This paper is part of the American College of Physicians' policy framework to achieve a vision for a better health care system, where everyone has coverage for and access to the care they need, at a cost they and the country can afford. Currently, the United States is the only wealthy industrialized country that has not achieved universal health coverage. The nation's existing health care system is inefficient, unaffordable, unsustainable, and inaccessible to many. Part 1 of this paper discusses why the United States needs to do better in addressing coverage and cost. Part 2 presents 2 potential approaches, a single-payer model and a public choice model, to achieve universal coverage. Part 3 describes how an emphasis on value-based care can reduce costs.

In this position paper, the American College of Physicians (ACP) proposes coverage and cost-of-care–related strategies to achieve a better U.S. health care system. The ACP's vision, outlined in an accompanying call to action (1), includes 10 vision statements, 5 of which are particularly relevant to the policies discussed in this paper (Figure). The companion papers address improving payment and delivery systems (2) and social determinants of health and reducing barriers to care (3). Together, these papers provide a policy framework to achieve ACP's vision for a better U.S. health care system.

Figure. American College of Physicians vision statements related to coverage and cost of care.

Although the United States leads the world in health care spending, it fares far worse than its peers on coverage and most dimensions of value. Cost and coverage are intertwined. Many Americans cannot afford health insurance, and even those with insurance face substantial cost-related barriers to care. Employer-sponsored insurance is less prevalent and more expensive than in the past, and in response, deductibles have grown and benefits have been cut. The long-term solvency of U.S. public insurance programs is a perennial concern. The United States spends far more on health care administration than peer countries. Administrative barriers divert time from patient care and frustrate patients, clinicians, and policymakers. Major changes are needed to a system that costs too much, leaves too many behind, and delivers too little.

Part 1 of this paper discusses why the United States needs to do better in addressing coverage and cost. Part 2 presents 2 potential approaches to achieve universal coverage. Part 3 describes how an emphasis on value-based care can reduce costs.

Methods

The Health and Public Policy Committee of the ACP, which is charged with addressing issues that affect the health care of the U.S. public and the practice of internal medicine and its subspecialties, drafted this paper. The Committee reviewed available studies, reports, and surveys on health care coverage options and the cost of health care in the United States, identified by searching PubMed, Google Scholar, news articles, policy documents, proposals for coverage expansion, and other sources. Sources published before 2009 were largely excluded, with the exception of contextual resources and references to ACP policy papers. On the basis of this review, the Committee drafted recommendations with input from the ACP's Board of Governors, Board of Regents, Council of Early Career Physicians, Council of Resident/Fellow Members, Council of Student Members, and Council of Subspecialty Societies. The position paper and related recommendations were reviewed and approved by the Health and Public Policy Committee in July 2019 and the Board of Regents on 2 November 2019. The ACP operating budget was the sole source of funding for the development of this position paper.

Part 1: Why Does the United States Need to Do Better in Addressing Coverage and Cost?

Too Many Americans Are Uninsured or Underinsured

The United States is the only wealthy industrialized nation without universal health coverage, a crucial component to ensuring quality health care for all without financial burden that causes delay or avoidance of necessary medical care. The Patient Protection and Affordable Care Act of 2010 (ACA) led to historic reductions in the number of uninsured persons, yet nearly 30 million remain uninsured, millions more are underinsured, and the number of uninsured persons is expected to grow (4, 5). In part, this is the result of congressional policy decisions, including the prohibition on premium tax credits to undocumented immigrants and limiting eligibility for premium tax credits and cost-sharing reduction assistance to people with incomes under 400% of the federal poverty level (FPL), as well as some states' decisions not to broaden Medicaid eligibility after a 2012 U.S. Supreme Court decision that made expansion optional (6). The ACP has offered recommendations for improving the ACA's coverage provisions (7). Yet, the ACA remains politically contentious and has been subject to numerous repeal attempts, court challenges, and regulatory changes that may undermine its effectiveness and viability.

U.S. Health Care Spending Is High and Unsustainable

The United States spends far more per capita on health care than other wealthy countries, and spending is increasing at an unsustainable rate (8, 9). In 2018, nearly 18% of the nation's gross domestic product—$3.6 trillion—was directed to health care. Hospital services accounted for 33% of spending, physician and clinical services for 20%, prescription drugs for 9%, and other professional services for 3% (10). Japan, the Organization for Economic Cooperation and Development (OECD) country most similar in population size to the United States (127.7 and 327.2 million, respectively), spends less than half per capita on health care as the United States, averaging $4717 per person annually (11, 12). The pricing of health care goods and services is substantially higher in the United States than in other developed nations. A 2003 analysis of OECD data showed that health care utilization in the United States did not exceed that of other countries, and price was the key driver of spending differences (13). More recent analyses support this argument and show that, except for imaging services, U.S. utilization rates are similar to those of peer countries (11). A systematic review found inconsistent associations, but generally low to moderate whether positive or negative, between cost and quality (14). Available evidence suggests that health care prices are an important driver of the high U.S. spending compared with other countries. However, it is important to recognize that utilization is growing and represents a larger share of spending, with more people being insured in the wake of the ACA and state Medicaid expansion (15).

The United States Pays More for Hospital Services

Inpatient hospital prices increased 42% between 2007 and 2014, and hospital-based outpatient care grew 25% over the same period (16). The Health Care Cost Institute reports that even though total inpatient utilization decreased 5% between 2013 and 2017, average per inpatient spending increased 16% during the same period, including price increases in all subcategories of inpatient admissions (17). Spending on outpatient services has also increased, including observation visits, which jumped from 6% between 2013 and 2016 to 13% in 2017, resulting in 20% spending growth between 2013 and 2017 (17). Comparatively, spending for physician and clinical services is expected to grow from $734 billion to $1.1 trillion over the same period (18). The Health Care Cost Institute reports that although total inpatient hospital utilization decreased 5% between 2013 and 2017, the average spending per hospitalization increased 16%, with price increases in all admission categories (17).

Although hospital services drive a large share of health care spending, many hospitals are operating with very close margins between revenue and cost. A 2019 report from the Medicare Payment Advisory Commission (MedPAC) found that the most efficient hospitals still have a negative margin of –2% compared with other hospitals. The margin was –1% the previous year. Despite losing money on Medicare patients, most payment adequacy indicators, such as access to care or quality of care, are positive (19).

The United States Pays More for Prescription Drugs

Compared with peer countries, the United States spends about 200% more per capita on prescription drugs. In 2016, the United States spent approximately $329 billion on prescription drugs, a number likely to grow (20). Recent OECD data show that Americans spend about $1200 per capita on prescription drugs per year (21). Despite the higher rate of generic drug dispensing in the United States than in other countries (84% compared with 30% for Australia, the country with the lowest rate), overall per capita pharmaceutical spending is highest among OECD countries. Unlike most peer nations, the United States does not have a centralized government body that negotiates drug prices or determines which drugs government programs will cover. The U.S. regulatory environment enables pharmaceutical companies to raise prices by any amount without justification. Although some new drugs offer therapeutic innovation and improvement, price increases for established brand-name drugs contribute substantially to growing prescription drug spending (22).

The United States Spends More on Administration

In large part owing to its pluralistic financing system, the United States spends more on administration of health care than peer countries. One study estimated that in 2012, the United States spent $471 billion on billing and insurance-related costs—$375 billion (80%) more than in a “simplified financing system,” such as Canada's single-payer model (23). Another study concluded that administrative costs were 31% of total U.S. health care expenditures, nearly double those of Canada (24). In 2010–2012, administrative costs varied with type of insurance market: 20% in nongroup and 11% in large-group markets (25). Average administrative costs for private insurers are around 12.4%, substantially higher than Medicare administrative spending, which accounts for around 2% of total program costs (26, 27).

Physicians and hospitals in the United States spend much more than their counterparts elsewhere on administrative activities. Physician practices in the United States spend $61 000 more per physician per year dealing with insurers than their Canadian counterparts (28). Hospital administrative costs make up 25% of total U.S. hospital spending, compared with 20% in the Netherlands, 16% in England, and 12% in Canada (29). Insurance premiums reflect high administrative costs. Analysts project that administrative costs account for 30%, or roughly $5700, of the approximately $19 000 annual premium for an average employer-sponsored health family insurance plan (30), slightly less than the average annual amount that workers pay toward insurance ($6015) (31).

