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In the last couple of days, my thoughts have turned to the question of how much Medicare for All legislation could save compared to the present non-system of health insurance. One estimate of the savings we often see in articles on Medicare for All is $350-400 billion annually. This a substantial amount and over 10 years might amount to over $4 trillion. However, I think it may reflect a serious underestimate. In this post, I’ll discuss five categories of savings and talk about the difficulties involved on pinning down good estimates. I’ll also come up with some wild-assed guesses (WAGs). I don’t think these will are very reliable, but they may be better than ignoring a category of savings entirely and arriving at a total savings estimate that’s a gross under-estimate. Also, I’m asking Firedogs who read this post to critique my estimates and contribute whatever they can to refining them. I’d like a real community effort here, to get as close as we can to the truth about this issue. In particular, I ask Scarecrow, hipparchia, ralphbon, Hugh, wesgpc, libbyliberal, masslib, selise, kip sullivan, Valley Girl, NathanAschbacher, HealthSustainomics, blub, lambertsrether, Ian Welsh, jon walker, and montanamaven, along with anyone else who’s been reading and writing about the issue of savings that might be expected from Medicare for All, or who sees a flaw in the estimates we’re coming up with, for help with this.
I see 5 categories of immediate savings from Medicare for All: 1) savings on Administration and profit elimination, 2) savings from reduction in volume of emergency room care, 3) savings in provider reimbursement, 4) savings in pharmaceutical costs and 5) savings from elimination of Medicare Advantage programs. Of course, a big source of potential error in this discussion is my overlooking a category of savings. So anyone who can suggest another category will immediately have a big impact on this analysis. Let’s now examine each of the categories of potential savings.
The estimate of $350 – $450 billion in annual savings from lower overhead charges and elimination of profits comes from a study by Steffie Woolhandler and David Himmelstein, published in 2003, but using 1999 data. They compared this category of costs in the United States and Canada and found that the United States’s Administrative costs exceeded Canada’s by 15.6% of total national health expenditures. When that percentage is multiplied by a 2009 forecast of National Health Expenditures (NHE) of “$2.5-2.6 trillion; 15.6% of that would be $390-405 billion.”
There other ways to estimate this category of savings, however. The combination of Administrative Costs and profit margins in private health insurance is about 30% of its premium revenue, while Medicare’s Administrative costs are evidently about 2.5% its expenditures. So, theoretically, there should be a 27.5% savings there if we assume that Medicare provides all insurance for essential care and spends. Recently, the Kaiser Family Foundation released the results of a study which found that the average premium cost health insurance provided by one’s employer is $13,375 per family, and $4824 for individuals. Not having easy access to the number of family and individual policies issued, I assume that the average premium per covered individual across both types of policies is roughly, $4483. From recent census data for 2008, I estimated that roughly 168,000,000 are getting their insurance from private companies alone. The product of these last two numbers estimates private insurance company revenue in 2008 at about $752,000,000,000. This is an under-estimate because it doesn’t include people who have Government insurance, but also buy private insurance supplements. From the census data, I estimated that there are roughly, 33,257,000 with joint coverage, but I’m not at all clear on how to estimate the amount of revenue generated this way, or the overhead/profit margins involved. So, perhaps someone else can help with a better estimate of this. In any event, using the $752,000,000,000 and multiplying by 0. 275, we get $207 billion in Medicare for All Savings rather than $400 billion. Even adding in revenue from the 33 million or so who have supplemental private insurance, it seems doubtful that this estimate would get anywhere near $400 billion. This makes me uncomfortable because it’s nowhere near the Woolhandler – Himmelstein estimate, so I’d appreciate learning about the flaws in this alternative estimate, if someone has some comments on it.
Moving to the second category, many have made the point that health care providers pass through the cost of treating the uninsured in emergency rooms to insurers, both private and Government, and also that the amount passed through is $1100 per insured person annually. The total of insured persons, both in the private and Government-insured categories, was roughly, 255,000,000 in 2008. So, the total expenditures passed through by providers is about $281 billion annually. If Medicare for All were covering everyone, these emergency room expenditures for routine care of the uninsured would be saved.
Savings in provider reimbursement arise because Medicare has lower reimbursement rates than private insurance companies. For our purposes here, I’ll use a multiplier of 80% of private sector rates after overhead and profit are subtracted from premiums. This translates to $109 billion in savings we can expect from Medicare for All.
Americans currently spend roughly $250 billion per year on prescription drugs. These drugs cost about 40% less in Canada than they do here. This suggests that if a Medicare for All program negotiated with the pharmaceutical companies it might save $100,000,000 per year.
Lastly, the Medicare Advantage program is said to cost Medicare $150 billion in subsidies for private insurers annually. Passing Medicare for All would save this expense.
Admittedly, the above savings estimates are rough and open to criticism. The question I’m raising here, however, is whether they’re in the ballpark? If so, savings to be expected from passing Medicare for All total roughly $846 billion annually, and not $400 billion. Also, if my reasoning about the first category of savings is wrong and the Woolhandler-Himmelstein-derived estimate still applies, then the savings that might be expected from Medicare for All would be more than $1.040 trillion annually. Even if the first of these estimates for total savings is correct, Medicare for all could be expected to reduce health care expenditures as a percent of GDP from 17.8% to 11.7% as soon as it was implemented.
Finally, what I’m trying to do with this analysis is to show that the impact on savings if we implement Medicare for All is much greater than many of us previously thought, and that, provided the analysis is correct in outline, if not in every detail, the expected impact of implementing it is so great that there really is no other reasonable alternative to it that Congress is now considering. I don’t know if I’ve really made that case successfully, but I leave it to you to deconstruct or reconstruct my thinking, and then we”ll know better.
