Tuesday, September 15, 2015

Paying for Single Payer

For a while now I've been saying that one of the questions I have for Bernie Sanders is how he would pay for single payer health insurance - especially in light of the fact that this is what stopped single payer from going forward in his home state of Vermont.

And so I was interested that, buried within an article in the Wall Street Journal about the costs of Sander's various proposals, was reference to a paper by Gerald Friedman, Ph.D. from the University of Massachusetts which outlined a payment plan for single payer. It's important to note that the bill Friedman analyzed (HR 676) is authored by Rep. Conyers. Sanders has never endorsed this bill and it differs from the one he introduced in the Senate in 2013. But we'll get to that later.

One of the assumptions about single payer is that it will save money in administrative costs (Friedman builds that into his calculations). But since it would eliminate the way we currently pay for health insurance (employer/employee payments, a mix of individual payments and government subsidies in the health insurance exchanges and government programs), any proposal for single payer will be required to identify who will pay and how much. Here is Friedman's proposal for that:

* Existing sources of federal revenues for health care

* Tax of 0.5% on stock trades and 0.01% tax per year to maturity on transactions in bonds, swaps, and trades

* 6% high-income surtax (applies to households with incomes over $225,000)

* 6% tax on unearned income from capital gains, dividends, interest, profits, and rents

* 6% payroll tax on top 60% of income earners (applies to incomes over $53,000, tax paid by employers)

* 3% payroll tax on the bottom 40% of income earners (applies to incomes under $53,000, tax paid by employers)

What this information provides for us is some idea of what such a system would mean - both in terms of the magnitude and the politics. Beyond the 6% surtax on upper incomes and 6% tax on unearned income, employers would be required to take on additional payroll taxes - depending on how much the employee earns, either 3% or 6%.  For those who currently pay for part of all of their employees health insurance, they would substitute that expense with the new payroll tax. And for those who haven't contributed to health insurance, it would entail a new cost.

When it comes to individuals, since the proposal does away with co-payments and deductibles, only those making over $225,000 or benefiting from unearned income (or trading stocks) would have to pay anything for health insurance.

As I noted earlier, this is an analysis of a bill that Sanders has never endorsed. The bill he introduced in 2013 (S 1782) differs mainly in the fact that, while Conyers would set up a national single payer system, Sanders allows for individual systems in each state.
The federal government would collect and distribute all funds to the states for the operation of the state programs to pay for the covered services...

Each state would have the choice to administer its own program or have the federal Board administer it. The state program could negotiate with providers and consult with its advisory boards to allocate funds...State programs could negotiate with providers to pay outpatient facilities and individual practitioners on a capitated, salaried, or other prospective basis or on a fee-for service basis according to a rate schedule.
This summer Sanders said that he was preparing to introduce such legislation in the Senate again sometime soon.
Addressing a rally outside the Capitol to mark the 50th anniversary of Medicare, Sen. Bernie Sanders on Thursday announced that he will introduce legislation to provide Medicare-for-all health insurance...

Sanders’ bill, which he said he will soon introduce in the Senate, would set federal guidelines and strong minimum standards for states to administer single-payer health care programs.
In terms of financing, here's what Sanders has proposed in the past:
(1) a health care income tax, and (2) an income tax surcharge on amounts of modified adjusted gross income exceeding $1 million. Imposes an excise tax on securities transactions and allows an income tax credit for such taxes.
As others have noted, this part of his plan remains under construction.

I am curious about why Sanders has never signed on to Conyers' bill. It would seem that - especially after the failure in Vermont - a national program has at least the possibility of cost efficiencies that could be necessary to make single payer viable.

Overall, there is a lot to like about proposals like this - just as they raise a lot of questions. But given the fact that what derailed single payer in Vermont was the possibility of an 11.5% income tax on all residents, Friedman's proposal looks better than that - as long as it raises sufficient revenue. Still...it is clear that Sanders is right to say that it would take a veritable progressive revolution to make this even a remote possibility.


  1. Interesting, I'm actually seeing some numbers on single payer for once. Thanks for bringing this to our attention!

    Even then, single payer doesn't necessarily fix medical costs, which are the biggest problem with our current system. A huge government agency (like Medicare, or HR 676) can bargain for better rates with hospitals, but ... why even persist with the bargaining system? As it stands, hospitals start by coming up with an outrageous list price for goods or services, and then insurers (private or public) negotiate costs downward, setting the price at levels that are still often vastly inflated. We regulate utilities, we regulate credit cards, we regulate insurance companies, why can't we regulate how hospitals set prices? Do that and our entire health care system immediately improves across the board, very little disruption.

    1. ... a little more info:


      So it turns out the CBO has never scored HR 676, but the article makes mention of this Pete Stark "AmeriCare" bill as yet another option. AmeriCare has a feature that HR 676 could sorely use: the choice to opt for private insurance if that's what you really want, because this is still America and a person should be allowed to choose. Seriously, that would go a long way to getting past the FUD that comes with single payer.

      But, all of that should still be secondary to regulating hospital pricing mechanisms.

  2. The problem on cost savings as far as I can see is that those figures are PRE ACA. The medical loss ratio - meaning the insurance companies "lose" a percent to your care (how creepy is THAT) has been set at 85% rather than the outrageous 60-65% it once was. So now how do we 'save' what we would have 'saved' pre 2013? At this point, it is my understanding that the "Cleveland Clinic" model - one comprehensive payment for a procedure that includes all the projected benefits - is the standard for both approving payments and for pricing. ACA and Medicare are using that to stop the overcharges on aspirin, bedpans, etc. since it is a package for, say, open heart surgery. No more nickeling and diming us and the insurance payees to death. It is also linked to outcomes - if hospitals and physicians don't actually get you well but keep you coming BACK for treatment - they don't get payments authorized while they are bound to keep treating you. It's a powerful incentive to get it right the first time. The rate of price escalation has slowed dramatically. But overall single payer still, to me, has not gotten a good as opposed to cursory review on what it would cost us on premiums since premiums will still exist. Until then, all the other costs are merely hypothetical add-ins to the system. it's what it costs us v. ACA that matters.

  3. I am Canadian so you don't have to sell me on single payer, but is his really an issue to fight in 2016? Never mind that it has zero chance of doing anything but wasting time. Obamacare is a workable system and it is done. It is stupid for Sanders to run against Obama's accomplishments.