'Single Payer' Health Plans Gain Support
By Louis Nuyens

With California and the federal government facing huge budget deficits, government healthcare programs are faltering. There are growing numbers of uninsured, rising private health insurance premiums and deductibles, Bush administration calls for individuals to take up the slack by buying private healthcare insurance, and continued strong criticisms of managed care provided by private companies. A shakedown of government healthcare programs seems inevitable. Partially as a result of these troubles, arguments for a 'single-payer' healthcare system that would provide coverage for all citizens are gaining support.

Two new pieces of 'single-payer' program legislation - a California bill by state Senator Sheila Kuehl ("The Healthcare for All Californians Act," SB921) and a national bill introduced by US Congressman John Conyers ("The United States National Health Insurance Act," HR676) - are offering to cut healthcare costs and cover all citizens without reduction of services.

The Status Quo

Currently, the nation's healthcare is provided through a diverse mix of government programs, government funding made available through private managed care companies, and private healthcare insurance.

About half of all healthcare costs are paid for by taxes. The remainder is covered by employer and employee contributions to private health coverage plans, personal insurance packages, and at-the-counter payments. On average, over $5,000 is spent on healthcare, per year, per American. Overall, most of that money is administered by private healthcare management organizations (HMOs) that typically spend 10-30%, sometimes even more, on administrative costs, marketing, and profits. Still more is lost along the way before reaching the actual care providers.

According to Marcia Angell, former editor in chief of the New England Journal of Medicine and senior lecturer at Harvard Medical School, "As much as half the health-care dollar never reaches doctors and hospitals - who themselves face high overhead costs in dealing with multiple insurers." Hospital overhead also includes property and equipment costs, internal administrative costs, supplies, salary and benefits packages, and information management and subscription costs. By way of comparison, the Medicare program operates with only about 3% in administrative costs.

The for-profit HMO, as a general social phenomenon, has earned an infamous reputation with the general public. Private HMOs are essentially profit-seeking ventures which treat healthcare as a commodity. HMOs typically employ lawyers, disease-management and utilization-review consultants and analysts whose work is geared to optimize the profits of the HMO, including by limiting the amount of care actually provided to patients. HMOs often discourage physicians from prescribing care options that are deemed to be less profitable, leading to instances in which care even desperately needed by patients is often not offered, as has been demonstrated in numerous reports, studies and legal actions.

Meanwhile, many people are not covered at all. About 20% of Californians (about 7 million) have no medical coverage. With unemployment rising, the number of uninsured is increasing; in September 2002, the Census Bureau reported that nearly 1.5 million lost their insurance in 2001, nationwide. While private healthcare insurers are interested only in paying customers, the costs of uninsured weigh heavy on the nation: as uninsured individuals often take simple conditions to emergency rooms or forego preventative healthcare and end up requiring more expensive care as a result.

Finally, any time that the economy is in trouble, as it is at present, more restrictive coverage caps on healthcare benefits can be expected of employers, reducing the coverage to those whose healthcare insurance is through their workplace.

Forty-two million Americans are uninsured; another 40 million are said to be under-insured. The US is the only developed nation (the only nation in NATO and the international Organization for Economic Cooperation and Development (OECD)) that does not guarantee healthcare to all of its citizens.

The Studies

Universal health care proposals have been around for over fifty years. Single-payer proposals have been presented, albeit unsuccessfully, and gaining in sophistication for at least twenty years.

Until recently, arguments have been based on anecdotes and 'common sense.' Faced with the resistance and nay-saying of major healthcare companies, single-payer proponents had difficulty obtaining funding to evaluate in adequate detail something as complex as the results of such a large-scale change to the healthcare insurance market.

Within the last couple of years, authoritative studies have been conducted, and the results are in favor of single-payer plans.

In particular, in December of 1999, the California legislature requested the Senate Office of Research to assemble the Universal Health Care Technical Advisory Committee (UHCTAC) to identify, model and analyze alternate approaches to health care, that would, "...explicitly focus on a variety of policy approaches, including those that do not necessarily aim for, or guarantee, universal coverage."

Nine different approaches were selected and evaluated by a company who won the competitive bid. Three of the plans were single-payer plans, universal in scope (covered every citizen in California), expanded benefits beyond those of any HMO, and saved from $4 billion to $7 billion per year, over what is now spent on health care, through bulk purchasing of supplies, equipment, and pharmaceuticals, and administrative streamlining.

