'Medicare for All' Saves Money

A recent systematic review found that the projected cost of single-payer health care is likely to save money in the short-term, as compared to our current system, and produce significant increasing long-term economic benefit (see medicare for all lower costs plos2020 in dropbox, or doi.org/10.1371/journal.pmed.1003013 J, or go to https://journals.plos.org/plosmedicine/article?id=10.1371/journal.pmed.1003013)

Details:

-- PubMed, Google scholar, and Google search: single-payer AND the words 'cost', 'model', 'economic', or 'cost-benefit'; consultation with those in favor or in opposition to single-payer reform, and a convenience sample of 10 single-payer experts

-- 90 studies reviewed: primary analyses on 22 single-payer plans from 18 studies, published between 1991-2018, including 8 national and 14 state-level plans

    --the US studies were based on trials in several different US states, including Pennsylvania, New York, Vermont, Maryland, California, Minnesota, and Massachusetts 

-- exclusions criteria included: plans with large cost-sharing deductibles, or an explicit role for non-uniform payment levels (e.g. payments differing by patient), balance billing, multiple payment systems, multiple drug formularies, or private insurers or intermediaries

-- inclusion criteria included: all legal residents were permanently covered for a standard comprehensive set of ethically appropriate outpatient and inpatient services under one payer; there was a not-for-profit governmental or quasi-governmental agency in charge

Results:

-- the range of net costs/savings was: an increase of 7.2% of system costs, to a reduction of 15.5%

    -- 19 of the 22 plans found savings, with a median of 3.5% of system costs

-- these net costs reflected the costs due to higher utilization (eg, eliminating uninsurance/ending underinsurance) as well as direct savings (from administrative simplification, lower drug prices, and other factors)

    -- higher utilization increased costs 2%-19.3% (median 9.3%)

    -- total savings range from 3.3%-26.5% (median 12.1%)

-- specific changes in the estimates of costs:

    -- administrative costs saving 1.2%-16.4% (median 8.8%) of healthcare spending

    -- lower cost of medications and durable medical equipment, savings 0.2%-7.9%

    -- reduced fraud and waste, savings 0.4%-5.0%

    -- shift to Medicare payment rates, savings 1.4%-10%

-- the utilization increases are likely to decrease over time, with projections for up to 11 years finding that  savings accumulated at an estimated 1.4% per year

    -- the 3 models finding increased net costs had low or no cost sharing (co-pays), rich benefit packages, and a lack of savings predicted from reduced medication/medical equipment costs

        -- though these 3 studies would still achieve net savings by 10 years

-- including undocumented individuals did not statistically change the benefit of the single-payer system; a shift to Medicare payment rates was not a strong predictor of costs

Commentary:

-- a few issues with the above analysis:

    -- they did not include fraudulent and wasteful spending (reported to be 20-40% of health care spending), though likely this would decrease given that a single system would be easier to monitor; but the evidence that these costs would be lowered is lacking

    -- they did not include some new care models, such as Accountable Care Organizations, though preliminary analyses suggest that the savings have been small and the costs of the programs may exceed the savings

    -- the costs of uninsured patients getting into care may be be less than postulated, since a large % of them are young and healthy individulas

--of note, these analyses are limited by their assumptions:

    -- a 2018 study from the Political Economy Research Institute found that a national Medicare-For-All system would save $313 million in the 1^st year of implementation, another study by the Mercatus Center found the system would save $93 million in the 1^st year

    -- but a study by the Urban Institute suggests that there would be increased costs, though it was relying on private insurers

-- even  9 years after initiating the  Affordable Care Act, 10.4% (27.9 million) of non-elderly US population were uninsured

    -- it is clear from studies that lack of insurance is associated with poor health outcomes, including death. A national US survey found that one in 8 patients with atherosclerotic cardiovascular disease reported nonadherence to medications because of cost (see http://gmodestmedblogs.blogspot.com/2020/01/medication-nonadherence-due-to-cost.html )

    -- and underinsurance, where the deductibles and other cost-sharings are a significant financial barrier to care, is rising and is associated with 25% greater likelihood of omitted or delayed care. For example, one study found that 40% of Americans have problems paying their medical bills or difficulty affording premiums or out-of-pocket medical expenses, and half will skip or postpone some of their medical care or prescriptions because of cost (see http://gmodestmedblogs.blogspot.com/2019/05/health-insurance-deductibles.html  )

    -- almost 1/5 of the US economy is consumed by healthcare costs, with national health expenditures reaching $3.6 trillion in 2018 (17.7% of GDP)

        -- and, contrary to what many may think, 64% of our current national health expenditures (11% of GDP) are in fact by governmental funding (eg, public programs, private insurance for government employees and tax subsidies for private insurance). Of note this is more than the total health expenditures in almost any other nations with single-payer systems...