(Also posted at the Alllifeisproblemsolving blog where there may be more comments)
76 Comments
So You want Medicare for all, Ha. I just went on medicare and have been bombarded by every insurance company in America. You need a suppliment and have to sign up for part D. My self paid health insurance plan I dropped for Medicare, gave Me more and Cheaper than what I have with Medicare. It actually P####S me off that I have to deal with any insurance company with Medicare. Medicare is just a shill for the insurance industry, under the guise of Government Healthcare. I saw a company refuse to give my mother a MRI the doctor ordered saying Medicare wouldn’t pay for it, but before they refused they took her medicare card. She found out on her medicare statement they billed, and medicare paid for that MRI she didn’t get.
One could make the argument that until the Republicans decided to “fix” it, medicare wasn’t broken. Cleaning up their mess is what we should be doing. But what Republicans couldn’t destroy, the Blue Dogs are determined to ruin.
letsgetitdone writes 3000 words with actual national figures, and all you have are some paltry anecdotes?
Hi spork, Was it that long? I tried to keep it short and pretty simple. It is funny though, that I sketch out an argument explaining how to save at least $856 Billion per year, $8.56 trillion over 10 years, and I get a reply that focuses on faults in Medicare that have nothing to do with my proposal, and that were introduced by the very people who are currently busy crafting the incredibly expensive Baucus giveaway that will do very little if, anything, to solve either private or public sector problems with rapidly increasing costs. No wonder it’s so difficult to get Medicare for All passed. People react to words and phrases blindly and won’t focus on the big picture related to a proposal. So, iremember54, pay attention, If the details I’ve sketched out are largely correct, I’ve laid out a solution to health insurance reform which cuts costs enough to allow us to easily fund universal coverage as well as an end to the major abuses of the private health insurance industry. It’s fine to criticize it. I’m looking for criticism, but please show me the error of my ways in the savings I’ve laid out. That would be a contribution to this discussion.
iremember54, HR 676, the enhanced Medicare for All bill introduced by John Conyers and Dennis Kucinich will eliminate the problems you’ve mentioned, and also the Medicare Advantage program you’re complaining about. Btw, that program was introduced by Republicans under the second Bush 43 as part of a massive giveaway to private business. If you don’t like it you know who to blame. It ain’t Medicare in principle and it’s not the people who are currently in back of the HR 676.
As a retiree on Medicare who very much wants universal health care, I do have a question about HR 676. Would enhanced Medicare cover things Medicare does not now cover–e.g., essential health needs like annual physical exams, dental care, eyeglasses, hearing aids? If not, don’t we need to be working for a single payer system such as England has, or, better yet, France? It is true that Medicare recipients now need supplementary insurance, and those secondary carriers are just as good at denying payment as they are as primary carriers.
Though of course it’s much better than what many, many Americans get–or don’t get–through private insurers, it needs to be remembered that the Medicare we have now is not a panacea.
Would enhanced Medicare cover things Medicare does not now cover–e.g., essential health needs like annual physical exams, dental care, eyeglasses, hearing aids?
short answer: yes.
hr 676 has all those, plus mental health, anything that your doctor says is essential medical care. stuff like hair implants and tummy tucks would be considered non-essential and you would have to buy extra insurance or pay your own money for those things.
slightly longer answer: if hr 676 were seriously being considered, no doubt various politicians would try to gut parts of it and we could possibly end up with it not covering quite everything.
I’d always thought that the way to win over bubbas in Jesusland to socialized medicine was to cover breast and penis enlargements as well as liposuction.
lol!
you’d be surprised though. i live in strongly jesusized bubbaland, and i know some ultra-conservatives here who are seriously considering emigrating to countries with fully-socialized medicine, just for the health care.
The other selling point would be that we’d force former insurance executives and actuaries to take their socialized medicine in large, impersonal wards.
Remember, the business model of financialization is to intermediate every transaction through the nexus of finance, insurance or real estate, irrespective of whether that intermediation produces value for the transactors.
marcos, I seriously doubt that. I think that we’re looking at semi-private rooms, and that they might even be able to get supplementary insurance to upgrade to private rooms. Remember, Medicare for All is not socialized medicine, only socialized insurance.
Just scaring them like they’re trying to scare us.
Just getting Medicare for All back on the table will scare the bejesus out of them. If they thought it had a chance of passing they’d agree to anything short of HR 676, so they could make big money for a few more years. From a progressive negotiating point of view, the current bills coming out of Congressional committees were really dumb. They gave up almost everything to begin with and ensured that progressives would be reduced to fighting for crumbs.
However, we can cross that bridge when we come to it. The first bridge to cross is the one over the massive gap of getting it on the table in the current climate. By making the case here that so much in savings are involved, I’d hoped to get a meme spread around that might catch fire and cause people in Congress to take another look, or look like total fools.
Here’s a link to HR 676. It’s only 30 pages. Easy to read and understand. It covers all the things you listed. See p. 5. It along with Bernie Sanders’ S703 area by the far the best bills out there to solve the health insurance problem. If both were passed we could then get to work on reforming health care quality, an entirely different matter.
Your estimate seems very conservative.
Each year, the U.S. spends 17% of its $14 trillion GDP (i.e., $2.4 trillion) on health care. If we decreased that by $400 billion to $2.0 trillion, we would still be spending 14% of our GDP on healthcare, which is very high in comparison to the other developed (OECD) countries, all of whom spend about 10% of their GDP on health care.
Hi wigwam. Right, but I’m claiming that passing Medicare for All would save at least $856 Billion and would bring expenditures down to $1.64 trillion or 11.7% of GDP. Is this still too conservative? Are there even more savings to be expected?
Isn’t HR 676 going to get a CBO score in the House sometime soon? You may find out then…
Hi Jason, Don’t know. Are they being forced to finally score if it comes up for a vote? Even if they do score it however, their focus on the savings will be strictly budgetary, won’t it? They won’t view it as savings if the bill lifts the premium burden from people, and substitutes for it a tax burden that is much less, will they? More generally, will the scoring include estimates of the social and economic impact of HR 676? I doubt it.