Health Care Outcomes in the United States Often Compare Unfavorably With Those in Other Countries

High U.S. health care spending has generally not yielded gains in health or productivity (9). Looking at health care expenditures in the absence of contextual factors, such as quality of care and social determinants of health, does not capture the complexity of the U.S. system and subsequent impact on costs to government payers and individuals (32). An estimated 80% of an individual's health is tied to socioeconomic factors, physical environment, and health behaviors (33). For example, living in a food swamp with greater access to fast-food establishments, convenience stores, or other stores lacking nutritious food increases an individual's risk for obesity (34). The cost of obesity in the United States rose from approximately $212 billion in 2005 to $315 billion in 2010 and is expected to rise (35). Without addressing the complex factors contributing to health care spending as part of broader reforms to health care coverage and financing, the United States will continue to spend substantial amounts of money on health care without seeing measurable improvements in health.

The United States excels in some health care process measures, such as prevention and patient preferences, and 30-day mortality rates for heart attacks and stroke are lower than those in peer countries (36, 37). However, despite higher spending, the United States generally has less favorable outcomes than other countries. In a Commonwealth Fund comparison of 2017 health system performance of 11 industrialized countries, the United States ranked last or near-last in access, administrative efficiency, equity, and health care outcomes (36). According to the OECD, the United States ranked second to last in the percentage of the population that had coverage for a core set of health care services in 2015 and performed poorly on consultations and medications skipped owing to cost (38). Life expectancy is lower and chronic disease rates are higher than those of peer countries (39). Infant mortality ranked 26 out of 29 in 2010, even after adjustment for reporting differences (40, 41). The United States has a higher mortality rate for medical conditions for which there are recognized health care interventions than Germany, the Netherlands, Japan, France, and Australia (37).

Health Care in the United States Is Unaffordable for Many

Affordability of coverage is a common reason for remaining uninsured (42). Factors that contribute to the affordability of health care include prices of goods and services, premiums, copayments, deductibles, coinsurance, type of health care coverage (employer-based, third party, or government), and benefits included with the plan. Premiums vary with enrollee mix, insurer administrative costs and profits, generosity of coverage, and prices of goods and services (25).

The share of workers with employer-sponsored insurance dropped from 67.3% in 1999 to 55.9% in 2014, with a slight increase to 58.4% in 2017, possibly due to the ACA and improved economy (43). Family premiums for employer-sponsored insurance have increased 54% since 2009, outpacing inflation (31). In 2019, the average annual premium for employer-sponsored coverage was $20 576 for a family and $7188 for an individual and had risen over the previous year (31, 44). The 2019 Milliman Medical Index found that total health care costs (including employer subsidy, employee contribution, and employee out-of-pocket cost at time of service) for a typical American family of 4 with an employer-sponsored preferred provider organization insurance plan exceeded $28 000 (45). The Congressional Budget Office predicts that over the next decade, premiums will continue to outpace wages, decreasing the prevalence of employee-based coverage (46). Evidence suggests that more low-income families, who generally spend a larger proportion of income on employer-based insurance than wealthier counterparts, enrolled their children in public insurance plans to relieve the burden of employer-sponsored insurance costs (47, 48).

As insurance costs rise, many employers offer insurance with high cost sharing (49). The Kaiser Family Foundation reports that 82% of workers have an annual deductible, and since 2009, the deductible burden has increased 162% (31). Since 2006, total cost sharing has grown at a higher rate than wages (50). Of employer-sponsored insurance enrollees who were continuously insured throughout the year, 28% were underinsured in 2018, compared with 10% in 2003 (51).

Market conditions affect affordability, with monopolies associated with higher premiums. The ACA marketplace–based insurance premiums were on average 50% higher in areas with a single insurer than in those with robust payer competition, and locally dominant health systems can demand higher payments from certain insurers, which are reflected in premiums (52–54). In competitive markets, insurers can select clinicians to include in a network and clinicians can choose whether to contract with an insurer, but it is unclear whether savings gleaned from insurers' negotiations with clinicians translate to lower premiums or more benefits for consumers. Consequently, the ACA requires spending 80% to 85% of premiums on care and quality improvement (55).

Part 2: Potential Approaches to Achieving Universal Coverage

There are several models for health insurance systems (56–58), and the U.S. system includes aspects of each of the models outlined in the Table. The Veterans Health Administration reflects the Beveridge model, Medicare reflects the national health insurance model, employer-based insurance the Bismarck and private insurance models, and the out-of-pocket model reflects direct patient contracting models (concierge, retainer fees) and being uninsured (56).

Table. Health Insurance System Models

The ACP believes that universal coverage is essential. Critics of universal coverage argue that it would lead to rationing; lower pay for physicians, hospitals, and other sources of care; and higher out-of-pocket costs for patients (59). Universal coverage alone does not ensure access to high-quality, affordable care—the goal should be both universal coverage and access—yet lack of health insurance coverage is associated with higher preventable mortality (60). Dimensions of universal access include physical accessibility; affordability; indirect costs, such as transportation; and acceptability of services to patients (61). Critics also assert that the price controls associated with universal coverage lead to long waits and delays in care. Yet, although the United States performs above average on certain measures, such as wait times for a specialist appointment, many countries with universal coverage outperform the United States on timely access to care (36).

Because many universal coverage proposals include a compulsory coverage element through taxes or mandates, some argue that universal coverage compromises individual freedom by forcing individuals to purchase something they may not want (62). The ACP believes that to achieve true universal coverage, coverage must be compulsory. A Beveridge- or Bismarck-style system would probably mandate participation, because financing relies on general or payroll taxes. Adverse selection and uninsured “free riders,” who access free or low-cost care despite being able to afford health insurance, are a concern in health care systems where private insurance coverage is voluntary (63, 64). Such mechanisms as automatic enrollment or premium penalties for delaying enrollment are alternative mechanisms to encourage enrollment and stabilize the risk pool in a voluntary system (65). According to the World Health Organization, “Because of adverse selection and the exclusion of the poor, no country in the world has managed to come close to [universal health coverage] by using voluntary insurance as its primary financing mechanism” (66).

ACP Policy Positions and Recommendations: Universal Coverage

The following section provides ACP's recommendations and policy positions for achieving universal coverage. The background and rationale follow each recommendation.

1. The American College of Physicians recommends that the United States transition to a system that achieves universal coverage with essential benefits and lower administrative costs.

a. Coverage should not be dependent on a person's place of residence, employment, health status, or income.

b. Coverage should ensure sufficient access to clinicians, hospitals, and other sources of care.

c. Two options could achieve these objectives: a single-payer financing approach, or a publicly financed coverage option to be offered along with regulated private insurance.

Single-Payer Model Option

Federal and state governments have taken an incremental approach to extending coverage, including Medicare for seniors, Medicaid for poor persons, the Children's Health Insurance Program (CHIP) for middle-income children, and the ACA for lower- and middle-income uninsured persons. Yet, support for a single-payer system has grown in in recent years (67).

“Single-payer” is often confused with other concepts or goals, such as universal coverage, administrative efficiency, and better affordability. Critics and proponents of single-payer health care often describe it as a Beveridge-style, socialized system where the government pays for services, operates hospitals, and employs physicians and other health care professionals (68, 69). However, according to Liu and Brook (70), the term “single-payer” originated to differentiate the Canadian system of government financing and private delivery from that of the United Kingdom, where, for the most part, the government is responsible for both, and now is often used to describe financing by a single public entity irrespective of delivery type. Single-payer systems do not necessarily prohibit private insurance. For example, many Canadians have private insurance to cover supplemental benefits not included among guaranteed benefits, such as prescription drugs (71). In Denmark's single-payer system, 39% of people have private supplemental insurance to finance such services as physical therapy (72). Other countries permit the sale of complementary coverage for faster access to covered benefits or acute care services from private sector professionals (73).

Liu and Brook (70) reviewed 25 U.S. federal and state single-payer proposals and found that most included provisions on comprehensive benefits, patient choice of “providers,” little or no cost sharing, guidelines and standards, electronic medical records, billing, formularies, and payment reform. (In this paper, ACP uses the word “provider” only when citing sources that use the term to describe health care facilities and clinicians that include physicians, in which case we put it in quotation marks. The ACP itself does not use “provider” to describe physicians because it is an economic term that devalues their skills, training, and contributions to patient care). Common physician payment scenarios include a fee-for-service model where reimbursement is negotiated by a rate-setting panel and “provider” representatives, salaries, or capitation arrangements (70). Global budgets for hospitals are also common.

Supporters see government-run, single-payer systems as models where insurance is more affordable, portable (not dependent on place of residence, employer or employment), administratively simple, and devoid of corporate interest. Compared with the existing multipayer system, a single-payer could achieve lower prices by using its bargaining monopsony power, reduce administrative costs and burdens, and ensure uniform benefits (74, 75).

