Is national health insurance “socialized medicine”?
No. Socialized medicine is a system in which doctors and hospitals work for the government and draw salaries from the government. Doctors in the Veterans Administration and the Armed Services are paid this way. Examples also exist in Great Britain and Spain. But in most European countries, Canada, Australia and Japan they have socialized financing, or socialized health insurance, not socialized medicine. The government pays for care that is delivered in the private (mostly not-for-profit) sector. This is similar to how Medicare works in this country. Doctors are in private practice and are paid on a fee-for-service basis from government funds. The government does not own or manage their medical practices or hospitals.
The term socialized medicine is often used to conjure images of government bureaucratic interference in medical care. That does not describe what happens in countries with national health insurance. It does describe the interference by insurance company bureaucrats in our health system.
Won’t this raise my taxes?
Currently, about 64% of our health care system is financed by public money: federal and state taxes, property taxes and tax subsidies. These funds pay for Medicare, Medicaid, the VA, coverage for public employees (including teachers), elected officials, military personnel, etc. There are also hefty tax subsidies to employers to help pay for their employees’ health insurance. About 17% of heath care is financed by all of us individually through out-of-pocket payments, such as co-pays, deductibles, the uninsured paying directly for care, people paying privately for premiums, etc. Private employers only pay 19% of health care costs. In all, it is a very “regressive” way to finance health care, in that the poor pay a much higher percentage of their income for health care than higher income individuals do.
A universal public system would be financed this way: The public financing already funneled to Medicare and Medicaid would be retained. The difference, or the gap between current public funding and what we would need for a universal health care system, would be financed by a payroll tax on employers (about 7%) and an income tax on individuals (about 2%). The payroll tax would replace all other employer expenses for employees’ health care. The income tax would take the place of all current insurance premiums, co-pays, deductibles, and any and all other out of pocket payments. For the vast majority of people a 2% income tax is less than what they now pay for insurance premiums and in out-of-pocket payments such as co-pays and deductibles, particularly for anyone who has had a serious illness or has a family member with a serious illness. It is also a fair and sustainable contribution. Currently, over 41 million people have no insurance and thousands of people with insurance are bankrupted when they have an accident or illness. Employers who currently offer no health insurance would pay more, but they would receive health insurance for the same low rate as larger firms. Many small employers have to pay 25% or more of payroll now for health insurance – so they end up not having insurance at all. For large employers, a payroll tax in the 7% range would mean they would pay less than they currently do (about 8.5%). No employer, moreover, would hold a competitive advantage over another because his cost of business did not include health care. And health insurance would disappear from the bargaining table between employers and employees.
Another consideration is that everyone would have the same comprehensive health coverage, including all medical, hospital, eye care, dental care, long-term care, and mental health services. Currently, many people and businesses are paying huge premiums for insurance that is almost worthless if they were to have a serious illness.
Won’t this result in rationing like in Canada?
The U.S. Supreme Court recently established that rationing is fundamental to the way managed care conducts business. Rationing in U.S. health care is based on income: if you can afford care you get it, if you can’t, you don’t. A recent study by the prestigious Institute of Medicine found that 18,000 Americans die every year because they don’t have health insurance. That’s rationing. No other industrialized nation rations health care to the degree that the U.S. does.
If there is this much rationing why don’t we hear about it? And if other countries do not ration the way we do, why do we hear about them? The answer is that their systems are publicly accountable and ours is not. Problems with their health care systems are aired in public, ours are not. In U.S. health care no one is ultimately accountable for how it works. No one takes full responsibility.
The rationing that takes place in U.S. health care is unnecessary. A number of studies (notably the General Accounting office report in 1991, and the Congressional Budget office report in 1993) show that there is more than enough money in our health care system to serve everyone if it were spent wisely. Administrative costs are far higher in the U.S. than in other countries’ systems. These inflated costs are directly tied to our failure to have a publicly-financed, universal health care system. We spend at least twice more per person than any other country, and still find it necessary to deny health care.
Who will run the health care system?
There is a myth that, with national health insurance, the government will be making the medical decisions. But in a publicly-financed, universal health care system medical decisions are left to the patient and doctor, as they should be. This is true even in the countries like the UK and Spain that have socialized medicine.
In a public system the public has a say in how it’s run. Cost containment measures are publicly managed at the state level by an elected and appointed body that represents the people of that state. This body decides on the benefit package, negotiates doctor fees and hospital budgets. It also is responsible for health planning and the distribution of expensive technology.