That’s right, they’ll CBO score it for the vote, or so says Ezra.
As for the full impact, no, you’re probably right, the CBO misses a ton of savings in all the bills we’ve been discussing. But we will get impact on the budget, number of people covered, etc…
the CBO misses a ton of savings in all the bills we’ve been discussing
some of those savings are from ideas that are still purely theoretical, and some are from ideas that have been tried and
that have not been shown to be not as great as touted.eek, grammar…
some of the ideas that look good on paper have been tried in actual practice and while sometimes raising quality, have not saved nearly as much money as their proponents thought they would.
Thanks, we need to be ready to try to fill in impacts that go beyond their scoring since it will certainly be biased towards calculatingg budgetary costs rather than system-wide savings and benefits.
As you point out, CBO scoring looks at the impact on the federal budget but doesn’t account for savings accruing to employer, employee, state and local budgets and most importantly, total GDP spending. That’s a big problem for HR 676, especially with its (to my mind at least) extraneous elements like severance pay for health insurance employees and the conversion of for-profit hospitals to non-profits.
Since Weiner has one shot with his promised House vote, I’ve read he may substitute another ‘Medicare for Everyone’ bill that would be easier to pass muster with the CBO. I’d note that efficiency savings and shifting current federal health spending only get you so far. The big question is where to get the extra money without imposing an intolerably high mandate tax on everyone.
On a couple of blogs, I’ve read that Weiner has talked to Dingell about modifying his decades old HR 15 proposal (funded via a 5% VAT tax). But he has a couple of other options– Dingell and Kennedy introduced identical “Medicare for All” bills last Congress that would give citizens a choice between Medicare and the federal employee plan (funded by 1.7% tax on employees, 7% tax on employers). There’s also Pete Stark’s Americare bill– yes the name sucks, stick with “Medicare”– that’s been called the “public option on steroids”. Its funded by encouraging employers to shift the $800 billion in premiums they pay now from private insurers to Americare.
That is very clever, Stark’s plan would bring up to $800 billion (unclear how many employers would stick to private insurance) in new funding onto the federal budget without raising taxes.
“The big question is where to get the extra money without imposing an intolerably high mandate tax on everyone.”
The answer is by eliminating the need for employers to pay for insurance, transferring those dollars to wages, and then taxing for Medicare at a rate lower than most all insurance premiums. Healthcare finance becomes a relationship between the worker and government rather than between worker and employer.
Yes, and I think that HR 676 provides for that.
On a couple of blogs, I’ve read that Weiner has talked to Dingell about modifying his decades old HR 15 proposal (funded via a 5% VAT tax). But he has a couple of other options– Dingell and Kennedy introduced identical “Medicare for All” bills last Congress that would give citizens a choice between Medicare and the federal employee plan (funded by 1.7% tax on employees, 7% tax on employers). There’s also Pete Stark’s Americare bill– yes the name sucks, stick with “Medicare”– that’s been called the “public option on steroids”. Its funded by encouraging employers to shift the $800 billion in premiums they pay now from private insurers to Americare.
yes, i suspect we’ll get something other than hr 676 offered as a substitute for hr 3200, which would be a shame really.
Well, let’s make a lot of noise in support of HR 676. I’m persuaded that if the American people knew everything that is in it, they would love it. It makes our present Medicare system look sick. It’s civilized.
Well, let’s make a lot of noise in support of HR 676. I’m persuaded that if the American people knew everything that is in it, they would love it. It makes our present Medicare system look sick. It’s civilized.
oh, i do!
when i talk to people in person, i don’t have much trouble at all convincing them that an improved medicare-for-all would be a waaaaaay better deal than what they’re getting now.
I’ll stick with HR 676. I think it’s important to get off the backs of employers and fund this from Medicare for All Tax revenue. I like the provision for this in the bill now.
Are they being forced to finally score if it comes up for a vote?
that’s my understanding. apparently, any politician can ask for any bill to be scored, at any time, but that this is not normally done unless a bill is actually likely to be voted on. scoring every single possible any congresscritter ever introduces would take too many people too long and we’d never get anything done.
although one could argue that if we’d never gotten around to actually invading iraq and afghanistan, that ‘doing nothing’ isn’t an entirely bad state….
but back on topic, yes it’s likely to get a score, rather than a full analysis, so it will look hugely expensive, requiring us to raise taxes. many blue dogs and all republicans will faint dead away at the possibility of even voting for such a bill, but a ‘bad’ cbo score is not necessarily a dealbreaker for liberals if it can be shown to ultimately benefit the people. a full analysis would show this [small increase in taxes + huge reduction in premiums etc = overall less money coming out of voters’ pockets].
they’re unlikely to get a full analysis out of cbo at this late date [time-consuming process], but past single payer bills have had full cbo studies done and it shouldn’t be too hard to extrapolate from them to present-day spending. the cna study you linked to would further bolster the economic case for breaking the stranglehold that the insurance industry has on other businesses and this could engender their support.
a few smart congresscritters could take this stuff and run with it. anthony weiner is by no means a radical lefty, he’s very middle of the road compared to the population as a whole [which of course puts him rather far left in congress]. the intertoobz inform me that eric massa was once a moderate republican but split with that party over the war. give these two guys a little bit of economic ammunition and a lot of vocal public support, and they could go a long way.
I agree. I know Weiner’s not radical, he’s just a relatively young New Yorker, which means he’s not afraid of Government-led solutions to social problems.
A few thoughts on this good piece:
Many people are employed with the health insurance apparatus. Where are they going to work if the insurers are bypassed? Not a show stopper for going around the insurance scammers by any means, but these are working people who should not be thrown into poverty because they happened to work for the wrong industry. There should at least be a transition program with job retraining provided for them.
Local and state governments would see much of their health related expenditures absolved if financing were to come from the government via a Medicare program, and that would save money in a distributed manner that is difficult to quantify.