Opponents see single-payer as government overreach, leading to long wait times for care, tax increases, and a damper on innovation (76, 77). They also worry that higher demand for services could lead states to broaden the scope of practice for nonphysician professionals (78). However, peer countries with single-payer, universal coverage struggle with some of the same issues that the United States confronts. Cost concerns have prevented Canada from including prescription drugs in the basic benefit package, and general practitioners in the United Kingdom's National Health Service complain of heavy workloads and paperwork (79, 80).

Transforming the current pluralistic U.S. system to one that is government-financed would probably cause major disruption in the health care industry and create winners and losers. For physicians, a single-payer system could lessen administrative burden and free time for direct patient care. Uncompensated care costs resulting from lack of insurance or unpaid cost sharing would no longer be a concern. However, these benefits may come at the expense of physician autonomy and increased demand for care (81). Many single-payer proposals would base payments to physicians on Medicare's flawed payment system, which encourages volume over value, undervalues cognitive services and primary care, overvalues procedures, and bases payments on the input costs of each billable service rather than on value to patients. As discussed in the companion ACP paper “Envisioning a Better U.S. Health Care System for All: Health Care Delivery and Payment System Reforms” (2), any system of universal coverage should not perpetuate the existing flawed Medicare payment system. Most primary care physicians in particular probably could not afford to accept current Medicare rates for all of their patients.

For patients, a single-payer system may affect choice. Taiwan's experience in adopting a single-payer system provides some context; as Cheng (82) wrote, “For Taiwan's citizens, freedom of choice among providers of health care trumped freedom of choice among insurance carriers and contracts. These citizens' high satisfaction with their health system suggests that they still endorse that choice.” Equitable single-payer coverage would help to eliminate racial, ethnic, and income-related health care disparities.

Transition to a single-payer model could be politically difficult and strain the federal budget, because taxes would probably replace premiums and private insurers would have a reduced role or be eliminated altogether. The U.S. public is generally skeptical of centralized government, particularly when it comes to health care (83). A U.S. single-payer system could be structured in a way that considers these factors. For example, the federal government could provide the bulk of funding and set minimum standards to guide state operations. States could administer coverage and perform oversight and regulation of supplemental plans offered by private insurers, which could provide such benefits as financial assistance for direct primary care practice costs. Such an approach could ensure access and equitable benefits (federal funding and standards), promote federalism (states operate and regulate), and patient choice (access to all participating physicians, clinicians, hospitals; private supplemental insurance, and administration). Private sector physicians, other clinicians, and hospitals would continue to deliver most care, alleviating concerns about government control. However, the experience of current federal–state programs, such as Medicaid, suggests a need for caution in recommending such an approach. Many states have imposed strict conditions on eligibility (including strict income limits and work requirements) on their Medicaid programs, pay very low fees to physicians, and contract with managed care plans that may divert financing from patient care to their own profitability. A single-payer system that gives states considerable flexibility in designing and implementing their programs could experience similar problems.

A single-payer financing approach could achieve ACP's vision of a system where everyone will have coverage for and access to the care they need, at a cost they and the country can afford. It also could achieve our vision of a system where spending will have been redirected from health care administration to funding coverage, research, public health, and interventions to address social determinants of health.

A single-payer financing approach could also achieve other key policy objectives, including portability, lower administrative costs and complexity, lower premiums and cost sharing, lower overall health care system costs, better access to care, and better health outcomes, depending on how it is designed and implemented.

Yet, adopting a single-payer system would be highly disruptive and could lead to price controls that would perpetuate flaws in the current Medicare payment system, including the undervaluation of primary care. If prices are set too low, it could lead to shortages and longer wait times for services. Without sufficient cost controls, however, the cost of a single-payer system could be too high to be feasible. Accordingly, in addition to a single-payer system, ACP believes that a public choice model should also be considered that can help achieve our vision of better health care for all.

Public Choice Model Option

Polls have found that most Americans are dissatisfied with health care costs and believe the U.S. health care system is in a “state of crisis” or “has major problems,” but are pleased with the coverage and quality of their health care (84, 85). Separate surveys suggest that Americans with employer-based health insurance are generally satisfied with their coverage (86, 87), but those with high-deductible plans are less satisfied than those with low-deductible plans and 4 in 10 reported difficulty paying for care before meeting the deductible (88). Yet, Americans' concerns over proposals to replace existing insurance with something new contributed to the demise of President Clinton's health care reform initiative (89) and inflamed opposition to the ACA (90).

Depending on its structure and implementation, a public choice (or public option) model available to all could help to achieve universal coverage, better access, and improved outcomes without the disruption of a single-payer approach. Under a public choice approach, those covered by employer-sponsored insurance can choose to enroll in the public insurance plan or remain in their existing plan. The public plan would be available nationwide, ensuring portability from state to state. Elements of this approach are reflected in the German and Swiss health insurance schemes, both of which use a social insurance/managed competition structure to extend coverage to all.

The ACP has offered recommendations for a public option that would be available alongside private insurance in the ACA marketplaces to inject competition into areas underserved by private insurers and reduce premiums. The ACP also supports a Medicare buy-in option for persons aged 55 through 64 years (91). Evidence shows that areas with a single insurer have faster premium growth than those with multiple insurance options (53). Although the number of ACA marketplace insurers grew overall in 2019 and insurers appear to be profiting, participation is less robust than in the program's early years in some areas (92, 93).

In 2019, 75% of employers offering coverage offered only 1 plan type, although nearly 64% of workers who had employer-based insurance had more than 1 plan available to them (31). Employers that offer a single plan generally provided a preferred provider organization plan, but 27% of workers only had an offer of a high-deductible health plan. People with affordable, comprehensive employer-sponsored insurance are ineligible for subsidized marketplace-based coverage under the ACA. This means most nonelderly Americans are restricted to the health insurance plan offered by their employer, or unsubsidized individual coverage inside or outside of the health insurance exchange. A public choice approach would provide choice to those with few or undesirable private options. A nationwide public plan would be portable and people would not need to remain in a job solely to maintain health insurance coverage (94). The public choice plan's benefits may be greatest for low-income uninsured and underinsured persons. Roughly 2.5 million people are eligible for expanded Medicaid but live in a nonexpansion state and earn too little to qualify for subsidized marketplace-based insurance (95). A public choice approach would ensure access to coverage for such individuals. Some public choice proposals include benefits not typically found in employer-sponsored or traditional Medicare plans, such as dental care and hearing and vision aids.

Safeguards would be necessary if the United States were to introduce a public choice model. Financial subsidies and regulations to make the public plan affordable would need to be made available to a wider array of people than in the ACA marketplace. Employer-sponsored insurance would need to be required to meet new benefit and regulatory standards to prevent adverse selection, ensure a level playing field, and promote equitable coverage. Robust risk adjustment mechanisms would need to be adopted. Employers would need to financially contribute to the public plan when employees choose it over the employer-sponsored plan. Alternatively, employers could choose to pay to enroll their employees in the public plan rather than offering a private plan.

Public option proposals also have noteworthy disadvantages. Continuing the multipayer system would require more complex regulatory structure and stricter oversight and result in fewer savings from lowering overall administrative costs than a single-payer model, and still would probably require substantial controls over prices to keep coverage affordable. If physician payments in the public plan were based on Medicare rates, physician practices could face financial difficulties that would undermine participation, especially in areas with workforce shortages. Such price controls could perpetuate undervaluation of primary care. Without sufficient controls, however, costs could make a public plan infeasible.

A public choice approach would be unlikely to achieve the same degree of reductions in prescription drug prices and wasteful spending expected with a single payer. The administrative burden associated with the existing multipayer system could remain unless most people and their employers migrated to the public plan. Access to physicians, hospitals, and other health professionals may be restricted if insurance plans formed limited “provider” networks. Folding ACA marketplace plans, Medicaid, and other forms of coverage into a new public plan could disrupt care continuity. Automatically enrolling certain populations, such as newborns, into the public choice plan would put it at a competitive advantage over private payers, reducing their ability to compete. Medicare Advantage provides a cautionary experience of what can happen in a system where private and public entities compete, underscoring the need for strong regulatory oversight and a level playing field. The U.S. Government Accountability Office and MedPAC have called for improvements in the program, where private insurers are contracted to provide Medicare benefits as an alternative to the Medicare fee-for-service program, after finding questionable risk coding practices (96, 97), narrowing “provider” networks and inaccurate directories (98), and evidence that beneficiaries in poor health were more likely than beneficiaries in better health to disenroll because of problems related to getting needed care and accessing their preferred doctor or hospital (99).