The benefit package people will receive will not be decided upon by the legislature, but by the appointed body that represents all state residents in consultation with medical experts in all fields of medicine.
What about medical research?
Much current medical research is publicly-financed through the National Institutes of Health. Under a universal health care system this would continue. A great deal of drug research, for example, is funded by the government. Drug companies are invited in when it comes to marketing successful new drugs. AZT for HIV patients is one example. All the expensive clinical trials were conducted with government money. When it was found to be effective, marketing rights went to the drug company. (This is a controversial practice because it means pharmaceutical companies enjoy significant profits on the back of taxpayer-financed research.)
Medical research does not disappear under universal health care system. Many famous discoveries have been made in countries that have national health care systems. Laparoscopic gallbladder removal was pioneered in Canada. The CT scan was invented in England. The new treatment to cure juvenile diabetics by transplanting pancreatic cells was developed in Canada.
It is also important to note that studies show that the number of clinical research grants declines in areas of high HMO penetration. This suggests that managed care increasingly threatens clinical research. Another study surveyed medical school faculty and found that it was more difficult to do research in areas with high HMO penetration.
Won’t this just be another bureaucracy?
The United States has the most bureaucratic health care system in the world. Over 24% of every health care dollar goes to paperwork, overhead, CEO salaries, profits, and other non-clinical costs. Because the U.S. does not have a system that serves everyone and instead has over 1,500 different insurance plans, each with their own marketing, paperwork, enrollment, premiums, rules, and regulations, our insurance system is both extremely complex and fragmented. The Medicare program operates with just 3% overhead, compared to 15% to 25% overhead at a typical HMO.
It is not necessary to have a huge bureaucracy to decide who gets care and what care they get, if and when everyone is covered and has the same comprehensive benefits. With a universal health care system we would be able to cut our bureaucratic burden in half and save nearly $150 billion per year.
How will we keep costs down if everyone has access to comprehensive health care?
People will seek care earlier when diseases are more treatable (and affordable). We know that the uninsured delay or avoid seeking care because they are afraid of health care bills. This will be eliminated under such a system. Undoubtedly costs of taking care of the medical needs of people who are currently doing without will cost more money in the short run. But we will be spending proportionately less on administration to compensate.
In the long run, the best way to control costs is to negotiate fees and budgets with doctors, hospitals, and drug companies and to set and enforce an overall budget.
How will we keep doctors from doing too many procedures?
This is a problem in systems that reimburse physicians on a fee-for-service basis. In today’s health system, another problem is physicians doing too little for patients. So the real question is, “how do we discourage both overcare and undercare”? One approach is to compare physicians’ use of tests and procedures to their peers with similar patients. A physician who is “off the curve” will stand out. Another way is to set spending targets for each specialty. This encourages doctors to be prudent stewards and to make sure their colleagues are as well, because any doctor doing unnecessary procedures will be taking money away from other physicians in the same specialty. Another way is to continue to develop expert guidelines by groups like the American College of Physicians, etc. to shape professional standards – which will certainly change over time as treatments change. This really gets to the heart of “how do you improve the quality of health care” which is a longer topic . Suffice it to say that universal coverage is a pre-requisite for quality improvement.
What will happen to physician incomes?
On the basis of the Canadian experience, average physician incomes should change little. However, the income disparity between specialties is likely to shrink.
The drop in income that a physician might experience under a single-payer system could be mitigated by a drastic reduction in office overhead and malpractice costs. Billing would involve imprinting the patient’s national health program card on a charge slip, checking a box to indicate the complexity of the procedure or service, and sending the slip (or a computer record) to the physician-payment board. This simplification of billing would save thousands of dollars per practitioner in annual office expenses.
How will we keep drug prices under control?
When all patients are under one system, they wield a lot of clout. The VA can purchase drugs for 40% discounts because they are a bulk purchaser. This is called monopsy buying power and it is the main reason why other countries’ drug prices are lower than ours. The same could happen with medical supplies and durable medical equipment.
Why shouldn’t we let people buy better health care if they can afford it?