We would also see health components removed from liability insurance, auto, home, etc, which would lower premiums.
The impacts on the labor market cannot be underestimated. Removing one barrier to labor mobility would allow working people to change jobs without fear of losing health care. Wages would rise, some of that increase would be consumed by Medicare for all taxes, but that would free employers of the burdens of providing health insurance coverage.
Yes, the deficit is important, but if money is shifted at the level of the state, locality, firm and individual from feeding the Wall Street insurance monster back into the pockets of average Americans, then those dollars would probably find their way from the financial economy into the productive economy which would repurpose them from the realm of free market fantasy into that of demand which would stimulate production, which would generate more taxes.
The individual mandate is meaningless so long as insurers pool profits rather than pool risk.
Thanks marcos, I couldn’t address the social and economic impact here, but here’s an interesting analysis from the California Nurses Association. It claims 2.6 million jobs would be created. About 450,000 jobs are provided by the insurance industry now. Not all of those would go away. Also, there would be new jobs created in the Government to handle the great expansion of Medicare. Of course, the higher-level insurance executives, financing people, insurance investigators, legal people, and claims processors who specialized in deciding whether claims would be honored or policies rescinded would be without jobs. A little bit of rough justice, I think. On the other hand, maybe they’d be able to sleep again at night. -:)
gmta!
the pnhp estimate is most likely a middling-to-conservative one, and is probably about what we’d save if we just extended our current medicare system to everyone, since we’d still have most of the population having to buy — and use — medigap-type insurance, much like canada’s system [the one used for comparison in their study]. the insurance companies would be reduced in power, thus reducing the administrative burden they now place on doctors and hospitals, but they’d still be in the mix, and they’d still be contributing to the complexity. extra bureaucratic layers are sometimes useful, but they are almost always more expensive than they need to be.
the important point about that study is that it’s an estimate of TOTAL administrative costs in the medical system, not just the overhead of the insurance companies. the insurance companies have an army of actuaries to figure out who to insure [or not insure] and an army of clerks and customer service reps and all their managers to delay and deny payments. in return, battling with the insurance companies to get paid requires each doctor’s office and each clinic and and each hospital to hire their own armies of clerks and managers. the inference is that these armies, in conducting their own private never-ending war, are draining ~$400 billion out of everyone’s collective pockets.
YThanks hipparchia, but what specifically is wrong with my calculation coming up with only a fraction of the 400 B in savings in category one?
nothing wrong at all!
it’s just that i went off to find some numbers to crunch per your homework assignment :-) and got distracted so i haven’t made it back here yet.
overall, i think a realistic politically feasible estimate is that:
1. first we’ll cut out the $400 billion from administrative waste and spend it instead on ‘catch-up’ care for the uninsured. no real savings the first year or two, maybe 5 years.
2. we can’t lower our spending below a floor of about 14-15% of gdp in the next few [several?] years after that. part of this is that for-profit hospitals are slated to be converted to non-profit over a period of 15 years in hr 676, and as long as they exist in the system, they’ll be driving the non-profits to act like for-profits, just as they are now. we can start curbing some of that immediately, since hr 676 would switch hospitals to global budgeting right away, but i’m thinking those global budgets are going to start off at near what’s being spent now, and only gradually be reduced over time. i could be wrong about this, i’m partly swagging it [the s is for either scientific or silly, depending on who you ask] based on what [little] i know of the inner workings of large corporations and their interactions with competitors, with business partners, and with regulatory bodies.
3. some miscellaneous legacy stuff… we have a lot of expensive technology and we’re not going to stop using it. i’ve been reading up on mri machines, just for fun — those are some expensive puppies: to buy, to maintain, to operate. we could get by with fewer than we have, but we’re not really going to sell the extras on ebay. doctors’ takehome pay isn’t going to go down appreciably without a cultural change, and my guess is that would take probably the span of a generation. other stuff, but the list is long; suffice to say that one person’s price cut is another person’s pay cut.
my inner pessimist says we would hold spending at the present %gdp for a decade or two. my inner political realist says we can achieve lowering it to ~14% of gdp. my inner mathematician and idealist says we can provide absolutely fabulous, generous, all-you-could-ever-want care, accompanied by much publicly-sponsored basic and applied research, for 10-11% of gdp with a fully-socialized national health service, or for 12-13% with national health insurance.
ok, i wrote all that and realized i could probably have summed it up thusly:
1. removing the financial leeches from the system frees up an immediate $400 billion to be spent on care, instead of spending it on make-work and corporate welfare.
2. all other reductions in spending rely almost completely on just how big a pay cut you can persuade the rest of the actors — doctors, hospitals, drug companies, device manufacturers, etc — to take.
Right. But what if provider rates under Medicare remain the same as they are now, and the providers have no place else to go? After all, they can’t migrate to Canada the way some Canadian Doctors did when Medicare went in there. Even at current Medicare Rates, Doctors will do a lot better here than they do in other western nations.
Great comment hipparchia. But, we’re spending 2.5 trillion now. The savings in the five categories I listed total 856B, bringing our expenditures down to 1.64 trillion or 11.7% of GDP. All the assumptions in back of the calculations are laid out. So, back to my question. What’s wrong with them? If nothing then why can’t the savings be realized as soon as HR 676 is implemented?
Thanks hipparchia, but what specifically is wrong with my calculation coming up with only a fraction of the 400 B in savings in category one?
