More on the Economics of Single Payer Insurance

The proposed Maryland Health Security Act has put the idea of single payer healthcare back on the table. The Maryland chapter of Physicians for a National Health Care Program has summarized its main features and provides a link to the bill. It proposes to lower health care costs by broadening the pool of the insured, lowering administrative costs, and negotiating for better prices on drugs and medical devices (anyone who has purchased pharmaceuticals outside the US will attest that this make a large difference).

Real News Network has run a series of interviews on this plan. You can view Part 1 for an overview. I thought the second and third segments, on the economics, would be of particular interest to readers. Gerald Friedman of UMass Amherst has done a study of the plan which ascertained that it would produce considerable savings, which he describes in Part 2. Part 3 discusses broader economic ramifications, for instance, that employers in Maryland would enjoy a competitive advantage relative to other states, and that implementation of the plan would lead to some businesses shifting more of their operations into Maryland, thus increasing the state’s tax base.

Part 2:

More at The Real News

Part 3:

More at The Real News

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      1. Cliff in NH

        “It is precisely because the individual mandate is equivalent to a tax that Justice Roberts ruled with the majority,” Franco said. “And that is the core concept of single payer — that it is a tax-financed system. What Roberts says means single payer is immune to all the constitutional attacks we’ve seen lobbed at the ACA, and that we likely would have seen lobbed at single payer in Vermont.”

  1. Paul P

    Heath care is 16% of GDP and rising. Transport the heath care system of Taiwan, France, Germany, Sweden, Canada, Spain, England, etc. to the United States and costs would be cut in half and outcomes improved. BTW, New York State has its own state single payer bills in the state legislature. See,

    1. econ

      USA should not fear single payer health care. Why? You are the only civilized and un-civilized country on Earth that does not have single payer health care with or without some co-pay insurance.
      The Veterans Admin Hospitals are more efficient and provide better health care than the others through health insurance companies. Check the RAND study of recent vintage. Fear and foreboding!! Is it socialist? My God! Look under your beds now, there may be a socialist waiting to take you over.

      1. eyesoars

        ZOMG! You mean our military is now a socialist organization?

        I had no idea Obama was so EEEeeevvvvil!

  2. Amnon Portugaly

    The US should take example from two bona fide capitalistic countries, Taiwan and Switzerland.

    Taiwan National Health Insurance (NHI), was instituted in 1995. NHI is a single-payer compulsory social insurance plan which enables equal access to health care for all citizens.

    Health insurance in Switzerland is universal and compulsory for all persons residing in Switzerland

    1. nonclassical

      …wife is nurse when we live in Germany-cost of German healthCARE is 15% cost of U.S. healthPROFIT, and comes with CHOICE between “private” or “state” auspices:

      meanwhile, here are international health system quality rankings:

      1 France
      2 Italy
      3 San Marino
      4 Andorra
      5 Malta
      6 Singapore
      7 Spain
      8 Oman
      9 Austria
      10 Japan
      11 Norway
      12 Portugal
      13 Monaco
      14 Greece
      15 Iceland
      16 Luxembourg
      17 Netherlands
      18 United Kingdom
      19 Ireland
      20 Switzerland
      21 Belgium
      22 Colombia
      23 Sweden
      24 Cyprus
      25 Germany
      26 Saudi Arabia
      27 United Arab Emirates
      28 Israel
      29 Morocco
      30 Canada
      31 Finland
      32 Australia
      33 Chile
      34 Denmark
      35 Dominica
      36 Costa Rica
      37 USA

  3. jake chase

    Now all you have to do is convince all the politicians living on bribes from the health insurance industry. Maybe the doctors should start bribing them too?

    1. nonclassical

      Jake-medical providers including doctors are largely bought off by pharmaceutical co. or insurers…

      1. LucyLulu

        No. Doctors don’t need to be bought off. They fear a reduction in wages and less control over practice from a transition to single-payer healthcare.

