Single-Payer Health Care Is Less Expensive—Deal With It

Basically everyone—including progressive activists, billionaire investors, the Congressional Budget Office, top health care consulting firms, drug makers, and the hospital industry—believes a single-payer health care system would cut health care spending in America.

That is why it is very strange to see Kevin Drum at Mother Jones write this:

If you want to make heroic assumptions about how much a single-payer would save, go ahead. But nobody serious is going to buy it. If we’re lucky, a good single-payer system would slow the growth of health care costs over the long term, but it’s vanishingly unlikely to actually cut current costs.

It is critical to address this weird claim from Drum because the idea that single-payer would cut health care costs isn’t some optimistic liberal talking point. It is a near universal assumption and the main reason achieving single-payer has politically been so difficult. It is the heart of the whole debate.

Again, this is not a liberal idea. The Lewin Group, a health care consulting firm owned by UnitedHealth Group, has repeatedly concluded that single-payer would cut health care costs. For example, they analyzed a single-player plan for Minnesota and concluded, “that the single-payer plan would achieve universal coverage while reducing total health spending for Minnesota by about $4.1 billion, or 8.8 percent.” It reached the same basic conclusion looking at a national single-payer plan in years past.

Similarly, the Congressional Budget Office studied allowing a small group of people to buy into Medicare like a public option. They concluded this public plan would have premiums 7-8 percent cheaper than private insurance, so it would immediately cut health care spending.

The simple fact is large government health care programs like Medicare and Medicaid are much better at negotiating lower prices from providers than private insurance companies. The incredibly high rates private insurance pays providers is the main reason American health care is so expensive.

As a result, any reasonable shift of a large number of people from private insurance to public insurance will cut health care spending (i.e. hospital revenue).

This overwhelming belief among hospital CEO’s that single-payer would reduce their revenue is what makes single-payer so politically difficult.

Hospitals don’t like dealing with hundreds of different private insurance companies, each with different pay rates. It creates a massive administrative burden for hospitals compared to hospitals in single-payer countries. Hospitals put up with this administrative headache because they know can charge private insurers so much more for the same services.

This is why during the secret Affordable Care Act negotiations the main demand of the hospital lobby was for there to be no public option. The hospitals are terrified of letting people move from private to public insurance because it would immediately cut their profits and overall health care spending.

The Lewin group also found that if you simply allowed all companies to buy into Medicare, the vast majority of companies would abandon private insurance for it and, as a result, hospitals would see a major drop in revenue.

The irony is that single-payer would be much easier to achieve politically if everyone involved thought, like Kevin Drum, that it would not cut health care spending. The hospitals would love a single-payer system where they get the same amount of money while doing only one tenth of the administrative work.

There is a reason hospitals oppose even baby-steps towards single-payer. They are convinced any single-payer system would cut health care spending. The hospital lobby knows there is simply no justifying the rates hospitals currently charge private insurers if they are negotiating with a large government risk pool.

The prediction that single-payer would cut health care cost is not a liberal fantasy, but a nearly universal belief among people involved in health care. It is this widely held assumption that directly or indirectly shapes nearly every health care debate. There basically wouldn’t even be a fight over single-payer if almost everyone didn’t believe it would reduce health care spending.