[argh, i hate doing math with keyboards…]
your calculation isn’t wrong, so much as some of the numbers we need are, right now, unknowable.
let’s suppose that medicare pays $100 for [x], where [x] can be some basic widget of health care. let’s further suppose that medicare’s overhead is ~3%. so medicare has to take in $103 in taxes/premiums to pay the dr or hospital or pharmacy $100 for [x].
private insurers don’t have to share their data with anybody so here’s where a lot of the unknowable comes in. it is prevalently quoted throughout the blogosphere that private insurance pays somewhere between 5% more and 40% more than does medicare for [x]. it’s also widely quoted that private insurance spends only ~80% of the premiums it takes in on medical care and keeps the other 20% for itself.
let’s assume that medicare pays $100 for [x] and private insurance pays 40% more for that same [x]. if we pay for that [x] through medicare, we’d need to take in, in taxes or premiums, $103 per [x]. if we pay for that [x] through our hypothetical insurance corp, it needs to take in $175 in premiums, because it’s going to pay $140 for that [x] and that $140 is only 4/5 of what it’s going to take in [because it’s going to keep the other 1/5 for itself].
we’re rapidly approaching ‘private insurance costs double what medicare costs‘ territory here, if that 40% estimate is accurate. from the nhe data [table 3], private insurance paid for ~$775 billion of health care in 2007, cut that $775 in half and there’s most of your $350-400 billion right there. a little more conservatively, you could say that private insurance costs 1.5 times more than medicare, so your savings from removing the insurance corps would only amount to ~$250 billion and the other $100-150 billion has to come from somewhere else.
is the 40% estimate accurate? really hard to say, just for a blogger sitting at the dining room table, but here’s uwe reinhardt, a health care economist, with some revealing insights, if not exactly complete data:
insurance corp A, in new jersey, pays anywhere from ___ to ___ for ___:
$2,200 – 3,600 for delivery of a baby
$26,000 – 45,000 for coronary bypass
$2,700 – 4,200 for appendectomy
$3,300 – 5,800 for hip replacement
insurance corp B, in california, pays anywhere from ___ to ___ for ___:
$1,800 – 14,000 for appendectomy
$33,000 – 100,000 for bypass
i wish he had provided data for what medicare
chargespays for those services in those markets, and (2) whether the highest and lowest price extremes are common or rare, but he didn’t. the 40% is probably a high estimate, but still, you can see that there are cases where private insurers are probably paying way more than medicare does for any given [x].also, this is much of the reason why the ‘but insurance companies only make 3% profit!‘ argument is silly, yet you’ll see various bloggers pushing it as the reason for not getting rid of insurance companies.
Thanks for your comment hipparchia. It suggests that my broad claims about savings may be in the ballpark. And also that I may well have under-estimated the savings in category 1. If these are $400B the percent of GDP for NHE would fall to 10.4%
the one thing i want single payer advocates to keep in mind is that we’d very possibly follow the path of canada, since their system was almost exactly like ours back in the 1960s and we would be switching to a system very like theirs if we go with hr 676.
it’s an ugly graph [i didn’t draw it, i stole it from somebody else’s blog] but basically canada and the us were both spending about 7% of their gdp on health care 40+ years ago. canada got their medicare fully implemented in 1970[?] and their health care spending plateaued at about 7% for about the next decade, after which spending rose, but more slowly than it had before. this is btw what obama and everybody else are talking about when they talk about ‘bending the cost curve’ — canada bent theirs in 1970, we’d be bending ours 40 years later.
politically, you can make a case for throwing the insurance companies out [or marginalizing them into near-oblivion] because not only are they not adding any value, they are taking our money and outright killing people. it will be a huge fight to push them out of the position they’ve got in the system, but it’s doable. insurance companies can threaten to drop patients, but most people see medicare as a reliable and dependable refuge to escape to in that case, so it will be more difficult to scare the public on this point.
everybody else otoh contributes something essential, even though most of them are indulging in price gouging, many to an egregious extent. you can trim some of this with more negotiation of drug prices, and with global budgeting for hospitals, and you may even convince physicians to take a [probably small] cut in pay in exchange for the resulting increase in autonomy over medical decisions [the insurance companies intrude into medical decision-making far more than medicare does]. if any of these entities feels threatened though, it will be easy for them to scare the voting public with counter-threats of ‘going galt’ because most of us see doctors and hospitals and wonder drugs as irreplaceable.
yes, mathematically and logically, the potential for huge savings is there, and i would dearly love to be able to sell hr676 using these points. politically, though, we’ll be doing good to drop our spending from 16% of gdp [the present 17% is really an aberration, because health care spending is rising, while the sucky economy is not] down to ~15% of gdp and holding there for several years. dropping to 14% has an outside chance of happening, but i’m not going to hold my breath.
Thanks for your comments. But sensible and reasonable as they are they don’t really address my calculations or my assumptions. I’ve not proposed that providers get paid any less from Medicare than they get today. All the savings I’ve calculated are based on current rates and only assume the elimination of private insurance in essential health care. Of course, if providers must accept Medicare rates it will change their profit picture; but I don’t find the threat of going Galt credible. In fact, I think it’s nonsense, because even medicare rates exceed the reimbursement they would get in other systems. The truth is that for-profit capitalism is dead in medical care in every other majoe industrial country but this one. The medical community will adjust to this change, and its institutions will survive, and young Doctors will be much happier practicing medicine under Medicare for All, than they are now.
I think that the larger constituency a program like Medicare has, the greater the political pressure to make the system work for people. Seniors are quite powerful politically, but were unable to overcome pharma on the donut hole. Perhaps with an even broader constituency, one that is actively paying tax/premiums for health care, we can overcome corporate dominance of the political process.
By siding with pharma and insurance, electeds are playing with seriously dangerous fire, given the sustained super majority support amongst the public for guvmint administration of health care finance. Given campaign contribution limits, it is astounding that a few hundred thousand from a corporation could possibly be more attractive than the millions possible from delivering lower cost, high quality health care to everyone.
I think that the larger constituency a program like Medicare has, the greater the political pressure to make the system work for people. Seniors are quite powerful politically, but were unable to overcome pharma on the donut hole. Perhaps with an even broader constituency, one that is actively paying tax/premiums for health care, we can overcome corporate dominance of the political process.
yep.
this is the part of everybody in, nobody out that the corporations don’t want the people to realize.