  4. Dave Schuler

    “Transport the heath care system of Taiwan, France, Germany, Sweden, Canada, Spain, England, etc. to the United States and costs would be cut in half and outcomes improved. BTW, New York State has its own state single payer bills in the state legislature. ”

    Make sure you transport the cost structure while you’re at it. It’s the prices, stupid.

    1. Alex

      But don’t you know, the academics have ascertained that it will all be roses and unicorns to move to a single payer system. Having participated in the swiss system for a time and having had to be hospitalized for two days, what they don’t say above is that most swiss pay almost 8% of their income for their health care and this health care is BASIC health care – you pay for extras and its estimated the avg swiss person pays an extra 30% for uncovered health issues. You can get private health care for such mundane things as dental care or if you want semi-private room (I was in a ward with 12 other people 3 of whom had serious bronchial infections, but we were safe because there was a thin sheet between then and the rest of the ward). From a recent study of the swiss system (

      Affordability: Concomitant with health expenditure climbing to 11.4 per cent of GDP over the last decade, ‘basic package’ premiums have increased by an average of 5% per year and out-of-pocket expenditure is high compared with the OECD average. The Swiss system has not been very effective at containing costs and unsurprisingly there are now concerns that the premiums may be ‘unaffordable for many people’.

      1. liberal

        Moving to single payer will definitely save money, but there’s considerable waste in health care itself, probably more than the waste due to our crazy insurance system.

        In terms of efficiency, Britain’s system is the way to go.

      2. Larry Barber

        But the Swiss don’t have a single payer system, they have compulsery insurance which is not the same thing. Also 8% is a lot less than what we pay, its just that we are better at hiding the real costs.

        The oh so daming article you link to starts with “The result appears to be high quality care for all, excellent patient satisfaction, strong uptake of new technology and drugs, short waiting lists and impressive health care outcomes.” The Swiss system may not be perfect, but it appears to be performing a lot better than ours in the US.

      3. James Brown

        First you can sign me up for 5% a year premium increases right now. I’m in a large group plan and low double digits is more common. Second 11.4% of GDP is 5 percentage points BELOW the U.S. level. To put that in perspective that’s about equal to the defense budget. Lastly, damning the Swiss for poor cost containment without looking at the growth rate in the U.S. is classic pointing out the mote in the other guy’s eye.

      4. LucyLulu

        If you look at the Swiss system, it looks a whole lot like Obamacare. It’s mandatory private insurance, from a choice of private insurers, with subsidies for low-wage earners. IIRC, it is also the second most expensive healthcare system in the world, and only #20 in outcomes per chart above (albeit, still better on both counts than U.S.). It’s not the one I’d choose to model our country after, but per capita, they still spend about half what we do, and that includes any out-of-pocket expenses, and 100% population coverage.

  5. briansays

    through hard work and luck i was able to retire at 57
    the monthly premiums for a $5,000 deductible individual plan has gone from $217 to $548 a month in less than 5 years
    i have no medical problems
    i would be happy to pay an actuarily sound amount which i am sure would be a lower amount to buy into medicare early as a public option and have my premium dollars go to a public benefit rather than a private cabal
    obama folded and a small number of democratic senators sold out

    1. nonclassical

      …upon retirement we will be moving back to Europe, where cost of apt, food, transportation, + ambiance, is around half U.S. healthPROFIT cost..

  6. Schofield

    God’s truth! Why is it Americans can’t see that healthcare is a quasi-monopoly irrespective of what country it’s servicing and as such needs regulating in the most bribe-proof way human ingenuity can devise.

  7. petridish

    Has anyone here read the NYTimes article in Links re: unnecessary cardiac procedures? Or, for that matter, the books Money Driven Medicine by Maggie Mahar or The Checklist Manifesto by Atul Gawandi? Or this article about chemotherapy blowback?

    Accessible, affordable, effective healthcare is a benefit of an econmically viable, civilized, progressive society. The “capitalist” predation that American “healthcare” has become is a nightmare.