Whenever we allow the wealthy to buy better care or jump the queue, health care for the rest of us suffers. One need only look at the example of the nation’s health insurance program for the poor, versus the Walter Reed Hospital in Bethesda, MD, that serves members of Congress. Access to care for the poor is deteriorating because Medicaid is a grossly underfunded health care program. Because it doesn’t serve the wealthy, the payment rates are low and many physicians refuse to see Medicaid patients. D.C. General Hospital in D.C., which serves the poor, is always on the brink of bankruptcy. Calls to improve Medicaid fall on deaf ears because the beneficiaries are not considered to be politically important. On the other hand, members of Congress have completely free access to care at Walter Reed where the quality of care couldn’t be better.
What will be covered?
All medically necessary care, including doctor visits, hospital care, prescriptions, mental health services, nursing home care, rehab, home care, eye care and dental care.
What about alternative care, will it be covered?
Alternative care that is proven in clinical trials to be effective will be covered. For example, spinal manipulation for some back conditions. Other treatments will be decided by the health care planning board or other public body. New kinds of treatments will be added to the benefits package over time as they are shown to be effective, including “alternative” treatments. Similarly, ineffective, harmful, or wasteful care can be removed from the benefits package, such as funding for a costly medication that is no better than aspirin for arthritis.
Isn’t a payroll tax unfair to small businesses?
The payroll tax is more costly to businesses who are not currently insuring their workers. However, it is much less THAN what they would pay for good private insurance for themselves and their workers. For most of the small businesses already providing coverage, the payroll tax will be much less expensive than what they are paying now.
Ideally, the payroll tax will be replaced in the future by a tax that doesn’t charge an administrative assistant making $17,000 a year the same percentage of salary as a CEO earning $175,000 a year.
Can a business keep private insurance if they choose?
Yes and no. Everyone has to be included in the new system for it to be able to control costs, reduce bureaucracy, and cover everyone. However, business and anyone who wants to can purchase additional private insurance that covers things not covered by the national plan (e.g. cosmetic surgery, orthodontia, etc.).
Insurance companies will no longer be needed to decide who gets medical care and what kind of medical care, and would not be allowed to offer the same benefits as the universal health care system. Any allowance for this would weaken and eventually destabilize the health care system. It would undermine the principle of pooling the risk. Health care systems act as universal insurers. At any one time the healthy help pay for those who are ill. If private insurers are allowed to cherry pick the healthy, leaving the public health care system with the very sick, the system cannot help but fail. This is part of what is happening in U.S. health care now.
Another reason is that, if allowed, patients would enroll in the private system while they were healthy (and their premiums were low), and enroll in the public system when their care (and private premiums) became expensive. This, in fact, is what we saw happen to Medicare and HMOs. There, patients needing expensive care, e.g., a hip replacement, were encouraged to drop out of their HMO so traditional Medicare would pick up the tab. However, while they are healthy they enroll in the HMO for the modest additional dental and drug benefits.
What will happen to all of the people who work for insurance companies?
The new system will still need people to administer claims. Administration will shrink, however, eliminating the need for a large bureaucracy. The focus will shift to those who deliver health care. More health care providers, especially in the field of long-term care and home health care, will be needed, and many insurance clerks can be retrained to enter these fields. Many people now working in the insurance industry are, in fact, already health professionals (e.g.nurses) who will be able to find work in the health care field again.
How will we contain costs with the population aging and the advent of expensive technology?
Japan and Europe are already facing this problem head-on and doing fine. They have a much higher percentage of elderly than we do, and still spend less on health care by far.
The best way to approach this is to regard it as a societal problem, one that needs a solution with everyone in mind. Germany and Japan recently adopted single-payer long-term care systems to cover the long-term care needs of the elderly at home and in specialized housing. Germany is pioneering a program that pays family members to care for the elderly at home. That’s family values!
What about ERISA? Doesn’t it stand in the way of implementing a universal health care plan?
No. ERISA (the Employees Retirement Income Security Act) prevents a state from requiring that a self-insured employer provide certain benefits to their employees. However, a single payer plan would not mandate the composition of employer benefit plans – it would replace them with a new system that would essentially be “Medicare for All”. The state would require employers to pay a payroll tax into the health care trust fund. This is legal and is done now with taxes levied to pay for Medicare.
How will the Health Planning Board operate?
In Vermont, it would work something like this: The health planning board (the Health Care Administration) would be a public body with representatives from every legislative district. The representatives would be appointed by each member of the state house of representatives. The state would be divided into 7 regions. The appointed members from each region would elect one person among them to serve on the health planning board. The board would consult regularly with a medical expert advisory committee. The latter would advise the regional board members on what treatments, medications and services should be covered, decisions supported by medical science.