It’s not about a few hundred thousand from one corporation; it’s about siding with people who spend billions over the course of one’s career. Mike Lux has a good piece about that.
The CBO chief honcho, Douglas Elmendorf, averred that Medicare for all would be the least expensive:
The last two sentences seem innocuous given the fact that Medicare is a going concern in the government. It has indeed been corrupted by the prevous administration and therein lies the problem: How to insure that this gets fixed and that such assaults are prevented in the future?
The confuse-a-cat foghorns have managed to convince the elderly Obama is eliminating their medicare coverage and socializing their medical insurance. Obama should just ignore all this ridiculous claptrap and get on with real reform as opposed to the cosmetic version now in vogue (or en vogue).
Thanks alank. Elmendorf hasn’t been too friendly to HR 3200. I’ve suspected this was the case because he actually thinks that HR 676 is a better solution. I also think that some of the sparks existing between he and Peter Orszag are due to their conflicting opinions on the desirability of preserving a big role for private insurance. Orszag is more favprable to existing industries and the importance of preserving them.
Yep, PF is critical. Here in San Francisco, I’ve worked on several winning very progressive district supervisor campaigns which won with PF against Democrats who are as conservative on economics and pro-corporate, anti-poor as Republicans. When we get our ideas out on a level playing field, we can win because our ideas are better.
We’ve had PF for the mayor’s race for a few years now, but nobody qualified against the prince of press releases Gavin Newsom last time. We almost beat Newsom in 2003 without PF, but that appears to have been an aberration. Nobody should confuse Newsom’s same sex marriage and greenwashing persona with a progressive or a competent administrator. He’s actively sabotaged the progressive agenda here, screwing the poor and rewarding the rich.
But still, the amount of contributions an incumbent could realize from beneficiaries of Medicare for All, if there was supporting advocacy to protect the program which encouraged sustained small donations would be significant.
We can also look to the upcoming Supreme Court decision on Citizens United to provide an opening, where states can amend their incorporation laws to specifically craft corporations as entities not endowed with full personhood as pertains to the Bill of Rights. It should prove interesting to see if the credit card race to the bottom is repeated, where states like South Dakota took advantage of credit deregulation to allow no cap on rates irrespective of more stringent laws in many more populated states. One could imagine a federal conflict between firms incorporated in corporate havens like Delaware, which would never restrict speech rights of corporations, trying to influence a another states’ election where corporate political speech rights have been restricted. Once we relieve corporations of the burdens of the right to political speech, problems like health insurance sabotage of needed reform will be much less likely.
I agree. But getting that done will be really complicated. The question of comity where one state’s laws don’t endow corps with speech rights, but another’s do will be critical. It seems to me that an entity endowed with rights in one state and having an economic right to operate in another, can’t be denied the freedoms they were given in the first state. On the other hand, to do business on a continuing basis in another state, a corp must register as a foreign corporation in the second state. It is at that point that it’s free sppech might be constrained.
But here’s where things might get really complicated. Let’s say an umbrella corporation is given the right of unrestricted speech in Delaware, and that it then establishes a wholly-owned subsidiary in a state that does constrain corporate speech. Then it could take care not to have its subsidiary do any political speech in its state, but it could direct political messages to that State from the umbrella corporation. I don’t see how that could be stopped. So, concluding, I think we need national laws to regulate the right of states to form legal persons with economic functions and specifically to constrain their “speech” to product marketing and organizational positioning alone. No “political messages” allowed by such “persons.”
The good thing is that the question of corporate personhood has been plucked from a obscure grassroots progressive murmur to the mainstream by nobody other than Sonya Sotomayor in her first outing on the high court, opening the door to Democrat ownership of corporate reform as a check on the unregulated tsunami of corporate speech that is waiting to slosh our coastlines once the activist radical conservative majority on the Roberts Court cuts law out of whole cloth, stare decisis be damned!
Good for Sonia, maybe she’ll exceed all of our very low expectations. I hope so. Every once in awhile we see someone who looks awfully centrist becoming a progressive hero. Two outstanding cases are FDR and Pope John XXIII. Others on the Court itself are (or were) Earl Warren, Hugo Blackmun, and John Paul Stevens.
Hey guy, I wasn’t bashing Medicare only pointing out, that it’s a problem system, full of fraud and abuse, that pays for stupid things while letting people die from things it doesn’t pay for. We need universal Healthcare, but modled after a system that works, not one that uses the present system of problems to supply care. Our doctors, hospitals, and just about everybody in the healthcare industry are crooks, out to make billions on the sickness of the people. Medicare doesn’t now, and won’t if everybody had it, solve these problems. We need to demand our Governemnt gives us a universal system that takes care of all of us and all our problems with our money. Now they do everything but spend our money on us.
iremember54, We can fix Medicare, alright. But first things first. Let’s solve the insurance problem, then worry about going after waste, fraud, and abuse. Te calculations above say that we cut % GDP spent on health care to 11.7%. Once we’ve done that we can start working hard on improving quality and enforcing regulations.
HR 676 is indeed being scored at Weiner’s request. Single payer advocates fully expect the scoring to appear unfavorable for the reasons everyone’s mentioned above: to wit, the impact on the Federal budget is not the same as the impact on the economy as a whole.
Ali Thebert of Physicians for a National Health Program (PNHP) discussed this on a September 15 PDA health care conference call you can listen to here. (The CBO discussion begins around 46 minutes in.)
According to Thebert, PNHP has been making health economy experts available to the CBO and is also preparing detailed talking points to be issued once the CBO scoring is released. As mentioned on the call, it’s essential that not only Weiner but every legislator who claims to support HR 676 in principle be familiar with these talking points.
thanks for this link.
I guess we need to blog this to hell and back and get the blogs into Congressional staff.
