Health and financial security Medicare What's Buzzing

Near consensus among researchers that Medicare for All saves money

Written by Diane Archer

Christopher Cai and colleagues at three University of California campuses examine the projected cost impact for single-payer health insurance in the US in a recent paper in PLOS Medicine. They found near consensus among analysts that guaranteeing health insurance to all Americans under one public program–Medicare for All–saves money.

Cai et al. studied and compared cost analyses for 22 single-payer plans in the US since 1990. Of those analyses, they found that 19 showed single-payer yielded net savings of around 3.5% in year-one, and growing over time. All 22 suggest that single-payer yields net savings over several years.

All studies, regardless of ideological orientation, showed that long-term cost savings were most likely, while delivering high-quality health care coverage to everyone in the US.

With single-payer Medicare for All, the greatest savings come from a simplified billing system. The administrative savings are very large. The latest estimate is that annual administrative savings would be about $600 billion. Substantial savings, about $200 billion, also come from bringing down spending on prescription drugs. Large further savings can be achieved over time from relying on global budgets that cap spending.

Of course, the amount of savings depends on what exactly is included in the Medicare for All plan. What are its core features? But, regardless of these design features, relying on a public health insurance system, without private health insurers, would lead to lower overall health care costs. In 2018, total US health care costs were $3.6 trillion, representing 17.7 percent of GDP.

Already the US government pays for about two-thirds of health care costs. This includes public insurance (e.g., Medicare, Medicaid, VA, TriCare, and myriad state and local safety net funds), as well as private insurance for government employees and tax subsidies for private insurance. But, it spends this money – more than total health spending in any other country – in a fragmented way.

The savings from moving to a unified payment system from a multi-payer system is greater than the added costs of insuring everyone in America. The cost reduction is estimated at 3%–4% in the first few years, growing greater over time. New research on health care utilization in historical coverage expansions suggests that net savings may be even greater than found in the reviewed economic analyses.

One key feature of single-payer is a single uniform electronic health records system that enable the government to see what’s working and not in the health care system. For example, a single uniform system would help identify providers who are billing inappropriately for services and would help reduce the 20% of health care spending that is not clinically helpful or is fraudulent.

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