Proponents of a single-payer health plan for New York pitch it as a cure-all — one fix that would achieve universal coverage, let people to go to any doctor or hospital, abolish copays and deductibles, cut down on paperwork, and save billions in the bargain.

Forty-five billion dollars, to be precise — or so said Assembly Health Chairman Richard Gottfried of Manhattan, as the Democrat-controlled lower house passed his New York Health Act on June 1.

It sounds too good to be true because it is. My analysis for the Empire Center shows that his $45 billion savings estimate relies on tendentious assumptions, debatable methods and a heavy dose of wishful thinking.

Others, including Bernie Sanders and his supporters, who disparage Obamacare and see single-payer as the cheapest and most elegant solution to what ails our health-care system (if only we could find the political will to make it law), should pay attention.

Gottfried’s bill would establish a Canadian-style health plan for all residents of New York, regardless of immigration status. That one plan would replace coverage currently provided by private insurance, workers’ comp, Medicaid and, with the feds’ cooperation, Medicare and the Veterans Health Administration.

The plan calls for levying two steep new taxes, on payrolls and non-payroll income. Yet Gottfried claims most New Yorkers would still save money, because they wouldn’t have to pay health premiums anymore.

“Of the tens of billions, hundreds of billions that we spend here in New York State on health care, 20% to 25% of those dollars are spent on administrative costs and profit that are of no health benefit to anybody,” he said.

Those numbers come from an analysis of Gottfried’s proposal by Gerald Friedman, an economics professor at the University of Massachusetts at Amherst. Friedman says switching to single-payer would slash administrative costs from 13% down to less than 2%.

Both figures are exaggerated. Federal data shows that administrative costs for all health plans, public and private, average about 8%. And an Urban Institute analysis of Sanders’ “Medicare for All” proposal argued that its administrative costs would be at least 6%.

Friedman further projects big savings as hospitals and doctors spend less on haggling with insurers. But that would mean paying providers less, when Friedman’s paper contemplates paying them more than they currently receive from Medicaid and Medicare.

And, exasperating as health-plan red tape can be, it’s not pure waste. It’s a check on the system that averts fraud, restrains inflated fees, avoids overtreatment and keeps a lid on spending.

For evidence, look at New York’s Medicaid program for the poor. As the Cuomo administration aggressively enrolled recipients in managed care, per-patient costs plunged 17% over four years.

It’s true that other countries with single-payer plans, such as Canada and the U.K., spend dramatically less than the U.S. on health care. But they also have long waiting times to see specialists, pay their doctors and nurses significantly less and, in some cases, ration access to expensive procedures and drugs.

Beyond affordability questions, AlbanyCare would impose government price control on all health-care services, eliminating market competition.

It would channel billions more through New York’s dysfunctional state capital, multiplying opportunities for corruption.

Last but not least, it would require more than doubling the tax burden of what’s already the most heavily taxed state.

There’s no sign that AlbanyCare is on the path to becoming law; Republicans still nominally control the Senate, and the governor is in some ways a fiscal conservative. Still, many people will continue to perceive it as the policy holy grail. There’s no such thing.


About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

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