Thanks, LGID. Wish I could help on your request for input on your calculations, but I don’t consider myself remotely qualified to dive in. Good to know that those who are, like the Himmelstein/Woolhandler team, are on the case and preparing for the CBO release.
I have just read your mail Joe, but as it happens I don’t have enough time right now to help you. This is very unfortunate, but I will provide my insights, suggestions and numbers to you later (whether it is in this place before discussions are closed about this argument, or by email where there is no time-pressure). But I will say this: to compare the old system with the new system, one does need a clear picture of what this new system “Medicare for All” is all about. What does this basic coverage package for necessary care consist of for all Americans (as even solidarity has its boundaries)? What kind of care works, what is effective, and what should be considered one’s own responsibility? All these are rather big questions in order to limit broad solidarity into a basic coverage package. “New glasses, dental care” are they really part of the new advanced “Medicare for All” ? Where does one cross the line of one’s own responsibility (in a solidarity system)?
Somehow I don’t like it that the new system has to prove its viability and existence mainly in terms of monetary impact. What about the social and ecological impacts of this system ? It would be really mind boggling, if there should be a new system in place as I see it. Forget about the estimates you used, it is far bigger for the US society (and I don’t mean the savings on executive pay and lobbying Congress every day).
I once read (I don’t remember now the right figures, but I think it was Swedish) that a transition from a public to a privatized setting, really costs –us citizens-dearly. I will look for the percentage, etc. But I think, that the monetary savings will mainly have to found in the daily operations of medicine and healthcare (contracted by “Medicare for All). Let’s imagine for a while that “Medicare for All” would increase the effectiveness of health care productivity by 15 %. Are you still with me, 15 % of total cost savings, without reducing the quality of care.
But if we should also measure this change in terms of social and ecological impact (which I think CBO will not score), the savings will be astronomical. What does it cost to get a political commercial out on prime time? And just imagine, that we simply don’t have to discuss this matter anymore, and spend our time instead to giving our children their most needed attention, to grow up as fine, (moral) responsible citizens. Is this savings in financial capital? No, it is not, it is investment in human and social capital, but try to put a financial figure on this.
Just one example, about the ecological costs of modern Health Care, which is totally addicted to the use of (chemical) drugs (and which I hope Medicare for All strongly will help to prevent). Did you ever consider that drugs (no longer used or necessary) are flushed down the toilet, contaminating our water systems and threatening out good health and well-being? What are the costs of filtering them out of our water system? What are the costs of people getting sick by these health care operations? Just an example and I admire my very good friend Joel Kreisberg for fighting this all the way. Why don’t we listen to people like Orr and Callahan, as all this is about ethics and not about money? Why don’t we become more modest (in healthcare), and if one thinks that this is a horrible statement, just face it that one has to die eventually, healthcare or “Medicare for All” has never been the INSURANCE that one would live forever ! But we do have a right to die decently (and I don’t need posts from people about socialism and death squads).
Hi Henk, Thanks for your well-considered reply. I agree with your point of view, of course. But, in the short such a point of view wouldn’t have an impact on the present debate. While the chances are small, an analysis that showed that an overwhelming amount of dollars could be saved by going to Medicare for All, might just strengthen the hand of progressives in the short term. To answer your question about what the bill contains in benefits, here’s the list from p. 5
The list is really comprehensive.
lets, have not had a chance to sit with your wonderful speculations but thank you so much for working on them! I will return later tonight.
this link below about May 5th, the day single payer heroes were removed by Max and Finance Committee et al. from faux-round table has some good percentages for us to work with — they show up later on in the short documentary if you continue to watch.
http://therealnews.com/t/index…..%3A35%3A22
I will be back tonight. Also I keep checking out pnhp website for their updated list of recent articles.
thanks again. :)
Thanks lib, I keep checking pnhp too, and thanks for the link to the documentary.
LGID, there’s one significant area of economic savings — primarily, cost savings to employers that can filter back to the economy as a whole — that I don’t generally see addressed in discussions in this area. I have no idea how to begin to quantify it.
The complexity of employer benefits management has generated an impressive ancillary sector of benefits consultancy and outsourced management services. Many of these services come from specialized law firms, HR consultancies, and other groups helping businesses navigate compliance with insurance regulations and choosing and managing insurance benefit packages for their employees.
The more complex the regulations, the more dollars flow to these ancillary consultancy and external benefits-management services. For a sense of scale, Google on “ARRA COBRA Insurance.” A high proportion of the 43,000 hits come from companies selling advice to other companies on how to manage COBRA benefits for their former employees and, more recently, how to comply with the requirements of the Obama stimulus package that affords COBRA beneficiaries a 9-month 65% discount on COBRA premiums. A lot of people are making a nice living advising businesses on adhering to the law and making the best business decisions with respect to just this one aspect of insurance regulation.
The more complex the regulations and law, the greater the need for dollars to flow to such business consultancies and external benefits management companies. It’s directly analogous to the massive consultancy sector necessitated by tax law.
I have no doubt that this sector, which must be draining billions that could otherwise help strengthen America’s competitiveness, is whetting its appetite for the new round of convolutions and requirements about to be imposed on business from the health reform bills currently in the offing. Only legislation that gets employers out of the health insurance business — or that vastly simplifies their obligations (and that ain’t HR 3200) — will significantly shrink this hemorrhaging of resources.
Hi Ralph, Thanks for this. I think this is an important category of savings.
Generally, in estimating savings, I’ve tried to draw a line between those savings that can be directly calculated and those that are more ancillary to the reform, or that would require econometric analysis to estimate. I can do the former in the context of a diary requiring relatively little research, but the rest, while very important, is beyond my resources of time. It’s something, perhaps for progressive think tanks to do and perhaps part of it will be within the scope of CBO scoring.