Since we could finance a fairly good system , like the Norwegian, Danish or Swedish system with the public money we are already spending (60% of health costs), why do we need to raise the additional 40% (from employers and individuals)?
There are three reasons why the U.S. health care system costs more than other systems throughout the world. One, we spend 2-3 times as much as they do on administration. Two, we have much more excess capacity of expensive technology than they do (more CT scanners, MRI scanners, mammogram machines than we need). Three, we pay higher prices for services than they do. There is no doubt that we do not need to spend more than we currently spend to cover comprehensive care for everyone. But it would make the transition to a universal system very difficult at first if we spent less. That is because we have a tremendous medical infrastructure, some of which would likely retain its slightly larger than necessary capacity during the transition phase. Secondly, we would likely retain salaries for health professionals at their current levels. Thirdly, we would cover much more than most other countries do by including dental care, eye care, and prescriptions. And for these reasons we would need the extra 40% that we are already spending – but NOT more. We could cover all the uninsured for the same amount we are currently spending!
How much of the health care dollar is publicly financed?
Previous calculations of the percentage of the health care dollar that is publicly financed were estimated to be around 50%. That was from federal and state taxes to fund Medicare, Medicaid and the VA. 30% was out-of-pocket and 20% from employers.
Estimates differ depending on how they factor in certain costs. For example, recent studies put the tax subsidy offered to employers into the public spending column. A tax subsidy to help employers buy health insurance for employees means the public helps pay the bill. Another factor is that many employees pay the full cost of the premiums for their health insurance at work – not the employer. Newer analyses of these factors put the public financing estimate at 64%, out-of-pocket at 17% (for uncovered services, premiums not paid for by an employer) and employers’ contributions at 19%. (Health Affairs 1999;18(2):176.
Why not MSAs?
Medical savings accounts (MSAs) and similar options such as health reimbursement arrangements are individual accounts from which medical expenses are paid. Once the account is depleted and a deductible is met, then medical expenses are covered by a catastrophic managed care plan, usually a restricted PPO plan. Individuals with significant health care needs may rapidly deplete their accounts and then be exposed to large out-of-pocket expenses. They would tend to select plans with more comprehensive coverage. Since only healthy individuals would be attracted to the MSAs, higher-cost individuals would be concentrated in the more comprehensive plans, driving up premiums and threatening affordability. By placing everyone in the same pool, the cost of high-risk individuals is diluted by the larger sector of relatively healthy individuals, keeping health insurance costs affordable for everyone. Also, since healthy individuals cannot possibly predict whether or when they would develop significant health care needs, they would eliminate that potential financial risk by being included in the comprehensive pool with everyone else.
Why not use tax subsidies to help the uninsured buy health insurance?
The major flaw of tax subsidies is that they would be used to help purchase plans in our current fragmented system. The administrative inefficiencies and inequities that characterize our system would be left in place, and we would continue to waste valuable resources that should be going to patient care instead. In spite of tax subsidies, moderate and lower income individuals would be able to afford only those plans with very modest benefits, and with higher cost sharing that might make health care unaffordable. Instead of perpetuating our current inequities, tax policies should be used to create equity in contributions to a system in which everyone is assured access to comprehensive beneficial services.
If the tax subsidies are granted to individuals, employers would be motivated to drop their coverage, and most individuals covered would have merely rotated from employer coverage to individual coverage. The net reduction in the numbers of uninsured would be close to negligible. If the tax subsidies are granted to employers, a major shift in funding passes from employers to taxpayers without significant improvements in the inefficiencies and inequities of our current system. We can use the tax system to create equity in the way we fund health care, but we should also expect equity and efficiency in allocation of our health care resources. That is possible only if we eliminate the private health plans and establish our own publicly administered system.
Won’t competition be impeded by a universal health care system?
Advocates of the free market approach to health care claim that competition will streamline the costs of health care and make it more efficient. What is overlooked is that competitive activities in health care under a “free market” system have been wasteful and expensive and can be blamed for raising costs. Not only have they NOT contained costs, they have raised costs. In fact it has been shown that in some states where competition among insurers and HMOs is fiercest, such as California, costs are higher than the national average.