A public choice approach could potentially achieve ACP's vision of a system where everyone will have coverage for and access to the care they need, at a cost they and the country can afford, with less disruption than a single-payer system. A public choice approach also could partially address ACP's vision of a redirecting administrative spending to fund coverage, research, public health, and interventions to address social determinants of health.

Depending on how the program was designed and implemented, this approach could achieve other key policy objectives, including portability, lower premiums and cost sharing, lower overall health care system costs, better access to care, and better health outcomes. Expanding availability to all Americans of an enhanced Medicare-like program represents a promising path toward achieving universal coverage that could evolve to a single-payer system, should most Americans choose to enroll in public coverage over private insurance, or employers choose to spend their contribution to health insurance by subsidizing their employees' enrollment in a public plan.

Before deciding on a single-payer or public choice approach, ACP examined a variety of alternative approaches. We found that market-based approaches would not achieve key policy objectives, including reducing administrative costs and associated burdens on clinicians and patients, ensuring that coverage is portable, ensuring that essential benefits are included, guaranteeing that patients are not discriminated against or charged higher premiums because of health status or poor health, and ensuring that all Americans have coverage for the care they need—that is, they would not achieve universal coverage. Our review of other peer countries' health systems found none that have achieved universal coverage through a purely market-based approach, although some have elements of market competition and heavily regulated “insurance”-type plans. As noted earlier, the World Health Organization found that “no country in the world has managed to come close to [universal health coverage] by using voluntary insurance as its primary financing mechanism” (66). Although the social insurance/Bismarck model of regulated insurance-type programs (similar to public utility regulation) could achieve universal coverage, it would require that the federal government impose an entirely different regulatory structure on insurers, including converting them to nonprofit entities, setting or controlling the rates they can charge, and determining the rules under which they would administer health care benefits. We found little in the available literature on how such a model might specifically be developed for the United States.

The ACP concludes that of the currently available approaches that have been extensively modeled and researched, either a single-payer or public choice model offers the best opportunity to achieve our vision of universal coverage at a cost the patient and the country can afford, while recognizing that each has advantages and disadvantages. The ACP acknowledges concerns about giving government too much control over health care but notes that the current system gives insurers, many of whom act like or are for-profit companies, too much control, while the government already has a substantial role in regulating and financing health care. Implementation of any system, whether single-payer or a public choice approach along with regulated insurance, must be designed to protect and ensure that patients can get, and physicians are able to provide, the care they need consistent with evidence-based guidelines, essential guaranteed benefits determined with patient and physician input, and overall available resources.

The ACP remains open to considering other ideas to achieve our vision of making coverage and access available to all at a cost the patient and the country can afford. Finally, ACP also supports continued improvements in the current pluralistic system, including the ACA, even as the United States transitions to new approaches to achieve universal coverage.

2. The American College of Physicians recommends that under either a single-payer or public choice model, coverage must include an essential health care benefit package that emphasizes high-value care, preferably based on recommendations from an independent expert panel that includes the public, physicians, economists, health services researchers, and others with expertise.

Whether a single-payer or public choice model, the U.S. system must guarantee coverage of essential health care services for a diverse population. The ACP supports mandatory coverage of essential health services, including primary care and prescription drug benefits. The ACP supports maintaining the ACA's essential health benefit package, which requires certain insurance plans to cover 10 service categories, ranging from such foundational services as hospitalizations and ambulatory care to more specialized areas, such as rehabilitative or habilitative benefits. Before the ACA's requirements, many individual market plans did not cover vital services, such as maternity care, behavioral health treatment, or prescription drugs (100).

Prominent single-payer proposals base the benefit package on an existing program, such as Medicare, Medicaid, or the ACA's categories of essential health benefits, or require coverage for all medically necessary services. A single-payer or public choice program based on Medicare would have to be expanded to cover services for a wider range of populations with differing needs. This includes extending coverage of nonemergency transportation services and Early and Periodic Screening, Diagnostic, and Treatment benefits to those eligible for Medicaid in the current system.

Most long-term services and supports, such as nursing facility and home health services, currently are covered by public payers. Medicaid paid for 42% of long-term services and supports in 2016 (101). A single-payer system or a public choice model that replaces the Medicaid program would have to incorporate these services, which will drive up demand and government spending. In England, most long-term services and supports are paid for by local or private entities, whereas in Canada, provincial and territorial governments may provide this care (102). The ACP believes that a sustainable strategy for long-term services and supports should be developed, especially as the baby boomer generation matures and demand for services grows. In the interim, whether a single-payer or public choice approach is adopted, Medicaid should continue to cover the bulk of this care.

According to MedPAC, “[L]ow-value care has the potential to harm patients by exposing them to the risks of injury from inappropriate tests or procedures and may lead to a cascade of additional services that contain risks but provide little or no benefit” (103). The delivery of low-value care occurs in traditional fee-for-service Medicare, Medicaid, and commercial insurance plans; however, fee-for-service Medicare is statutorily prohibited from considering cost-effectiveness when determining whether a service or item should be covered. In designing an essential benefit package for a single-payer system or public choice program, high-value care should be emphasized.

In 2011, at the Department of Health and Human Services' (HHS) request, the Institute of Medicine (IOM) (now the National Academies of Medicine, Engineering, and Science) developed criteria and methods to determine benefits to include in the ACA's essential health care benefits package while balancing coverage and cost. The IOM encouraged the government to consider population health needs, be evidence-based, emphasize the judicious use of resources, and improve value and performance (104). To achieve this, IOM recommended that benefits be based on an annually updated premium target and be continuously updated by using a public process and considering costs to be fully evidence-based and promote value (105). A national benefits advisory council and the public would provide input. Ultimately, HHS took a different approach, basing essential health benefits on a private sector or government employee benchmark plan, which led to some variation among states.

In some health care systems, expert commissions develop evidence-based recommendations on what goods and services to include in the benefit package. For example, the United Kingdom's National Institute for Health and Care Excellence (NICE) considers the clinical effectiveness and cost-effectiveness of new diagnostic and therapeutic services to determine whether to make them available to patients. About 40% of NICE's published appraisals are for cancer-related technologies (106). The Oregon Health Evidence Review Commission evaluates treatment effectiveness and other factors to prioritize services for the state's Medicaid and CHIP programs (107). Categories are prioritized by rank. For example, maternity and newborn health are ranked first, and inconsequential care is ranked last. Treatments within each category are then ranked on the basis of a formula that includes the category rank and impact on such factors as healthy life-years, suffering, effectiveness, and the need for service. Oregon factors in cost only when needed to break a tie. The state legislature determines at what priority level services should be funded, but access to unfunded services may be granted via such processes as waivers. In a 2011 policy paper (108), ACP recommended that multiple criteria should be considered to prioritize health care resources. These criteria included patient need, preferences, and values; potential benefit; safety; societal priorities that include fiscal responsibility, public health, and equitable access; quality of life gained, consistent and compliant with the Americans with Disabilities Act; and impact on families and caregivers, and achieving a balance between cost and clinical effectiveness to minimize adverse economic consequences on current and future generations.

As stated in the ACP Ethics Manual (109), physicians' ultimate duty is to their patients. The ACP believes that clinical effectiveness and cost-effectiveness should be incorporated into designing a patient-centered, high-value essential benefit package. However, nondiscrimination language, an appeals process, and other safeguards must be established to ensure that all can access the care they need. The development of a benefits package should include a formal process for patient and physician input and be free of conflicts of interest. According to the ACP Ethics Manual (109), “Stakeholders, including physicians, other health care professionals, patients, patient advocates, insurers, and payers, should participate together in decisions at the policy level; should emphasize the value of health to society; should promote justice and fairness in health care; and should base allocations on medical need, efficacy, cost-effectiveness, and proper distribution of benefits and burdens in society.”

Private Insurance in a Single-Payer System.

Most single-payer systems in other countries are administered by national or state/provincial government, but private insurers may play a role in administering coverage at the local level or offer special coverage. Canada, France, Australia, and other nations that have achieved universal coverage allow the sale of voluntary private coverage that covers services not included in the basic insurance package (supplemental); out-of-pocket costs (complementary); or the same services, but with different hospitals, clinicians, or service levels (duplicative) (110). A U.S. analogue would be the Medigap program, which provides Medicare beneficiaries coverage for cost sharing (111) and, before implementation of Part D in 2006, some prescription drug benefits (112).