  8. Don Levit

    I discovered this fact several years ago, which confirms that health insurers are in it for the money – period.
    In 1986, Blue Cross and Blue Shield (and similar insurers) lost its federal tax-exempt status. The primary reason cited by the IRS in a paper that I have is that the Blues (and similar insurers) had evolved into their for-profit competitors. Lacking any distinction between the Blues and for-profit insurers, the Blues were no longer deserving of its fedral tax advantages.
    The result was IRC section 501(m), stripping the Blues and other 501(c)(3) and (c)(4) insurers of their federal tax-exempt status.
    This should have been a wake-up call for not-for profit insurers (namely, 501(c)(3) and (c)(4)s, which IRC section 501(m) specifically refers to) to flourish based on unique products and services. Instead, the snooze alarm never went off, and we are situated with hundreds of me-too insurers.
    3 people and I are working with Milliman, an actuarial firm, to show the figures and their enclosed papers, to life insurers, who would like to save people 60-80% of their health insurance premiums, over time, so that more discretionary funds are available for their insurance products.
    The goal is a break even health insurance product of a newly formed 501(c)(4) health insurer, which is a subsidiary of the life insurer.
    We will have the material in a little over 2 weeks.
    This has taken several months (and a lot of fees), but the public deserves REAL options.
    Don Levit

  9. bluntobj

    Amusing that this plan is billed to “lower healthcare costs.”

    This is amusing in that mandating insurance merely expands the total possible pool of healthcare dollars. Single payer systems only enforce “cost savings” on providers by merit of being a monopoly.

    The “two systems in one country” methods inevitably result in either reduction in care to meet the offered public health payment and a elite class of health insurance that offers the benefits that we’ve taken for granted in the US. (Room versus Ward, better drugs, less wait, better physicians, maybe better outcomes?)

    As proposed, there is nothing that prevents escalation of healthcare premiums under a single payer system. The degree of profits that await the sickcare industry is unimaginable.

    As an example, my catastrophic plan costs about $108 a month. My wife’s full plan (the only one that covers maternity) is $290. If my kids are on the full plan thats another $250 each.

    So basically that’s $10,776.00 per year. I know that this is on the low side for insurance.

    My wife’s insurance jumped from $203 to $290 in August, a 42.8% increase due to Obamacare.

    Which brings me to my point: How much less, through mandated insurance, am I going to pay? 50% less? I highly doubt it. 20%? Could be plausible. Not to mention that the “savings” will be applied to an already inflated amount. So will I actually “save” anything? What will trying to get healthcare under Obamacare be like, especially if quality, timeliness, or scope of covered services will be sacrificed for costs?

    If the catastrophic care package is the one most chosen due to its affordability, that still leaves a huge chunk of deductible to be paid, in cash, at inflated prices.

    So how is this any different for me, one of those schmucks who has been paying for healthcare all along? I will pay more.

    1. Carla

      You haven’t been paying for healthcare. You’ve been paying for health insurance. Big difference.

      1. George santangelo

        Thanks Carla for stating the not so obvious that we in th US pay for health insurance not health care. When the insurance company makes decisions about what health care we can have, when we can get it and who can give it , isnt that a huge conflict of interest between us and our insurers. We have no bargaining power to reduce medical costs and even if insurance companies had bargaining power, which they don’t, they would use it to increase their profits without any requirement that they pass savings on to us. So we have the worst of all worlds in the US thanks to a political system bought and paid for by the health insurance industry.

      2. bluntobj

        And, completely unintentionally, also reinforced my point. Mandating that everyone buy health insurance does not, in any way, reduce healthcare costs.

        Oh, and also FYI, Since I’m on a catastrophic healthcare plan, I do pay for my healthcare, up to $10K. Not to mention the deductible on the other plans, plus co-insurance.

        So yeah, I guess I pay both, in cash. If everyone paid cash, and insurance in any form did not exist, you could chop 80% off of medical costs.

        1. Carla

          Well, I completely agree with you that mandating the purchase of health insurance will not lower costs.

          And, in my experience, which is considerable, insurance is a criminal enterprise.

          The fact is, health care is not a commodity to be sold for a profit. When you qualify for Medicare, you will understand.