New 'Single-Payer' Legislation

One of the challenges for promoting a single-payer system is that the phrase spans a wide variety of possibilities. There have even been proposals made by for-profit managed care organizations labeled as "single-payer," possibly in an apparent attempt to co-opt that term.

A general definition of a 'single-payer' healthcare system is one in which the financing of health care expenditures is made through a single source, usually the government, with funds collected through taxation of citizens and/or businesses. A single-payer system may or may not cover all citizens; it may or may not mean a socialist system, implying that the government owns all hospital facilities and employs all employees within the system.

The degree to which a single-payer system might be beneficial is tied up in a host of detailed specifics. However, at this point, studies are indicating clear and compelling benefits to scenarios within the single-payer spectrum. According to Sen. Kuehl, "Where we used to talk about whether we should attempt universal health care, the argument seems to have shifted to how we can accomplish it."

The bills introduced by Kuehl and Conyers are not socialized medicine. Each creates a government-based healthcare insurance program; but private physicians, hospitals and care provider companies, in free-market competition for customers, would provide actual care. Private insurance is not prohibited, although most health care needs would be covered by the plans. Even HMOs could participate, provided they meet best-practices standards. Neither plan is a duplicate of any other nation's existing healthcare plan.

The Kuehl Plan for California

SB 921 would create a statewide healthcare system covering all Californians based on residency. Coverage would include most common forms of routine and acute care; the most notable exception is long-term care, however, the California UHCTAC study indicated that the plan could cover long-term care and still result in net savings, so that might be added later. The legislation is designed to ensure that no one would lose benefits they currently have now - hundreds of benefits packages are being compared to the benefits of the bill, and Kuehl promises that the bill will be adjusted, as needed, with this goal in mind..

According to a fact sheet produced by Kuehl's office, the plan involves no new spending. This is not entirely accurate - it would be more accurate to say that the plan results in net savings. Funding would come from, "a low percentage tax on all employers, employees, the self-employed and recipients of unearned income, as well as a small tax on tobacco products and alcohol." It is estimated that nearly all employees would see a clear reduction in health costs at the same time that benefits are extended to all residents, provide more care options to all residents, and provide greater coverage for nearly all residents.

Also, according to Kuehl's office, physicians and other care providers would be far more free to prescribe and give the care needed rather than the care that is most cost-effective. The program would be implemented over a two-year transition period.

The Conyers Plan for the United States

Under the tag line, "Expanded & Improved Medicare For All Bill," HR 676 would create a publicly financed, privately-delivered single-payer health care program that uses the already existing Medicare program.

According to an executive summary of the bill provided by Conyers' office, "In its first year, single-payer will save over $150 billion on paperwork and $50 billion by using rational bulk purchasing of medications. These savings are more than enough to cover all the uninsured, improve coverage for everyone else, including medication coverage and long-term care. É Seniors and younger people will all have the comprehensive medication coverage they need.

"Employers who currently provide coverage for their employees pay an average of 8.5% of payroll towards health coverage, while many employers can't afford to provide coverage at all. Under this Act, all employers will pay a modest 3.3% payroll tax per employee, while eliminating their payments towards private health plans. The average cost to an employer for an employee earning $35,000 per year will be reduced to $1,155, less than $100 per month."

Private health insurers would be prohibited from selling coverage that duplicates USNHI program. benefits, but not packages of complementary benefits.

The conversion to a not-for-profit health care system would take place over 15 years, funded through the sale of US treasury bonds; payment to existing private health insurers would not be made for loss of business profits, but only for real estate, buildings, and equipment.

Other Plans That Merit Review

At least two other California bills merit consideration. Senators Burton and Speier have each developed so-called "pay-or-play" legislation, in which most or all employers would be required to provide medical benefits or pay taxes toward creation and/or operation of a publicly subsidized plan.

The Bottom Line

There is no longer much of a question about whether US healthcare systems are in need of innovative reform; the only question is how to best accomplish it.

For-profit healthcare insurers and providers, politicians, and others, will each have their own particular 'angles.' Many important specifics are yet to be resolved in each of the current plans.

The responsibility of ensuring that the result of reform provides substantial, lasting benefit to US residents lies with and will require the participation of US residents, in their own interest.