If a single-payer approach is pursued, private insurers could offer regulated supplemental insurance for services outside the essential benefits package or complementary coverage for out-of-pocket costs, although the latter may enable use of limited-value care (113). States could choose to cover additional benefits at their expense. RAND estimates that out-of-pocket costs under a national Medicare-for-all proposal would exist for “elective services” outside of the basic benefit package, such as cosmetic surgeries, infertility treatment, adult orthodontics, and over-the-counter medications (114). Similar to Medigap, states and the federal government could regulate supplemental or complementary plans.

Allowing the sale of private insurance may raise concerns about equity and access, particularly if it duplicates government coverage. In Australia, private coverage pays for extra benefits and a broader choice of private hospitals and specialists than public insurance. However, concerns have been raised that private insurance is being used to pay for public hospital care, despite the hope that private insurance would relieve demand on the public hospital system (115). Those with private coverage may have far shorter wait times for certain services, such as knee replacement surgery, than those with public insurance (116).

The ACP opposes the sale of duplicative coverage, owing to concerns that it may create a “2-tiered” system that could exacerbate health care disparities. However, if it is marketed, it is imperative that private insurance be carefully regulated to balance choice with equity and prevent discrimination and exclusion of vulnerable patients. Relevant regulations, such as guaranteed issue and renewability, community rating, medical loss ratios, and prohibitions on preexisting condition exclusions, should be established.

Private Insurance in a Public Choice System.

A public choice model should be required to adhere to regulations that ensure access, equity, and affordability. Permanent risk adjustment and reinsurance programs should be established to prevent adverse selection.

The Role of Cost Sharing and Premiums

3. The American College of Physicians believes that, whether a single-payer or public choice model, cost sharing that creates barriers to evidence-based, high-value, and essential care should be eliminated, particularly for low-income patients and patients with certain defined chronic diseases and catastrophic illnesses. In general, when cost sharing is required for some services, it should be income-adjusted through a subsidy mechanism and subject to annual and lifetime out-of-pocket limits. In a public choice model, premiums should be income adjusted and capped at a percentage of annual income.

Cost sharing can temper utilization and reduce costs by steering enrollees to high-value services. Single-payer proposals typically feature limited or zero cost sharing, which could increase demand for care. For example, Canada does not apply cost sharing or other fees for primary care or hospital services, a difference from U.S. trends toward higher deductibles and cost sharing (117) and patient anxiety about surprise out-of-network bills (118).

Over the past decade, enrollment in low-deductible health plans has decreased while enrollment in high-deductible health plans has grown for adults in employer-based plans (119). In the RAND Health Insurance Experiment, cost sharing reduced utilization of both effective and ineffective services (120). Low-income, sick patients in plans with zero cost sharing had better hypertension and vision outcomes than those with cost sharing, but those with cost sharing had fewer restricted-activity days and worried less about their health (120). Despite the potential benefits of cost sharing, the RAND study suggests that cost sharing should be minimal or nonexistent for low-income individuals. Evidence shows that even very low Medicaid copayments are associated with decreased use of necessary care (121). High deductibles may serve as a barrier to receiving high-value, preventive care and treatment after diagnosis. One study found that switching from a low-deductible to a high-deductible employer-based plan was associated with delays in breast cancer diagnosis and chemotherapy initiation among women, regardless of income (122).

These observations lead ACP to recommend zero cost sharing for essential services, particularly for low-income individuals (at a minimum, 138% of the FPL) as well as those with special health care needs, serious illnesses, and chronic conditions. Taiwan, Germany, and Switzerland are examples of countries that cap or eliminate cost sharing on the basis of income, service category, or health condition (123). For higher-income enrollees, cost sharing should be structured to direct patients to effective, patient-centered, high-value care. Value-based insurance design proposals, supported in concept by ACP, reduce or eliminate cost sharing for high-value services and have been shown to increase use of mammography (124) and adherence to medications (125–127).

Most single-payer systems are financed with revenue from payroll, income, or other taxes and do not charge premiums. An exception is Taiwan, which applies a payroll-based premium. A public choice option would probably incorporate premiums and cost sharing. Under a single payer, household health care spending could change depending on how the program is structured and financed. A New York State single-payer proposal (Appendix) is estimated to reduce health care spending for most New Yorkers, with those with household income less than the 75th percentile (up to $185 200) paying on average $3000 less per person on health care and those with household income in the 90th to 100th percentile paying more owing to the progressive tax rate financing structure (128).

The ACP recommends that a public choice model include income-adjusted premium and cost-sharing subsidies. The ACP has recommended extending the ACA marketplace's premium tax credits to people with incomes over 400% of the FPL and enhancing their generosity to make insurance more affordable (7). Prominent public option proposals would cap annual premiums to a percentage of income and limit cost sharing.

Payments and Availability of Health Care Services

4. The American College of Physicians recommends that that in either a single-payer or public choice model, payment rates to physicians and other clinicians, as well as to hospitals and other facilities that offer health care services, must be sufficient to ensure access to needed care and should not perpetuate disparities in current payment methods.

a. Current Medicare payment rates generally are insufficient to achieve the objectives of universal coverage.

b. Physician payment policies must ensure robust participation and not undervalue primary care and cognitive services, including the primary, preventive, and comprehensive care provided by internal medicine physician specialists.

Some single-payer and public choice proposals rely on a fee schedule to determine physician reimbursement. For example, the Physicians for a National Health Plan single-payer proposal (Appendix) would negotiate a fee schedule between the plan and regional physician representatives, with salaries for facility-based physicians. In general, it is estimated that under most single-payer proposals, overall physician compensation would decrease, administrative burdens would be relieved, and demand for services would rise.

A prominent Medicare-for-all proposal would base payment on a fee schedule similar to Medicare's, and independent evaluations make different assumptions on physicians and other clinician payment. The Mercatus Center (129, 130) estimates that “provider” payment would be level with current Medicare rates (estimated to be 40% lower than private payer reimbursement rates), and Thorpe (131) assumes a blended payment rate of 105% of costs. The Urban Institute (132) assumes that physician reimbursement would be at Medicare rates, but notes that “payment rates may in fact have to be higher, at least initially and perhaps indefinitely, to be acceptable to providers,” which would also raise federal spending and could temper utilization owing to insufficient capacity. RAND (114) estimates that under national single-payer health plan payment changes, “providers' willingness and ability to provide health care services—including the additional care required by the newly insured and those benefiting from lower cost sharing—would most likely be limited.”

Berenson and colleagues (133) concluded that if physician compensation was based on the Medicare fee schedule instead of the multipayer mix, median annual compensation would decline by 12%, with large variations by category and specialty. Primary care internists would see their mean annual compensation drop by about 8%. The impact of uniform Medicare rates and increased billable hours would vary for different specialties. Some nonsurgical, nonprocedural practices (such as endocrinologists and nephrologists) may experience higher incomes, whereas surgeons and radiologists may see lower compensation. However, the immediate impact on compensation may depend on physicians' current patient mix: A physician who cares for a disproportionate number of Medicaid patients may see compensation rise, whereas those who care for mostly privately insured patients may see compensation drop (134). According to the American Medical Association 2016 benchmark survey, the average general internal medicine physician patient share was 38% Medicare, 11.9% Medicaid, 40.4% commercial health insurance, 5.7% uninsured, and 4.1% other payer (135).

The health systems in some countries allow physicians to charge certain patients an amount on top of the public fee, similar to the balance billing that U.S. Medicare allows for nonparticipating physicians. The ACP believes that, whether a single-payer or public choice option, the U.S. system should reimburse at rates sufficient to ensure robust participation that makes balance billing largely unnecessary. If permitted, balance billing should be limited so as not to discourage care, especially among low-income patients. The growth of balance billing in France has raised concerns about access to specialists for those unable to pay additional fees (136).

Other policies should be adopted to ensure physicians are available to meet the higher demand for medical care. In a set of recommendations for a state-based single-payer program, Hsiao and colleagues (137) recommended including medical malpractice reform (specifically the no-fault administrative compensation system that ACP supports pilot testing [138]), enhanced loan repayment programs, and community hospital improvements.