          1. bluntobj


            Agree ABSOLUTELY that insurance is a criminal scam. Not so sure on the commoditization of healthcare, as medicare is not going to exist when I’m of an age to qualify for it.

            Which means my health is up to me, with all that implies.

            It also begs the following question: If health is truly a personal issue, for good or bad, has Medicare distorted how we morally perceive our own responsibility to our health? Without medicare, only those with good health through genetics, practice, luck, and finances would live longer periods. It’s not possible to claim that good health, or healthcare, is a right under that situation. It’s a matter of choice, habit, and fortune, just like the other aspects of life.

            Which deeply implies that Medicare and all related forms of health insurance has insulated us from the consequences of actions, and this will inevitably result in systemic destruction when it can no longer be sustained.

            Much like the housing bubble.
            Much like the dot com bubble
            Much like all the other real estate bubbles
            Great Depression
            Tulip bubble

            So the expansion of credit in the realms of healthcare (through insurance), and education (through student loans) leave us as a people and nation very vulnerable to those bubbles popping.

            Which begs another question: Why do we undertake “compassionate” or “need-based” social programs which have the effect of devastating their clients and entire populations over the long term, in order to feel that we are nice, good, and are “doing the right thing” in the short term?

            Story of human history if you can answer that one, I guess.

  10. leafleaper

    Your wife’s insurance did not go up because of ObamaCare any more than interest rates went up because of Dodd Frank, in both cases the Corporations ELECTED to proactively increase rates because supposedly they think increases might be more difficult to do if they actually have to justify them on the basis of risk.
    BUT the insurance companies, at least will have to spend 85% of what they have taken in on actual health care, or distribute the difference back to their customers. And they HATE it.

    1. ian

      As superficially attractive as it is for the insurance companies to spend 85% of what they take in on health care, how do you handle the situation of large unexpected costs? How predictable are their outlays every year?

  11. General Nonsense

    Ah, you can’t lower healthcare costs by increasing the pool of insureds. If we assume, as we must, that healthcare is a scarce resource, then increasing the pool of insureds increases the demand for that scarce resource without any corresponding rise in supply–it takes time and resources and pretty smart people to increase the # of Dr.s. Economics 101 says that will lead to increases in prices. In fact, as you try to squeeze the suppliers on price you are likely to have a drop in supply in the face of increasing demand. If I’m a doctor why should I work harder for less, after all I’m a pretty smart guy and can do something else with my life. As prices increase, premiums will have to increase or the system will have to be increasingly subsidized. As premiums increase people will feel more compelled to use the system to get their “money’s worth” icreasing demand in the face of (probably increasingly) limited supply etc. etc. Health insurance is not like car insurance where increasing the pool of insureds will spread the risk and thereby lower the premiums assuming the accident rate stays releatively stable-your not really spreading the risk or cost in the healthcare situation, you are subsidizing use which will lead to increased demand and increased cost. There is no fair way I can think of to allocate healthcare. We used to use the price mechanism, i.e., ability to pay–not real fair if you have a serious illness but at least you know what you need ot have in terms of coverage and have a motivation to get it as well as take care of yourself and you make your own choices in that regard. In the US we’re somewhere between price and subsidization. The more we subsidize the more costs go up, same as with college tuition. As we move more toward subsidization there will have to be some kind of rationing, and government will have to start insinuating itself more into your life and day to day decisions…you want that BIG MAC well, then when you need an x-ray you’ll have to wait until all the vegan’s are taken care of because they took care of themselves and you didn’t e.g.. It’s a tough problem that has no easy solution. I think healthcare is one of those things that a just society should provide, I just can’t think a viable way to do it, and single payer presents as many problems, maybe more, than it solves.

    1. Carla

      @General Nonsense: “single payer presents as many problems, maybe more, than it solves.”

      Your moniker is, indeed, appropriate.

    2. reslez

      I just can’t think a viable way to do it

      Therefore it is impossible!!

      Wait, doesn’t every other industrialized country spend less for better outcomes?

      Yes. They do.

