted in 2010.

Another 30 percent of Americans are “what we call ‘under-insured.’ People who have insurance, but when they need to see a provider they don’t do it because they can’t afford it. Or, people do see a provider and then face very significant costs, bankruptcy,” Pollin said.

According to PERI’s research, Medicare for All would cover everyone and it would at the same time reduce costs from where they are now, he said.

Currently, Pollin estimated that Americans pay about $3.3 trillion per year for healthcare, equaling about 18 percent of the nation’s total GDP (gross domestic product). By streamlining healthcare services, “we think we can save about 10 percent of total costs relative to what we’re spending now,” Pollin said. “It would still be a massively expensive system, but it would be about 2.9 trillion as opposed to $3.3 trillion.”

For the average household paying for insurance out-of-pocket “their healthcare costs will go down from about 15 percent to 1 percent of their total income,” Pollin said.

A large part of those savings would come from eliminating redundant administrative expenses, he explained.

“Because we have this extremely complex system with multiple payers, multiple insurance companies, provider office’s having to deal with multiple insurance companies and spending a lot of administrative time doing that,” Pollin said. “It’s pretty clear that in shifting to a Medicare for All system we’re going to get very large scale administrative savings with no loss of service delivery. It’s a wasteful system.”

As a byproduct, the researchers predict that the price of medication would also come down.

As it is now, insurance companies negotiate with pharmaceutical companies for low prices. The more people an insurance company covers, the more bargaining power it has. Under Medicare for All, a single payer would have a tremendous amount of bargaining power to drive down costs.

Instead of employers or individual people paying for their own insurance plans out-of-pocket, Pollin’s analysis outlines a number of ways that Medicare for All could be paid for such as the sales tax. 

As a downside, Pollin said many people who work at insurance companies would lose their jobs. To negate that impact, the research analysis also includes a transition plan for unemployed insurance company workers, Pollin noted.

“Ours is the first study that addresses this (transition plan and ways to pay for it) in detail — there will be job losses. That’s how you get a lot of the savings. Not all the savings, but a lot of the savings. The fact is the jobs these people do are redundant,” he said.

The plan also addresses universal payment rates for providers.

“Right now, when providers bill private insurance companies they make more than Medicare rates. We’re saying Medicare rates across the board,” Pollin said. For some high-end specialty providers that would probably mean pay cuts. But for others including emergency room doctors and primary care physicians it could mean pay increases.

“Doctors are going to come out about the same, on average. And the reason for that is that doctors are spending about 8 percent of their time on administration. They would be freed up because of the time they’re spending filling out forms now, it wouldn’t be as burdensome,” he said.

While the Sanders’s bill proposes transitioning to a universal healthcare system over 4 years, Pollin’s research found that changing immediately might be better. Their research proposes that employers continue paying toward their employees’ health care for the first to or three years with an immediate 8 percent reduction in whatever amount of money they were paying previously.

“Every business pays 8 percent less. So if the day before Medicare for All is implemented you’re paying 1,000 for your workers, you’re going to pay 920 the next day,” he said.

With that, a 3.75 percent sales tax would be put on all non-essential items. Currently, there is no federal sales tax. Anyone who currently qualifies for government plans like Medicaid or Medicare would automatically qualify to receive a tax credit to compensate for that tax.

Finally, a 0.38 percent ‘wealth tax’ would be put into place “if you have over $1 million in assets,” with the first $1 million except. “That is a tax that will apply to the wealthiest 12 percent of houses,” he said. “When we do all those things we raise all the money we need, actually a little more, so we have a surplus.”

For now, the research is just theoretical. But it could become a reality in the future, Pollin said. Single payer healthcare has been proposed as an option at the federal level and in many states, including Massachusetts. In California, for example, the state’s senate passed a bill last year that would have created a single state run health plan.

The bill failed in the state’s Assembly.

In order to make sure the paper was well researched, the PERI researchers submitted their findings for peer review. The general consensus from reviewers was that the study was comprehensive, accurate, and well done, Pollin said.

“We took serious researchers with first-rate track records, and we posted their reviews online,” Pollin said. “They went through two or three drafts and had a lot of comments. Some of the referees still say ‘I disagree with this or that,’ and that’s fair. Why should they agree with everything?”

Andy Castillo can be reached at acastillo@gazettenet.com.


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