As you know, the California Nurses Association claimed that a Medicare for All would produce 2.6 million new jobs, a substantial positive impact of a bill like HR 676. And in previous discussions I think that you and hipparchia have pointed out that 450,000 who work for the insurance industry could lose their jobs. On balance I think the economic and social impacts of Medicare for All would be extremely positive; but I’m afraid no one will come up with good estimates of these in time to effect the present legislative schedule. That’s one reason why I think that progressives should kill many of the reform bills being considered right now.
Mandates without a public option and exchange open to all should be killed. I think any bill whose exchange and public option takes more than a year to implement should be killed, since I’d rather increase the pressure for HR 676 on legislators next year than have all further reform frozen until 2015 or so as would happen if one of the bills delaying an exchange until 2013 were implemented. On the other hand, there are limited bills that could make a contribution. For example bills that expand Medicare eligibility. Or bills that make rescissions, denials due to preconditions, price increases after health problems occur, and discrimination on prices due to preconditions, illegal.
Who told you my real name was Ralph?!? How the hell did you figure that out?? Goddamn it to hell, my cover is blown! I’m screwed!!!
I blame my friend Jason. He insisted I had a robust pseudonym.
-:) Mine is Joe, as is apparent from my bio.
lets, what a great analysis and amazing comments throughout thread.
Not that long ago I was quoting 22,000 deaths a year from inadequate health care. The new study raised it to 45,000. So just from the get-go, with more serious and comprehensive analysis, I think your estimate is VERY plausible.
I see the argument about health care jobs. But how about health care jobs without fat cats devouring OBSCENE amounts of money that goes for health care workers so workers may have a heftier chunk. There will be a need for these employees of the medical industrial complex, those lower in the food chain than the execs, and with a Congress doing its job, this transition could happen.
As I recall that $350-$400 sum of savings was based on overhead and executive compesnation costs, so your introduction of the other categories is wonderful and I hope will be picked up. 30+ cents on every dollar it costs us. After Congress and the Trojan Horse plan they are plotting, who knows.
Also, 38 pages of plan. Reader/citizen friendly, not 1000 pages of loopholes and legalspeak. The more words the more surface area to torture the spirit of the law with games for the letter of the law.
Finally, lets, the sum of moral satisfaction. We are a nation of brothers and sisters. Everybody in and nobody out. The family of man. We want people to be taken care of. We are not xenophobic and we believe a rising tide lifts all boats, as Single Payer Medicare for All would.
Thanks for going in amdist the trees of health care reform detail. Why health care system was so easy for abuse. Most of us are math-phobic and our eyes glaze over at trying to wrap our minds around the details, made all the convoluted so govt. and medical industrial complex can play “mystification” manipulation trap with us. Trust us. We will take care of your inadequate little mind… as well as the contents of your wallet and savings account. Anyway, just from the differences in the lengths of HR676 and the probably length of the new bill, this proves the “mystification game.”
Hi again, lib, on the 350-400 billion, I think that applied to overhead including executive compensation, plus profits. My calculation, above, of savings due to these factors is “only” $207 billion annually. If the $400 billion figure turns out to be correct, that would increase the total savings to $1.04 trillion.
I just saw this. I usually am busy prepping for my Saturday radio show. Your analysis seems sound to me. I heard there are only about 500,000 workers in health insurance. Many can be put to work in Medicare for All. But even if they, like textile workers, steel workers, auto workers, and appliance workers, have to be retrained, so be it. Sh*t happens. And I agree that they will sleep better at night.
To reduce our spending on health care from 2.4 Trillion to 1.6 million to come more in line with Canada at 11% of GDP instead of 16% helps a lot.
Yesterday we had quite a few callers say that they want to kill this bad bill and work on a Montana or Rocky Mountain Single Payer insurance plan. They are all for the Dennis Kucinich amendment to allow states to work on their own. We have less than a million people so we think we need to combine with a couple other states. They seemed very jazzed by this idea. One man said he already wrote to the Governor. And they thought it was the only question to ask potential candidates for the state legislature. My callers are mostly conservatives. Waddayathink?
And is anybody going to be in D.C. for the Mad as Hell Doctors Wednesday? I’m coming all the way from Montana.
Rather than basing it on the GDP of each country, what are the figures if you compare medical dollars spent per person in Canada vs medical dollars spent per person in the US?
Using an estimate of $2.5 trillion for health care expenditures, and the latest population estimate from the Census clock, the estimate of US per capita expenditures is $8130 USD per per capita. I don’t have the corresponding current estimate for Canada.
Awesome! Looking forward to your report.
Hi MM, Good news from your neck of the woods. Now, tell me that old you-know-what Baucus will get beat next time.
I’m planning to be at Lafayette Park with my wife on Wednesday. I’ll look for you. Any identifying signs? I’ve got a picture, here.
I’ll be there, too. Diane, I just posted a comment on your web site, so you should have my email address. Joe, it’ll be a pleasure to meet you.
Here’s a shot from the July 30 Medicare for All demonstration in Washington. See the guy in the blue shirt, frantically scribbling notes for his blog post on the event?
Thanks Ralph, I’ll look for you.
I’ve discovered a serious error in the above estimates. I stated that savings from eliminating Medicare Advantage would amount to $150 billion per year. I think, however, that the savings here are more like $15 billion per year, an error of $135 billion. That results in the following summary of findings, estimated annual savings of Medicare for All from:
– Administrative expenses and profit elimination — $207 billion
– Emergency room-related savings — $281 billion
– Lower provider rates — $ 109 billion
– Pharma savings — $100 billion
– Medicare Advantage — $15 billion
total Medicare for All expenditures assuming no deductibles or co-pays as specified in HR 676 — $1.789 trillion
Percent GDP — 12.8%
Annual cost per capita — $5816
If hipparchia’s estimate of savings from Administrative expenses of $400 billion turns out to be correct and is used in these calculations, then we have:
total — $1.595 trillion annual expenditures
Percent GDP — 11.4%
Annual cost per capita — $5189