Primary Care and Payment Reform

The U.S. shortage of primary care physicians impedes access to high-quality care (139). Medicare beneficiaries are more likely to have trouble finding a primary care physician than a specialist (140). Racial and ethnic minority beneficiaries report longer wait times and higher rates of forgoing care than non-Hispanic white beneficiaries. The U.S. Medicare fee schedule undervalues primary care compared with specialty services (141). In 2017, according to MedPAC, median primary care compensation was much lower than specialty care, raising concerns about fee schedule mispricing primary care (140). The Center for American Progress' Medicare Extra for All proposal (Appendix) would provide a modest boost to primary care physicians, but it is unclear whether it would reverse the primary care shortage or balance the primary care–specialist pay disparity (142). Countries with universal coverage also experience primary care shortages. In the 2000s, Canada raised reimbursement and increasing hospital funding to reverse physician workforce shortages and long waits for surgery (143).

In a public choice system, the continued existence of commercial employer plans, which typically pay physicians more than Medicare, may help to offset lower public plan pay rates, but this is not guaranteed. Medicare Advantage rates closely track Medicare fee-for-service rates (144). Proponents of public choice proposals, including Medicare Part E developer Jacob Hacker, believe that adopting Medicare rates will cause commercial rates to drop. Likewise, the Medicare Extra for All proposal would extend Medicare-based payment rates to employer-sponsored plans. The public choice approach, in addition to not having the administrative efficiencies of a single-payer system, could reduce access if payments are reduced to an extent that makes practices unsustainable. As stated previously, any system that the United States implements should not adopt the imperfections of the existing Medicare fee-for-service model that rewards high-volume, procedure-oriented specialties over complex cognitive care delivered by primary care physicians. The ACP has long supported the patient-centered medical home, a primary care delivery model that promotes team-based, coordinated care. Early evidence on the Nuka System of Care, a patient-centered medical home model designed to provide integrated, multidisciplinary care for the Alaska Native and American Indian population, indicates that emergency care use (including for asthma) declined after implementation (145, 146). The value of primary care is discussed further under recommendation 8.

The ACP believes that, whether a single-payer or public choice model, physician participation should be voluntary and physicians should not be required to be employed by the government, as in the United Kingdom's National Health Service. The Medicare for America Act (Appendix) would allow enrollees to see any physician that participates in the Medicaid or Medicare programs. ACP policy supports a public option in which physicians' participation is voluntary, as it is in the current Medicare system. The ACP opposes clauses in insurer contracts that obligate the physician to participate in any plan offered by an insurer.

Mandatory Versus Voluntary Coverage

5. The American College of Physicians believes that an automatic and mandatory enrollment mechanism should be developed under either a single-payer or public choice option system. In a public choice system, employers should be required to offer comprehensive coverage to their employees (and families) that is at least as generous as the public insurance option or pay a portion of the cost of their employees' public insurance plan coverage (that is, “pay or play”).

To achieve universal coverage, enrollment in any new U.S. system must be mandatory or automatic as it is in most countries, including those with social insurance or managed competition structures (147). Most single-payer proposals involve governmental administration, are funded by taxes, prohibit the sale of substitutive or duplicative private insurance, and include an automatic enrollment mechanism. Automatic enrollment could also be a feature of a public choice system.

In a public choice system, employers could opt to subsidize their employees' public insurance or offer their own coverage. This may require new regulations for employer-sponsored insurance plans, including actuarial value requirements. For example, the Medicare for America legislation (Appendix) would mandate that large employers that offer insurance ensure that it has an actuarial value of 80%, equivalent to a gold-level marketplace-based plan, and has benefits resembling the new Medicare program. Without these important safeguards, the more generous public insurance plan would attract a disproportionate share of sicker people, which would increase claims and premiums. Employers should be required to provide information on the public choice insurance program to employees during open enrollment.

Currently in the United States, immigration status affects eligibility for government-subsidized health insurance. Undocumented immigrants are generally ineligible for federal insurance programs, such as Medicaid, and are barred from buying marketplace-based insurance. Many eligible noncitizen legal residents can enroll in Medicaid after a waiting period and may be eligible for subsidized marketplace-based insurance. United States immigration law has long sought to restrict lawful permanent residence for noncitizens who may become eligible for certain government services (public charges), and the Trump Administration has extended this policy to Medicaid and other health programs (148). Although immigration status barriers for public health insurance programs may help ensure that the country's resources are being spent on its citizens, they deny the public and personal health benefits of coverage (149, 150). For example, undocumented immigrants are unable to access Medicare coverage for standard dialysis (151). One study shows that undocumented immigrants with chronic kidney disease who receive emergency dialysis have higher mortality and spend more days as inpatients than patients who receive standard dialysis (152). Undocumented individuals living in the United States are nearly 5 times as likely as citizens to be uninsured, even though about 85% are working or have a family member who is employed (153).

In 1982, the U.S. Supreme Court ruled that denying a child the right to attend public school on the basis of immigration status violates the Equal Protection Clause of the 14th Amendment. The court concluded that the societal harms of denying these children access to public education outweighed concerns about finances or impact on the quality of education for citizen children. It is unclear whether this precedent would apply to noncitizen eligibility for public health insurance, but ACP recognizes that there are public health and societal benefits of ensuring that all persons residing in the United States, regardless of immigration status, have access to health care services. In the 2011 position paper “National Immigration Policy and Access to Health Care” (154), ACP recommended that “[a]ccess to health care for immigrants is a national issue and needs to be addressed with a national policy.” Immigration policy should not interfere with health care professionals' obligation to care for sick persons and should not foster discrimination in the provision of health care. At a minimum, whether in a single-payer or public choice approach, undocumented immigrants and other ineligible populations should be permitted to buy unsubsidized public insurance. The ACP also recommends adequate funding of programs that serve the noncitizen uninsured population.

Administrative Requirements and Costs

6. The American College of Physicians believes that relief from health care system administrative requirements should be a priority under either a single-payer or public choice model. To the furthest extent possible, billing and quality measure reporting should be standardized and streamlined.

Physicians in the United States face a barrage of administrative tasks related to billing, electronic health records, and performance measurement. Administrative burdens contribute to physician burnout, which is costly (155) and may raise the risk for medical error (156). Physician practices in the United States spend much more than their Canadian counterparts on administrative activities (24).

Some U.S.-trained physicians choose to practice in Canada in part because of frustration in dealing with administrative burdens in the pluralistic U.S. system (157). A benefit of a single-payer system is a reduction in these burdens and associated costs could offset any reductions in pay. A survey of Massachusetts physicians found that a majority would trade a 10% reduction in income for a substantial reduction in paperwork (158). The Congressional Budget Office notes that administrative costs would be lower in a single-payer than in a multipayer system (102). Recommendation 9 also addresses administrative costs.

One analysis of a Medicare-for-all proposal estimates that physicians would have an average of 4 hours of freed time per week to direct to billable patient care (159). The same analysis estimates that average annual physician compensation would decline by 7% to 9%, but be somewhat offset by an 8% increase in billable hours. An evaluation of a different national Medicare for All proposal estimates that total clinician administrative spending would drop by 32.6% (114).

Financing of Coverage and Treatment of Special Populations

7. The American College of Physicians recommends that a single-payer or public choice model be financed through government spending, employer contributions, progressive taxes on income, tobacco and alcohol excise taxes, value-based cost sharing, reallocation of savings from reduced spending on administration, and system-wide savings and efficiencies described in this paper.

a. Health care programs that serve special populations, including the Veterans Health Administration, Medicaid long-term services and supports, and Indian Health Service, should continue to operate alongside the new program.

Estimates vary about whether a national single-payer system would save or cost more than current national health expenditures. The majority of national health expenditures would shift from a mix of public, employer, enrollee, and other spending sources to the federal government. RAND estimated that if a national single-payer system was implemented in 2019, total national health care spending would increase by 1.8%, but assumed that there would be unfulfilled demand owing to a constrained supply of physicians and hospitals and coverage of long-term care (114). The increase in federal spending results from its absorption of current spending by state and local governments, employers, and individual households (114). Single-payer proponents argue that savings will accrue from lower administrative costs, prescription drug spending, and reimbursement rates. However, these savings are likely to be offset by the expanded benefit package and higher demand.

The ACP believes that a single-payer system could garner savings with judicious cost sharing, prescription drug price negotiations, and a benefits package that focuses on high-value care. Furthermore, financing should be progressive with contributions dependent on income. Explicit means-testing of programs (denying high-income individuals access to the program) should be discouraged. Single-payer financing decisions may have broader economic ramifications. The Congressional Budget Office has noted, “The choice of tax structure would also have different implications for the labor supply and people's consumption of goods and services” (102).

The ACP recommends that public programs that cover special populations, including the Veterans Health Administration and the Indian Health Service, continue to operate alongside the new model. As mentioned elsewhere in this paper, Medicaid should continue to provide long-term services and supports. As a result, state Medicaid programs would still have a financial and administrative responsibility in the new system.

