single payer explained
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Single Payer 101Kao-Ping Chua
Jack Rutledge Fellow, 2005-2006American Medical Student Association
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Outline
I. Financing health care and single payer financing
II. What does single payer look like?
III. The argument for single payer
IV. The advantages of single payer to
different groups of people
V. The potential disadvantages of singlepayer
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The Financing of
Healthcare Two essential functions
Collection of funds
Reimbursement of providers
Single payer is way of FINANCINGHEALTH CARE
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Financing healthcare in
the U.S.Individuals /Businesses
Government[payer]
Health ServiceProviders
PrivateInsurers[payers]
Direct or Out-of-Pocket Payments
Medicare,Medicaid, etc.
Taxes
Premiums
Public employeespremiums
ProviderPayments
|------Collection of funds-------||---------Reimbursement--------|
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Single payer financing:
simplifiedIndividuals /Businesses
Government[payer]
Health ServiceProviders
Direct or Out-of-Pocket Payments
National
healthinsuranceprogram
Taxes
|------Collection of funds-------||---------Reimbursement--------|
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Single payer financing:
realityIndividuals /Businesses
Government[payer]
Health ServiceProviders
Direct or Out-of-Pocket Payments
National
healthinsuranceprogram
Taxes
|------Collection of funds-------||---------Reimbursement--------|
Privateinsurers (non-
coveredservices)
Premiums ProviderPayments
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Single payer specifies
FINANCING, not DELIVERYFinancing Delivery
U.K.(socializedmedicine)
Mostlypublic
Mostlypublic
U.S. Public andprivate
Mostlyprivate
Singlepayer
Mostlypublic
Public andprivate
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Single payer vs.
universal health care
Single payer is a way ofachieving universal health
care, but universal health careis not necessarily single payer
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What does single payer
look like? Eligibility/benefits: all residents of U.S.
enrolled; all medically necessary care
covered
Financing: Current sources of
government funding and adding newtaxes (offset by premiums)
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What does single payer
look like? Hospitals: Global budget for operating
expenses
Physicians: remain in private practice.
Reimbursement schemes: fee-for-service, salary
Medications/supplies: formulary and bulknegotiation
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The argument for single
payer Philosophical argument
Economic argument
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Philosophical argument: isfor-profit health care
acceptable? U.S.: market-based system
2000-2004:
Profits for top 17 U.S. health insurancecompanies rose 114% (compared to 5% for S&P500)
Health insurance premiums rose 60%, 6 millionmore uninsured
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Philosophical question
How much should the profit motive beinvolved with health care?
Depends on whether universality inaccess is important
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Economic argument
Administrative simplification
Cost controlmechanisms
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Economic argument:
administrative simplification
Source: Kenneth Thorpe, 1992.
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Single payer and
administrative costs Woolhandler: $294.3 billion per year
spent on administrative costs in U.S.
31% of U.S. health expenditures, vs.16.7% for Canada.
Conclusion: Single-payer system inAmerica would save on administrativecosts
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Caveats
Important question is not whetheradministrative costs are high, but
WHICH administrative costs are toohigh
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Caveats
Canadas system doesnt DO the sameadministrative functions as the U.S.
If we adopted single payer, oursystem would DO differentadministrative functions than Canada
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Stillsingle payer would
decrease MANY costs
Source: Kenneth Thorpe, 1992.
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The best economicargument?
Administrative costs have really been the rallying cryfor many single payer advocates, but they are not
the best economic argument for single payer.
WHY?
Administrative costs are not a primary driver of healthcare costs.
Reducing unnecessary administrative costs willgenerate a one-time savings it wont do much
toslow health expenditure growth.
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A better economic
argument: cost controlsCentral take-home point:
When you have a fragmented, non-centrally coordinated system in whichall the payers play by different rules,its very difficult to institute effective
systemic cost controls.
You can institute cost controls in someareas, but not others.
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Cost controls in centrally
administered systems Limits on use of ineffective technology
Bulk purchasing
Screen for fraudulent billing (e.g. Taiwan)
Improvements in quality that save money: Increased primary care
Electronic medical records
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STRONG (and thereforecontroversial) cost controls
Global budgeting
Price controls
Supply controls
Reimbursement caps for providers
Expenditure targets
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STRONG (and thereforecontroversial) cost controls
Other countries have all used these cost
control mechanisms with great success.
But there is always the danger of beingtoo aggressive about controlling costs.
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Caveat, again
None of these cost controls are inherent tosingle payer systems
The point is that policy makers have theOPTION of instituting cost controls
And whether that OPTION is exerciseddepends on public opinion!
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Advantages of single
payer to Patients:
Improved health
Free choice of provider
Portability of coverage
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Advantages of single
payer to Physicians
Restoration of clinical autonomy
Lower malpractice premiums
Improved patient care
Simplified billing
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Advantages of single
payer to Businesses
Decreased health care costs (for most)
Level the playing field
Improved global competitiveness
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Potential disadvantages
Threat of underfunding by hostilegovernment
Strength of special interests thatwould seek to undermine the system
Potential imbalance between qualitycontrolling expenditure growth
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Potential disadvantages
Transition from current system will be difficult
Important tradeoffs: will America make them? You cant give every health care intervention to every
person
Less choice in insurance plan
More government control for less private control
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Conclusion: How do you
evaluate a system? Every system has disadvantages, no matter
what. Based on your values, you can
select which disadvantages are outweighedby the advantages.
If you value universality and equity,
single payer is a wonderful option, despiteits potential disadvantages.
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