There are two main areas where competition exists in health care. Among the providers, and among the payers. When, for example, hospitals compete they often duplicate expensive equipment in order to corner more of the market. This drives up overall medical costs to pay for the equipment. They also waste money on advertising and marketing. The preferred scenario has hospitals coordinating services and cooperating to meet the needs of the public.
Competition among medical care providers can be beneficial in terms of improving the quality of medical care. Take for example, three primary care doctors in a certain area “competing” for patients for which they will receive equal reimbursement from every patient. The doctor who is most competent in different areas will attract the most patients in that area. One doctor may make house calls to see the elderly. Another may be very good at mental health care. This is competition based on quality not on price. Competition among insurers (the payers) is not effective in containing costs either. Rather, it results in competitive practices resorted to by private payers such as avoiding the sick, cherry picking, denial of payment of expensive procedures, marketing, etc.
Why not make people who are Higher Risk pay Higher Premiums?
Experience rated insurance requires higher risk people to pay higher premiums. This approach says that people who have had cancer or other problems in the past, or who have chronic conditions like diabetes and hypertension, must pay more because they are at higher risk of getting cancer again or having a stroke or other health problem. Experience rating allows insurance companies to “cherry pick” the healthiest people and either refuse to insure the sickest or, what amounts to the same thing, charge prohibitively high rates.This approach makes no sense. The whole point of insurance is to spread the risk so that everyone is covered. If you raise premiums – and thereby exclude from coverage – those people unfortunate enough to have been sick in the past, you defeat the point of both insurance and the health care system. Genetic conditions, childhood diseases, accidents, injuries and income distribution (or how much equality there is in a society) play a much bigger role in people’s health than so-called “lifestyle” factors. It costs much less to care for a smoker than a driver who has a paralyzing accident. (Of course, we need public health and education programs to try to prevent both!).
Community rated health insurance is the socially fair approach. It spreads the risks evenly among all the insured. It removes the punitive element. It does not discriminate against the very sick, nor against those of us who are at higher risk because of our age (say, over 50) or our gender (females have higher health expenses in their 20’s and 30’s than men do).
It appears that for what should be a broad social service an insurance-based approach does not work. For it to work at all society is asked to surrender all control of the system and what is left is both discriminatory and unaccountable to anyone. At some point in our lives all of us without exception have needed or will need some level of health care. Health insurance is unlike any other form of insurance. We all are involved in it. It is profoundly intertwined with social principles of decency and fairness. A system that punishes the sick is neither. Any reform of the health care system must begin from a principled approach.
"Of all the forms of inequality, injustice in health care is the most shocking and inhumane." - Martin Luther King, Jr.
Physicians for a National Health Program
Why Single Payer?
Single-payer national health insurance, also known as “Medicare for all,” is a system in which a single public or quasi-public agency organizes health care financing, but the delivery of care remains largely in private hands. Under a single-payer system, all residents of the U.S. would be covered for all medically necessary services, including doctor, hospital, preventive, long-term care, mental health, reproductive health care, dental, vision, prescription drug and medical supply costs.
The program would be funded by the savings obtained from replacing today’s inefficient, profit-oriented, multiple insurance payers with a single streamlined, nonprofit, public payer, and by modest new taxes based on ability to pay. Premiums would disappear; 95 percent of all households would save money. Patients would no longer face financial barriers to care such as co-pays and deductibles, and would regain free choice of doctor and hospital. Doctors would regain autonomy over patient care.
The Expanded and Improved Medicare for All Act, H.R. 676, based on PNHP’s JAMA-published Physicians’ Proposal, would establish an American single-payer health insurance system.
What about Obamacare?
The Affordable Care Act (“Obamacare”) aims to expand coverage to about 30 million Americans by requiring people to buy private insurance policies (partially subsidizing those policies by government payments to private insurers) and by expanding Medicaid. However:
• About 30 million people will still be uninsured in 2023, and tens of millions will remain underinsured.
• Insurers will continue to strip down policies, maintain restrictive networks, limit and deny care, and increase patients’ co-pays, deductibles and other out-of-pocket costs.
• The law preserves our fragmented financing system, making it impossible to control costs.
• The law continues the unfair financing of health care, whereby costs are disproportionately borne by middle- and lower-income Americans and those families facing acute or chronic illness.
This handy chart compares single payer and the ACA.
Ready to take action?
Let Congress know they should support single payer. Click here to send an editable letter in support to your representative.
