Health Reform WK-EDGE Decisions on key design components impact projected cost of single-payer health care system
Tuesday, May 28, 2019

Decisions on key design components impact projected cost of single-payer health care system

By Rebecca Mayo, J.D.

According to the Congressional Budget Office, the cost of establishing a single-payer health care system in the United States is largely dependent on where policymakers fall on a number of key design components.

The Congressional Budget Office (CBO) estimates that 29 million people under the age of 65 were uninsured in an average month in 2018. As more policymakers are pushing for programs to increase health care coverage or establish universal health care coverage, the idea of single-payer systems has been discussed. The CBO’s report explaining the design components and considerations for establishing a single-payer health care system covers issues such as federal vs. state administration, eligibility, and payment rates (CBO Report, May 1, 2019).

Single-payer system. A single-payer system generally entails the government entity operating the public health plan and being responsible for most operational functions of the plan. The receipts and expenditures associated with the plan appear in the government’s budget, but the eligible population is required to contribute toward financing the program. In a single-payer system, private insurance may not be allowed, or it may serve only a small role to supplement coverage provided by the public plan.

Administration. Decisions would need to be made about how the system would be administered. The federal government could administer the plan at a national level, it could administer some functions and delegate the rest to the states, or states could administer the plan with federal oversight. Coordination could best be achieved with a standardized IT system, but this faces many of the same challenges as have already been encountered in establishing an interoperable IT system in the current health care system. In 2017, the federal government’s cost of administering the Medicare program, Medicare Advantage and Part D, was about six percent of its expenditures.

Eligibility and coverage. Policymakers would need to decide whether the entire U.S. population would be eligible or whether people would be able to opt out for religious or moral reasons, or if they wanted to have their own private insurance. Specific coverage decisions could go several directions. The plan could cover only the basics required by the Patient Protection and Affordable Care Act (ACA), such as routine doctor’s visits, or it could cover a wider range of services. There could also be different coverage levels for different subsections of the population. For example, low-income enrollees could be provided more services while other enrollees could be responsible for more fee sharing. Long-term services and supports could be very costly if included in coverage, so a plan would need to address how to handle those expenses.

Private insurance. Private insurance could still exist as a service to supplement coverage not included in the single-payer plan. It could also be used for people who are not eligible for the single-payer system or as an alternative source of coverage if people could opt out of the single payer system. Policymakers could decide to encourage the use of private insurance by offering tax credits or discourage the use of private insurance by creating tax penalties. Allowing private insurance to supplement or substitute coverage may create concerns about inequality in care.

Payment rates. Payments could be paid on a fee for service (FFS) system where providers are reimbursed for services, or on a bundled and episode-based system where they are paid per visit independent of the level of care provided. Global budgets may be instituted where providers receive a fixed payment amount for a specific time period and the providers bear the financial risk if the cost of delivering care exceeds that. This is currently how hospitals in Maryland operate, with an annual budget set by the state agency which can be adjusted periodically.

Coverage and cost. The biggest question is what a single-payer plan would cost. In 2017, national health care spending totaled $3.5 trillion, with private sources such as businesses and households contributing just under half that amount and public sources contributing to the rest. Shifting the private expenditures to public sources would significantly increase government spending. However, how much the government would spend is largely dependent on the decisions discussed above relating to who would be covered, what would be covered, and how. Also, with more control over the system, the government could require transparent billing or try cost-reduction strategies like global budgets.

ReportsLetters: CBOReports AccessNews AgencyNews GeneralNews InsurerNews NewsFeed

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