  12. BondsOfSteel

    It’s interesting that someone finially started thinking of healthcare in ecconomic terms.

    In our current system, by far the two biggest payers are the US government and US businesses. The cost for uninsured consumers are passed on to the paying customers.

    Therefore, healthcare cost are ultimately paid by the taxpayer and consumers of those business services/goods. This means that businesses that provide healhcare in areas with non-universal coverage will be at a competitive disadvantage.

    Maryland’s plan would seperate the cost of healhcare from the cost of goods… making their businesses more compeative. Their taxes would go up since Marylandians would pay for all the costs… but, the profit of companys there should increase by the same amount.

    I’m a big fan of Stein’s Law. Universal coverage is inevitable.

  13. Cynthia

    Here are three main reasons why the growth in health care spending in the US outstrips that of the rest of the developed world: 1) overpriced drugs and medical devices; 2) overpaid executives on both the insurance side and provider side of health care; and 3) runaway administrative costs.

    Drugs and medical devices are overpriced in the US because consumers are forbidden by law from purchasing them outside the US and because health care providers are forbidden by law from negotiating prices with drug and medical device manufacturers. So by paying for over-priced drugs and medical devices, consumers and health-care providers in the US are essentially subsidizing drug and medical device manufacturers — something which fly in the face of free-market capitalism.

    No doubt that there is something morally wrong about getting rich off the backs of the sick and the disabled. So I’m at a loss as to explain why there’s no public outcry over executives from the health-care industry pulling down multi-million dollars salaries and bonuses, especially when we are in a situation where more and more Americans are dying due to lack of health care.

    And one of the main reasons why administrative costs in health care are spirally out of control is because health care insurers have recently made the decision not to reimburse patients’ medical expenses if either doctors or nurses fail to document the most minor or, in my view, the most irrelevant details about their patients. Insurers couldn’t care less if doctors and nurses properly diagnose and treat patients, thus improving their outcome and reducing their hospital stay, they ONLY care about finding excuses not to reimburse doctors and nurses for the care they give to their patients. So as health care insurers hire more chart auditors (i.e. “care utilization managers”) who are very costly BTW (their salary is roughly 20 to 30% higher than it is for a critical-care nurse), to comb through the charts looking for charting errors and omissions, the health care providers must respond by hiring more chart auditors (i.e. “care utilization managers”) who are just as costly as the ones being hired by insurers, to detect charting error and omissions and see to it that these errors and omissions are fixed. Otherwise, health care providers are at substantial risk of not being reimbursed by insurers. This arms race, as I like to call it, between health care providers and health care insurers must be put to a stop before administrative costs outstrip the cost of providing actual care for patients!

      1. Wade

        Doctors are paid more here in the US because medical schools, which are run by doctors, limit the supply of doctors. This artificial scarcity, of course, raises the income of doctors. This is no different from what happens in any union.
        For example, in order to become a doctor, a medical student needs to pass calculus. (And everyone knows that a deep understanding of calculus is needed to diagnose illness.) An amazing number of people who would otherwise make excellent doctors can be eliminated by this requirement alone.
        Then, there is Organic Chemistry (rote memorization in the extreme), and the high cost of medical school, and the ridiculous hours that interns are expected to put in. The list goes on and on, but with one purpose only. To eliminate perfectly well qualified people from the profession in order to raise wages for the remaining few.
        There are people who argue that doctors must be trained to the highest standards possible, because you’re putting your life in their hands. This is an argument meant to mislead.
        You put your life into the hands of the engineers who built that bridge you just drove over. They actually did need to know calculus to design it, but for some reason (which is that engineers, who by nature are self-sufficient, hate anything resembling unions), they were paid a small fraction of what a doctor is paid, for work that is just as critical to human life.

        1. enouf

          I think i recall a PBS video (Frontline perhaps) some years ago that followed a middle-aged man change his career — he decided to enter into (Harvard?) Medical School — As he went through, over the course of years, it became clear to him that it wasn’t for him, it was NOTHING like he thought it would be, or should be. They completely avoided anything concerning ‘Holistic’ alternatives, and ‘Preventative’ care was nowhere to be found in the training. Gee,.. could it be that BigPharma / BigInsurance, etc are responsible for the curriculum? (or lack thereof)

          Nah ….