For other steps you can take in support of single payer, check out our Get Active page.
Over the past two decades, peer-reviewed research by PNHP leaders framed the debate on health care and focused it on the need for fundamental reform. Our proposals detail what a single-payer system in the U.S. could look like.
Further information is available on our Single Payer Resources and FAQ pages.
Physicians for a National Health Program
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© PNHP 2015
Single-payer means that one fund, administered by a non-profit government agency accountable to the public would make payment for all medical services. Period. The 1500 private health insurance companies that currently do this work—each raking in profits for its stockholders and each with its own expensive bureaucracy and complicated policies—would no longer be involved as middle men. Medicare is an example of a single-payer plan.
For an entertaining and informative overview of single-payer, take a look at "WHAT IS SINGLE-PAYER?" an animation created for the general public by Stanford University Medical Student Graham Walker.
Like music with your messages? "PIRATES OF THE HEALTH CARE-IBBEAN," an animation with music by the Austin Lounge Lizards, will tickle your funnybone.
Check out the Physicians for a National Health Program web site (www.pnhp.org). It lays out, point by point, how a national single-payer system would work and explains in clear language why single-payer is the best solution to the health care crisis in America.
Why the US Needs a Single-Payer Health System
by David U. Himmelstein, MD & Steffie Woolhandler, MD
Our pluralistic health care system is giving way to a system run by corporate oligopolies. A single payer reform provides the only realistic alternative.
A few giant firms own or control a growing share of medical practice. The winners in the new medical marketplace are determined by financial clout, not medical quality. The result: three or four hospital chains and managed care plans will soon corner the market, leaving physicians and patients with few options. Doctors who don’t fit in with corporate needs will be shut out, regardless of patient needs.
A single firm - Columbia/HCA - now owns one quarter of all Florida hospitals, and has announced plans to move into Massachusetts. In the past year alone the firm has purchased more than a dozen hospitals in Denver and Chicago, closing unprofitable ones and shutting out unprofitable physicians and patients.
In Minnesota, the most mature managed care market, only three or four plans and three or four hospital chains are left. In many rural areas a single plan dominates the market, presenting patients and physicians with a take it or leave-it choice.
Managed care plans in California, Texas and Washington, DC have “delisted” thousands of physicians - both primary care doctors and specialists - based solely on economic criteria. One Texas physician was featured in Aetna’s newsletter as “Primary Care Physician of the Month”, and thrown out of the plan shortly thereafter when he accumulated high cost patients in his practice.
In Massachusetts, BayState HMO “delisted” hundreds of psychiatrists, instructing their patients to call an 800 number to be assigned a new mental health provider. The for-profit firm running Medicaid’s managed mental health care plan has just informed psychiatrists that many of them will be barred from the plan as a cost cutting measure.
HMOs are racing to take over Medicare, despite evidence that HMOs have actually increased Medicare costs. The managed care plans sign up mainly the healthy elderly, often illegally inquiring about their health history. The physician contracts offered by plans such as Secure Horizons/Tufts virtually exclude small practices as well as academic physicians who practice less than full time. Financial incentives that penalize the primary care physician for every specialty referral, diagnostic test, and hospital visit pit patients against doctors, and specialists against primary care physicians.
HMOs/insurers that can raise massive amounts of capital by selling stock have a decisive advantage. Their deep pockets allow them to mount massive ad campaigns, market nationally to large employers, and set premiums below costs until competitors are driven out. Once they’ve cornered the market they can drive hard bargains with hospitals and doctors. As a result not-for-profit plans across the country are going for-profit (even Blue Cross), and small plans are being taken over. Even the largest physician-owned plans cannot compete with U.S. Healthcare, Prudential and similar firms with multi-billion dollar war chests.
Large drug firms are preparing to directly take over much of specialty care. Merck, Lilly and others are developing “Disease Management” subsidiaries to sub contract with HMOs to care for patients with expensive chronic diseases such as depression, diabetes, asthma and cancer.
A single payer system would save on bureaucracy and investor profits, making more funds available for care.
Private insurers take, on average, 13% of premium dollars for overhead and profit. Overhead/profits are even higher, about 30%, in big managed care plans like U.S. Healthcare. In contrast, overhead consumes less than 2% of funds in the fee-for-service Medicare program, and less than 1% in Canada’s program.