Transitioning to Universal Coverage

If the United States adopts a single-payer system, policymakers would need to develop and implement a transition process that minimizes confusion and disruption while ensuring stable coverage. Funding for public insurance programs, including traditional Medicare, a portion of Medicaid, and CHIP, would probably be consolidated into the new single-payer plan. The health insurance industry employed nearly 540 000 people as of January 2019 (160), and private insurers will see their roles diminished or eliminated. Although specific policies are outside the scope of this paper, transition plans should consider supporting those in the current insurance workforce with resources for career retraining, transition to similar employment in the new system, or other initiatives.

Roughly 160 million people would lose existing employer-based health coverage if the United States adopts a single-payer system, but major health care system transformation is not without precedent. Medicare benefits were available less than 1 year after the program was signed into law (161), despite the necessity of compromises with hospitals, physicians, and other stakeholders (162). Stop-gap coverage options, such as broadening eligibility to the Medicare, Medicaid, and ACA marketplace plans, should be established during the transition to the new system. The ACP supports establishing a public option in the ACA marketplace (163), and more generous financial subsidies for ACA marketplace plans (7). A Medicare buy-in option for persons aged 55 to 64 years should also be created. In addition, a major public education campaign will need to raise awareness about the new plan.

The ACP envisions that transition might occur as follows:

First, close gaps and stabilize the markets created by the ACA, including creating a public option in all individual insurance exchanges, expanding Medicaid to lower-income persons in all states, and ending the income eligibility cap for premium subsidies and creating a Medicare buy-in for persons aged 55 to 64 years, as ACP has previously recommended as a way to improve the ACA (7, 91).

Next, transition to a publicly financed option for all who want it while allowing individuals to keep private coverage that meets federal requirements, with mechanisms to ensure that everyone is enrolled in a qualified plan.

Over time, if most Americans choose the public choice plan, the United States could transition entirely to a single-payer system.

Part 3: Strategies for the United States to Lower Health Care Costs

ACP Policy Positions and Recommendations: Investing in Primary and Comprehensive Care

8. The American College of Physicians supports greater investment in primary care and preventive health services, including support for the unique role played by internal medicine specialists in providing high-value primary, preventive, and comprehensive care of adult patients.

Primary care is essential in the prevention and early detection and treatment of disease, which can help to avoid costlier future care. Only between 6% and 8% of health care dollars are spent on primary care (164), but greater use of primary care is associated with decreased health expenditures, higher patient satisfaction, fewer hospitalizations and emergency department visits, and lower mortality (165). Recent state-level analyses show an association between investment in primary care and reductions in emergency department visits, total hospitalizations, and hospitalizations for ambulatory care–sensitive conditions (166). United States markets with larger numbers of primary care physicians have lower costs and higher quality of care (164). Data suggest that investments in primary care physicians in Medicare would result in an overall drop in total Medicare costs (167). Small increases in the number of primary care physicians (1 primary care physician per 10 000 individuals) have been associated with lower all-cause, stroke-associated, and infant mortality (168). Furthermore, primary care is integral in caring for people with chronic disease, a demand that will become increasingly critical as the U.S. population ages (169).

Increased emphasis on primary care is also critical in addressing downstream costs. States that have invested in primary care have seen cost-savings, particularly those states that have adopted the patient-centered medical home. A study of Oregon's Patient-Centered Primary Care Home Program found that $1 invested yielded $13 in savings downstream (170). Rhode Island, assisted by the Center for Medicare and Medicaid Innovation, made large investments in primary care resulting in 95% of practice sites certified as medical home sites, a shift that might reduce costs (171). A study that compared patient-centered medical home and traditional primary care sites suggested that the former saved 5% (172). Initiatives to increase investment in primary care should align with the Patient-Centered Primary Care Collaborative's recommendations, including standardized metrics, broad stakeholder participation, targeted strategies, aligning payment incentives, and evidence-based outcome evaluation (173).

The ACP believes that an effective approach to reducing or slowing the growth of health care costs should recognize, support, and sustain the role that internal medicine specialists play in delivering high-value, patient- and family-centered care, by virtue of their unique training and skills in primary, preventive, and comprehensive care, particularly in diagnosing and treating adult patients with complex medical conditions. This will require researching, distinguishing, and defining what aspects of the training and skills internal medicine specialists contribute to high-value care, and how those skills and training compare with those of other primary care clinicians. This approach will also require developing and implementing public policies, delivery and payment reforms, and workforce policies shown to be effective in supporting and sustaining ambulatory-based internal medicine as an essential component of a health care system oriented toward facilitating high-value care, and addressing existential threats to ambulatory-based internal medicine. Reaffirming the value of patients having an ongoing relationship with an internist or other primary care physician leading an integrated and multidisciplinary team of clinicians dedicated to achieving the best possible outcomes for patients, as part of developing and implementing a broader strategy of supporting the role of primary care physicians in achieving better outcomes at lower costs, is also necessary.

Reducing Excessive Pricing and Improving Efficiency

9. The American College of Physicians supports efforts to reduce excessive list prices for goods and services, reduce price variation not associated with differences in the cost of providing services, reduce administrative costs at the system level and at the point of care, and improve the efficiency of the health care system.

The ACP believes that there is an immediate need for policy changes to slow spending growth, primarily in health care administrative costs, prescription drug pricing, and low-value care. Highly variable pricing for public and private payers as well as patients also need to be addressed.

Administrative Costs. Health system reforms, such as the Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act, have spurred exceptional growth in health care administrative costs. From 1975 to 2010, the number of health care administrators increased 3200% while physician numbers increased only 150% (174). The need for administrators increased in part to meet needs, such as those in health information technology, but also to complete increasingly complicated billing and insurance-related tasks. For example, in 2013, the Duke University hospital system employed 1600 billing clerks despite having only 957 hospital beds (175).

Many proposals to reduce administrative costs center on reducing complexity and relying on health information technology. In the current U.S. system, each payer sets their own rules with regard to claims submissions, claims reconciliation, and payment requirements, and the payers are subject to different regulations on the basis of the type of plan. For example, plans covered under the federal Employee Retirement Income Security Act are subject to less stringent federal regulations than plans that must adhere to state and federal regulation. Administrative costs account for 25% of overall U.S. hospital spending, twice that of Canada and Scotland (29). Reducing per capita hospital administrative spending to that of Canada would have saved the United States $158 billion in 2011.

In 2017, ACP called for research on administrative tasks, such as billing and insurance regulation (176). In particular, research is needed to address the variance in regulations across clinical settings. In a study, researchers examined bills throughout an academic medical center and found that 3% of surgical procedure revenue and 25% of emergency department visit revenue goes to administration (177). The ACP reaffirms the need for rigorous research on the effect of administrative tasks on the health care system.

Prescription Drug Costs. United States policy related to prescription drug pricing has garnered considerable attention from government officials, policymakers, and the general public. Patient responsibility for drug costs increased from $59.5 billion in 2012 to $65.8 billion in 2016, despite increased use of generic drugs and ACA-related out-of-pocket maximums (178). Discounts related to coupons and Medicare Part D may shield patients, but individual out-of-pocket costs vary (178). Spending on specialty drugs in the Medicare Part D program rose from $8.7 billion in 2010 to $32.8 billion in 2015, comprising 30% of prescription drug spending although only 1% of prescriptions dispensed (179).

Numerous proposals at the federal level aim to improve transparency and regulation to the prescription drug market and to introduce tools used by private insurance to the Medicare Part D program to reduce costs and reform the pharmacy benefit management industry. Although these proposals may transform the prescription drug market over the long term, ACP recognizes that short-term strategies are also needed to rein in out-of-pocket drug costs. The ACP has long-standing policy supporting government negotiation of prices in Medicare Part D, as well as other policies that support prescription drug price transparency and increasing competition in the prescription drug market and opposing anticompetitive behaviors that keep lower-cost drugs off the market (180).

Investments in Health Care Infrastructure. In 2014, Sheppard (181) argued that the practice of medicine has always had a business component. Currently, hospitals and health systems must compete to attract new consumers and drive revenue through the delivery of health care services. Health systems must grapple with new regulations, legal issues around absorbing or forming practice groups, and maintaining and updating technology and facility infrastructure, among other issues. Hospital administrative costs appear to be driven by the complexity of the reimbursement system and the mode of capital funding. In the United States, the main source of capital funds stems from surpluses of day-to-day operations, creating incentives to create profit opportunities facilitated by increasingly complex billing systems (29). Hospitals in France and Germany, which have diagnostic-related grouping billing similar to those in the United States, receive a substantial share of capital from the government and have relatively low per-patient administrative costs (29).

