Getting sober about single-payer

by Bill Hammond |  | NY Torch

As the state awaits the RAND Corp.’s analysis of a proposed single-payer health plan for New York, the organization’s study of a similar plan in Oregon offers a potentially instructive preview.

Several key findings of the Oregon study, published last year, differ sharply with the something-for-nothing forecasts of single-payer advocates in Albany.

Perhaps most significantly, RAND’s Oregon study projects single-payer would result in “little change” in the state’s overall health spending, a contrast to the 16 percent savings touted by supporters of Assemblyman Richard Gottfried’s single-payer bill, the New York Health Act.

This suggests that the major tax hike Gottfried contemplates—of $92 billion, which would more than double total state tax revenues—would still not raise enough revenue to cover a single-payer plan’s costs.

The pending RAND study of single-payer in New York, commissioned by the New York State Health Foundation, promises a more sober analysis of Gottfried’s bill. To date, Gottfried and other supporters have relied on the forecasts of Gerald Friedman, an economics professors at the University of Massachusetts at Amherst and an avowed supporter of single-payer health care, and his conclusions have been challenged by the Empire Center and others.

The Gottfried plan—which has passed the Assembly four years in a row—calls for automatically covering every state resident, including undocumented immigrants, with no cost-sharing and no restrictions on choice of doctors and hospitals. Yet Friedman estimates the plan would reduce overall spending by 15 percent, or $45 billion, by slashing administrative costs and negotiating deep discounts with pharmaceutical manufacturers.

RAND’s Oregon study, which compared three universal-coverage plans to the status quo, foresaw no significant savings from single-payer—even though Oregon is a smaller, lower-cost state, and even though the single-payer plan analyzed is more frugal than Gottfried’s.

RAND estimates that single-payer would spark a 12 percent surge in demand for medical services. But Oregon’s version (unlike New York’s) calls for trimming provider fees by 10 percent, resulting in “little change in health system costs.” While Friedman projects an 11-point drop in administrative costs, from 13 percent to 2 percent, RAND more cautiously forecasts a 2-point drop, from 8 percent to 6 percent.

If those more conservative estimates apply to New York—and the $45 billion in savings don’t materialize—the necessary tax hike would jump by another 50 percent or so.

RAND also warns about obstacles that have received little attention in New York’s debate thus far:

  • Increased “congestion” in the health care system as more covered people seek care from a limited number of providers. “In the short run, the number of patients seeking care would likely outstrip the resources available to provide services …,” the study says.
  • Taking full control of Medicaid and Medicare coverage within the state, along with the federal funding for both, would require waivers from Washington, approval of which would be “highly uncertain.” This week, in fact, the Trump administration declared that it would not cooperate with establishing state-based single-payer plans.
  • Another “major hurdle” would be the Employee Retirement Income Security Act, a federal law that bars states from interfering with the benefit plans of large employers. Companies could sue to be exempted from single-payer taxes, which would disrupt the financing.

Oregon and New York are, of course, different states, and RAND’s researchers might come to different conclusions about Gottfried’s plan. But if its Oregon findings are any guide, single-payer supporters should prepare for some sticker shock.