Blue Cross in Massachusetts employs more people to administer coverage for about 2.5 million New Englanders than are employed in all of Canada to administer single payer coverage for 27 million Canadians. In Massachusetts, hospitals spend 25.5% of their revenues on billing and administration. The average Canadian hospital spends less than half as much, because the single payer system obviates the need to determine patient eligibility for services, obtain prior approval, attribute costs and charges to individual patients, and battle with insurers over care and payment.
Physicians in the U.S. face massive bureaucratic costs. The average office-based American doctor employs 1.5 clerical and managerial staff, spends 44% of gross income on overhead, and devotes 134 hours of his/her own time annually to billing2. Canadian physicians employ 0.7 clerical/administrative staff, spend 34% of their gross income for overhead, and trivial amounts of time on billing2 (there’s a single half page form for all patients, or a simple electronic system).
According to U.S. Congress’ General Accounting Office, administrative savings from a single payer reform would total about 10% of overall health spending. These administrative savings, about $100 billion annually, are enough to cover all of the uninsured, and virtually eliminate co-payments, deductibles and exclusions for those who now have inadequate plans - without any increase in total health spending.
The current market-driven system is increasingly compromising quality and access to care.
The number of uninsured has risen rapidly, to 39.7 million nationally [update: This figure is now over 42 million!]. The proportion of people with coverage paid by an employer is dropping, and those with employer-paid coverage face rising out-of-pocket costs. Only massive Medicaid expansions - 10.5 million nationally since 1989 - have averted a much larger increase in the uninsured. Proposals for welfare reform and Medicaid managed care programs would shrink Medicaid enrollment (increasing the number of uninsured) and threaten the quality of care for those left on Medicaid.
U.S. Healthcare and other investor-owned managed care plans are inserting “gag” clauses in physicians’ contracts. Our own U.S. Healthcare contracts forbid physicians to “take any action or make any communication which undermines or could undermine the confidence of enrollees, potential enrollees, their employers, their unions, or the public in U.S. Healthcare or the quality of U.S. Healthcare coverage” and forbids any disclosure of the terms of the contract. Meanwhile, Leonard Abramson, U.S. Healthcare’s CEO, took home $20 million in a single year, and holds company stock valued at $782 million.
Insurers are gutting mental health benefits, denying needed care, cutting payment rates, and insisting on the cheapest - and often not the best - form of therapy.
HMOs have sought to profit from Medicare and Medicaid contracts by providing substandard care, and even perpetrating massive fraud. The largest Medicare HMO, IMC in Florida, induced thousands of the elderly to sign over their Medicare eligibility and then absconded with $200 million in federal funds. Nationwide, Medicare HMOs provide strikingly substandard homecare and rehabilitation to the disabled elderly. Tennessee Medicaid HMOs have failed to pay doctors and hospitals for care.
After 360,000 women and children were enrolled (and $650 million was spent annually), Florida suspended enrollment in its Medicaid HMO program because of flagrant abuses. Administrative costs consumed more than 50% of Medicaid spending in at least 4 Florida HMOs. In one plan that enrolled 48,000 Medicaid recipients, 19% of total Medicaid dollars went for the three owners’ salaries. Thousands of patients were denied vital care; sales reps often illegally pressured healthy people into joining HMOs, while discouraging those who were ill; patient complaints, and inspectors’ findings of substandard care were repeatedly ignored. Overall, a cursory state audit found serious problems at 21 of the 29 HMOs participating in the program. A more extensive evaluation is just beginning. These Florida scandals are a virtual replay of California’s earlier Medicaid HMO experience.
HMO payment incentives increasingly pressure primary care physicians to avoid specialty consultations and diagnostic tests. In this coercive climate, errors of judgment will inevitably occur, denying patients needed specialty care, while specialists are idle. In some areas of the nation (eg. New York City and California) market imperatives have led to growing unemployment of physicians, while huge numbers of patients don’t get adequate care.
Surveys show that patients greatly prefer care in the small-scale, non-institutional practices that are being wiped out in the current system.
A single payer system is better for patients and better for doctors. Canada spends $1000 less per capita on health care than the U.S., but delivers more care and greater choice for patients. Combining the single payer efficiency of Canada’s system with the much higher funding of ours would yield better care than Canada’s or ours at present.
Canadian patients have an unrestricted choice of doctors and hospitals, and Canadian doctors have a wider choice of practice options than U.S. physicians.