        2. LucyLulu

          The real constraint comes into play with the number of available residency slots. All doctors must do a residency. Guess who pays for residency training? Medicare. With budget constraints, Medicare hasn’t increased funding, thus residency slots, for over 10 years. Just recently a new source of funding was obtained that increased the available funds by 4%. I’m unsure how that translates into number of available slots.

    1. ian

      I think you forgot the lack of a good accounting of true costs. I think of a personal experience last year: my son got a cut on his finger that required 3 stitches. At the hospital, a physicians assistant (not a doctor!) spent about 20 minutes doing the procedure. The consumables were a syringe of novocaine, 3 inches of suture and a needle. The bill to the insurance company was $1800, which they paid.
      Ok, I get that this is cost shifting that pays for folks who use the ER with no insurance, and that this goes on all the time. The problem, as I see it, is that nowhere in this was the actual cost recorded. I can’t see how you can reform anything without a true, accurate accounting of actual costs.

  14. stevefraser

    If ObamaCare is so great, why are the DEMS giving tens of thousands of waivers to their friends?

  15. Don Levit

    The catastrophic plan, as was posted earlier, would be, over time, the only premium being paid on a pay-as-you-go basis.
    For a premium between $250 and $500 a month, a family unit will be able to buy an increasing paid-up policy, that over 3-5 years, accumulates $25,000-$50,000 of paid-up benefits. No more premiums would be due on that portion.
    The balance of catstrophic coverage is the savings of 60-80% off of a traditional premium.
    The way we accomplish this paid-up objective is by setting aside reserves for the lower claimants, reserves which are owned by the insurer, but are available primarily only for the insured’s paid-up medical expoenses.
    Don Levit

  16. General Nonsense

    Just a couple of further observations.
    Universal healthcare is not impossible, but it involves hard choices that are not being discussed, i.e., rationing, government intrusion into your life, increases not decreases in cost, etc.
    Also, I have family in England and have had clients there and those who can afford it opt out of the universal healthservice because of access and quality of care issues. In fact, unless you force Dr.s to participate, which will raise a whole other raft of issues, you’re going to have a two tiered system. That exists in NYC now. i have health insurance, but most of the Dr.s I go to won’t accept it. I have to pay the Dr. cash and seek reimbursement. The best Drs will opt out any system that seeks to limit their fees or conditions payments, and there will be people who will pay for their serices and the rest of the system will come under further stress.
    Insurance Companies are certainly not without sin, but healthcare premiums in most states, possibly all, are set by the State Ins. Dept. The insurers have to show their books and demonstate their costs and the Ins. Dept allows them to charge a premium that will give them a reasonable profit. You can argue that the insurers game the system and capture the regulator etc, but how is that going to change if the govermnent becomes more involved? So if your looking for private insurers to participate you’re not going to get any cost savings there.
    And reduction of administrative costs have been a panacea for decades. The solution has invariably been to add more rules and bureacracy and leading to an increase in administrative costs.
    For the reality of what a universal system will look like in this country look no further than Medicare/Medicaid and multiply by 10 or so, and we can’t even pay for that program as it is.
    AS I said before I would like universal healthcare, but if we are going to make that choice the real costs should be being discussed and they are not.

    1. LucyLulu

      Most Brits are quite happy with their system. They can purchase additional private insurance if they like.

      Who says single-payer adds to cost. Yes, we can look to Medicare. Administrative costs run 3% for Medicare. Find me a private insurer that can come close. If Medicare costs are high, it’s due to the high number of people covered and the high risk group they cover. (OTOH, Medicaid has some real issues.)

      However, the other huge problem that must be addressed is our fee-for-service model that provides perverse incentives for increased morbidity and utilization of services. Rationing??? Let’s just worry about getting rid of the unnecessary and/or ineffective procedures and treatments first.

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