-- another issue with the current system is surprise billing, where patients are treated in the appropriate facilities for their health insurance, yet thet get unregulated huge extra bills from physicians working there who were not part of their insurance plan (see http://gmodestmedblogs.blogspot.com/2019/12/surprise-billing.html )

-- one other issue in our healthcare system is the remarkable inequities in payment structures and paperwork requirements by primary care physicians, leading to fewer physicians going into primary care and decreasing availability/utilization of primary care overall. This is likely to be exacerbated with an aging population requiring more intensive and extensive primary-care access and treatment (see http://gmodestmedblogs.blogspot.com/2020/01/decreasing-utilization-of-primary-care.html ). This issue needs to be fixed in order for any longterm health system to be effective, both medically and cost-wise. And this is certainly true for a single-payer system (which requires easy, accessible access to primary care as its bedrock, as in other countries)

-- though the above study suggests that the higher costs in the US are primarily due to higher prices and administrative inefficiency, there is also dramatic clinical inefficiency as compared to health systems in high-income countries: our having to repeat tests because there is no coherent system of care, lack of integrated care with hospital visits, specialists, emergency departments,…

    --And the not infrequent problem of employers changing health insurance companies to one a little cheaper, forcing employees to discontinue their sometimes long-term therapeutic clinical relationships, and the ensuing medical errors when an new clinician does not really know or understand the patients medical and psychosocial issues, and the increased costs of changing medications to new ones on the new formulary/repeating tests/reinitiating specialty consults with new specialists/etc. (ie, the basic problem with a system of health care dominated by employer-based plans vs an integrated socially-determined system of care)

-- single-payer systems (such as Medicare-For-All) would develop a unified financing system, benefit package, elimination of private insurers, and have universal negotiation of provider reimbursement and drug prices (eg, the VA system currently has a 30% decrease in prescription drug prices through their market power)

    -- the common response is that research and development requires drug companies to get the high prices, BUT:

        -- prices by drug companies often increase even after they recover their costs

        -- R&D costs for 10 companies that marketed new cancer drugs were $9 billion, though revenues were >$67 billion

        -- Fortune 500 drug companies had mean profit of 24% in 2019, vs 9% overall

        -- and, the R&D costs are inflated, with half of their costs based on "lost opportunity", which a 2012 study found was assessed at the rather steep assumption of 11%/yr compounded, with a similar percentage found in 2016 (see drug co research devel bmj2012 in dropbox, or doi: 10.1136/bmj.e4348). the drug company R&D estimates also ignore the fact that the initial expenses are paid for by us through NIH etc research grants and tax credits, as well as the exorbitant salaries/buildings/etc on the drug companies

    -- Even generic drugs have been exploited by drug companies to reap huge profits: see http://gmodestmedblogs.blogspot.com/2018/12/generic-drug-prices-skyrocketing.html

    -- And in the US, the average is $1011 spent on drugs annually vs the Organization for Economic Co-operation and Development (OECD) finding of an average of $422. and there is a projected savings of $505 if Medicare adopted the VA's prices

limitations to this study: 

-- none of the trials/models in the US achieved the full single-payer configuration, so there is mathematical modeling. And using information provided from several of the countries where single-payer systems exist (all of the rest of the high-income countries have some sort of single-payer system, though these models vary amongst them), especially Canada, Australia, and Taiwan

-- there may be additional costs: eg some single-payer systems have (appropriate) financial incentives to improve certain public health goals. these cost money, at least in the short-term

-- there are likely high costs in the transition from our current system, which are not included in the analysis. for example, transitioning the very large number of people currently employed in billing, insurance, advertising (not necessary in a single-payer system)... into other jobs. this is esp an issue in Massachusetts, for example, where health care is one of the largest industries and employ lots of people. but there will be significant costs related to job loss, retraining and reintegration into the workforce

-- and there are issues with generalizability to other areas of the country: 

    -- some related to access (some rural areas have no real accessible primary care, especially if more people desired access in a robust single-payer system

    -- currently uninsured/underinsured would need a cultural shift from using the emergency rooms as their only point of access to going to primary care for preventive care

        -- the former ER approach is an extremely expensive one as well as a clinically and public-health-wise a far inferior entry point into care

        -- and, this is true even in areas with more accessible primary care right now: many people still utilize ERs even when their primary care centers are available; these centers need to be open, accessible, without financial obstacles (copayments, etc) and reasonably extensive enough to meet the patients' needs

    -- these transitions, systems-wise and patient-based, would take more time to achieve their true single-payer, comprehensive system and the ensuing decreased costs

so, a few issues:

-- by these estimates, it seems quite likely that Medicare-For-All would lead to short-term cost savings, with likely increases over time

-- it is clear that lack of universal health coverage is adversely affecting lots of people's health in the US (ie, the issue is more than cost-saving...)

-- the biggest savings are from administrative costs (eg Canada has a 12-15% lower cost, which would be on the order of $500 billion for the US) and pharmacy costs, which of course means that insurers and drug companies will spend huge amounts of money to fight Medicare-For-All, as they have done in the past (eg with Clinton's plan)

    -- but this also means that the savings noted above may by very different if we could not lower these costs and achieve a real single-payer system

--and, increasing the number of insured people will require a larger number of primary care clinicians (the foundation of every other health system that i know), yet we in the US are moving quite rapidly in the opposite (and much more expensive) direction of having fewer primary care clinicians available and more specialists

    --ie, part of the fix and move to single-payer needs to be a fundamental restructuring of the role of primary care clinicians (eg, decreasing burdensome paperwork) and compensation (primary care cannot be the least well-paid, esp in a system where medical school/etc costs, and cost-of-living are so high)

geoff​

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