Canadians get more doctor visits and procedures, more hospital days, and even more bone marrow, liver and lung transplants than Americans.
While there are waits for a handful of expensive procedures, there is little or no wait for most kinds of care in Canada. An oft-cited survey that alleged huge waiting lists counted every patient with a future appointment as “in a queue.” (The fringe group that conducted the survey also advocates the abolition of the licensing of physicians to open up free competition among “healers”). More legitimate research shows that the average waiting time for knee replacement in Ontario is 8 weeks, as compared to 3 weeks in the U.S. But patient satisfaction levels with the procedure and care are identical. The time from first suspicion to definitive therapy for breast cancer is actually shorter in British Columbia than in Washington State. There are virtually no waits for emergent coronary artery surgery in Canada, though elective cases face delays, particularly with the surgeons held in highest regard. Interestingly, though Canadian MI patients receive substantially fewer invasive diagnostic and therapeutic procedures, death and reinfarction rates are comparable in the two nations. Finally, under a single payer system we would face much less restraint on care than Canada because we spend (and would certainly continue to spend) much more, and have many more specialists and high tech facilities. Hence even the modest limitations on care seen in Canada are unlikely here.
Surgical outcomes for the elderly (all of whom are insured in the U.S.) are, on average, slightly better in Canada.
Surveys show that Canadian doctors are far happier with their system than we are with ours. According to a 1992 poll, 85% prefer their system to ours; 83% rate the care in Canada as very good or excellent, and most physicians would urge their children to enter the profession. Fewer than 300 out of Canada’s 50,000 physicians emigrate to the U.S. each year, and a survey of doctors who have practiced in both nations shows a clear preference for the Canadian system. Medicine has remained an extremely desirable profession; medical school admission is even more competitive in Canada than here.
Surveys show very high patient satisfaction in Canada. 96% prefer their system to ours, and 89% rate care good or excellent (up from 71% 4 years ago).
Canadian physicians’ income are comparable, in most specialties, to those in the U.S., and have kept pace with inflation for the past 25 years.
It is perhaps comforting to know that Canada’s highly regarded and efficiently managed health system is run by a government no more competent nor popular than our own. Their postal service and public railroad system generally receive lower marks than ours; their government’s record on fiscal management is not better than ours; and polls show that Canadians distrust their government even more than we do.
Many of us have negative feelings toward government, and examples of government inefficiency and incompetence abound. Yet the record of private insurers is far worse. Their overhead is, on average, 600% above that of public programs, and no private insurer’s overhead is as low as Medicare’s. Dozens of financial scandals have wracked insurers and HMOs in the past year alone (our personal favorite is the $500,000 travel budget consumed by the head of one Blue Cross plan, including a $7000 junket to Africa to lecture on insurance fraud). Moreover, Medicare treats doctors and patients more respectfully than most private insurers, funds virtually all residency training, and pays Massachusetts hospitals higher rates than do most HMOs. Finally, when a public program misbehaves we have channels to seek redress; we know where Congress meets, and can vote them out. For-profit firms must answer only to their stockholders.
- U.S. Healthcare 1994 Annual Report.
- NEJM 1991; 324:1253.
- NEJM 1993;329:400-3.
- U.S. General Accounting Office. Canadian Health Care: Lessons for the U.S. 1991
- Data from U.S. Census Bureau, Current Population Survey March Supplement.
- U.S. Healthcare primary care physician contract
- Modern Healthcare 5/1/95:60
- Health Care Financing Review 1994;16:187
- Fort Lauderdale Sun Sentinel. Florida’s Medicaid HMOs: Profits from Paiin. 12/11-12/15, 1994 and State Health Watch April, 1995.
- JAMA 1993;270:835
- NEJM 1990;323:884
- NEJM 1993;328:772
- NEJM 1994;331:1063, Ann Int Med 1992;116:507, & OECD Health Database
- Waiting Your Turn. Fraser Institute, 1994
- NEJM 1994;331:1068
- Medical Care 1993;34:264
- Health Affairs 1991;10(3):110
- NEJM 1993;328:779
- Health Affairs, Summer 1992:61
- Toronto Globe and Mail, 10/23/92
- American J Public Health 1993;83:1544
- Medical school application statistics from JAMA medical education issue, multiple years.
- Toronto Star 9/13/93
- NEJM 1990;322:562