The American Hospital Association has identified 6 major federal capital financing programs that support hospitals (182) and additional, smaller opportunities may be available. The major programs are spread across federal agencies, including the U.S. departments of Agriculture, Commerce, Housing and Urban Development, and Treasury and the U.S. Small Business Administration, with primary goals of economic development and job creation or retention in rural or underserved communities. Because most capital financing programs that assist hospitals limit those eligible to primarily rural or underserved communities, there is little research on how federal investment in larger health systems in more populous areas might impact administrative costs by relieving the pressure to produce revenue for capital expansion projects or modernization. Additional research could be conducted to determine whether additional capital financing grants for U.S. hospitals could result in cost savings in the current health care financing environment.

Overtreatment, Low-Value Care, and Preventable Diseases

10. The American College of Physicians supports greater efforts to reduce low-value care and reduce costs associated with preventable disease.

Overutilization of low-value care contributes to the high cost of U.S. health care. It is estimated that $760 to $935 billion is wasted annually in the health care system, with overutilization or low-value care accounting for $75.7 to $101.2 billion annually (183). Although the United States is not alone in overutilization, particularly overuse of antibiotics, it leads in overutilization of many services, including imaging services, repeated colonoscopy or chest computed tomography, and diagnostic allergy testing (184). In 2012, the ACP was one of the first 9 specialty partners in the American Board of Internal Medicine's Choosing Wisely campaign to promote high-value care, an effort that has generally been considered a success. However, additional efforts are needed to reduce the overuse of low-value services that are frequently performed and may represent a large share of revenue (185).

Medical liability, fee-for-service reimbursement, and other financial incentives are often cited as reasons for overutilization. However, local practice patterns can also affect the care patients receive (186, 187). Medical liability reform is often cited as necessary to address high health care costs in the United States. A National Bureau of Economic Research working paper examining the military health care system, in which physicians have medical liability immunity, showed that active-duty patients receiving care on a military base were treated less intensively than elsewhere, without adverse health consequences (188). The researchers concluded that providing medical liability immunity could reduce inpatient spending by 5%. The ACP has proposed medical liability reform with a focus on patient safety and reducing errors and including caps on noneconomic damages, piloting communication and resolution programs, and safe harbor protections for physicians who provide care consistent with evidence-based guidelines (189).

One quarter of Medicare dollars are spent during the last year of a beneficiary's life (190). Although there is a need to address these costs, the focus should be on providing high-value, patient-centered care at the end of life and recognizing the potential value palliative care when appropriate (191). Specialist palliative care “[focuses] on symptom management, quality of life, and delineating goals of care in patients with serious illness, whether the goal is cure, prolonging life, or maximizing function and quality of life” (190). Palliative care has been shown to reduce costs, particularly in the hospital setting, and increase patient and physician satisfaction (192). A study of early palliative care interventions in patients with metastatic non–small cell lung cancer found both improved quality of life and survival with early palliative care compared with standard care (193).

According to the Centers for Disease Control and Prevention, 90% of U.S. health care costs are associated with people with chronic medical or mental health conditions (194). Chronic conditions, such as cardiovascular disease, diabetes, and obesity, among others, are the leading cause of death and disability in the United States and accounted for $1.1 trillion in direct health care costs and $2.6 trillion in indirect costs (that is, lost economic productivity) in 2016 (195). Addressing risk factors (196) that contribute to these chronic conditions is important to reducing health care costs and improving population health. It is estimated that by 2030, a total of 83 million individuals in the United States will have 3 or more chronic conditions, up from 30.8 million in 2015 (197). Increased investment in public health interventions that target chronic health conditions leads to lower costs and high returns on investment. For example, for every $1 spent on tobacco cessation programs the average return is $1.26 and the economic impact of reducing youth smoking by the Truth campaign is estimated to have saved the United States $6.80 for every $1 invested (198). However, public funding for public health represents a relatively small share of health spending and continues to be underfunded (199). Additional investment is needed at the federal, state, and local levels to keep pace with Americans' health care needs.

Global Budgets and All-Payer Rate Setting

11. The American College of Physicians supports greater adoption of innovative all-payer models, a global budgeting model, or health care growth benchmarks, informed by the experiences of states that have implemented such approaches.

The use of rate setting or oversight of payments from public and private payers is not a new concept in the United States. Prospective hospital rate setting was once a popular policy option, with as many as 30 states implementing programs by 1980. However, deregulation—attributable to the rise of managed care and political, economic, or institutional factors—reduced the number of states participating in these types of programs to 2 by 1997 (200). However, policymakers are again considering whether all-payer models and global budgets can limit unsustainable spending growth.

Currently, although virtually all patients are charged the same list price, actual payments vary widely on the basis of negotiated discounts. For example, a hospital may receive reimbursements from more than a dozen different health insurers and health plans, each with its own payment schedule. In addition, Medicare and Medicaid have their own rules for paying hospitals. All-payer systems use the same payment rates for all patients who receive the service or treatment from the same clinician or hospital. Rate setting is used to determine per-service or per-case rates, and the reimbursement a clinician or hospital receives for a given service is the same regardless of who pays. Different payers do not pay different rates for the same service.

Maryland and Vermont All-Payer Models. Maryland currently operates the only all-payer hospital rate regulation system in the United States. Maryland hospitals operate on a waiver from the Centers for Medicare & Medicaid Services that allows the state to set rates that all third parties pay for inpatient and outpatient services. The system stemmed from a legislative edict around 4 principles: efficiency, access for all, equity among payers, and solvency for all efficient and effective hospitals (201). The model is on track to meet targets for both patient safety and savings and has successfully saved Medicare $586 million in hospital payments and $461 million in total health care costs between 2014 and 2016 (202). The model reduces these expenditures without shifting costs to other parts of the health care system outside of the global budgets; however, there was no statistically significant impact on total expenditures or total hospital expenditures among the commercially insured (202).

Maryland's all-payer system also includes a global budget. Global budgeting is “the process by which society chooses, directs, and enforces how much to spend on health care, what to spend it on, and where that spending will take place” and is mostly utilized in the hospital setting (203). Global budgets give hospitals clear incentives to manage provision of care within a defined budget. One of the clearest incentives is to reduce the number of admissions that the global budget must cover, an important approach to reducing hospitals' variable costs. Global budgets imply that all payers participate and thus is simpler to operationalize in a single-payer or all-payer environment. Global budgets may have either a “hard” or “soft” cap. In systems with a hard global budget, the hospital's payment is limited to the prospectively set global budget amount and clinicians are not reimbursed for all expenditures over the benchmark, creating an incentive to reduce unit costs (204). With a soft global budget, expenditures above the target benchmark may be partially reimbursed. Consensus among policy analysts is that hard global budgets are more effective than soft global budgets in reducing costs, because they rigorously enforce limits on spending and provide spending predictability for payers and health care policymakers. However, once a soft cap is reached, high physician penalties, such as a reduction in fees, may have a similar effect as a hard cap (205).

Evidence from the Maryland all-payer model suggests that acute care hospitals in the state transitioned to global budgets more quickly than projected. However, areas that may also produce cost saving outside of the hospital's control, such as aligning hospital and physician incentives, reducing patient demand, and improving population health, have been slower to take hold (206). Since the model's implementation, the state has identified promoting innovation, technology, and education as part of the program's progress plan and underscored the important role that academic health systems play in fostering the quality of patient care and patient outcomes (207). However, stakeholders need to develop additional policies to ensure that incentives are suitably aligned to balance costs and innovation, and that accountability is not inappropriately shifted to health systems.

In addition to the Maryland all-payer model, the Vermont All-Payer Accountable Care Organization (ACO) Model established state and ACO-level accountability for health outcomes for the state's population, aiming to incentivize the collaboration between the care delivery and public health systems. The Vermont All-Payer ACO Model is distinct from the state's prior consideration and eventual rejection of a single-payer financing system. There has been some early success with the Vermont All-Payer ACO Model. High-risk Medicaid beneficiaries in the program are using primary care, behavioral health, and pharmacy benefits at higher rates than other beneficiaries, and the percentage of beneficiaries with early to late-stage disease who did not have a primary care visit fell from 4% to 2%. Emergency department visits and hospitalizations also dropped during the first 9 months (208).

Massachusetts Health Care Growth Benchmark. In 2012, Massachusetts enacted a new law establishing a health care cost growth benchmark, a statewide target for the rate of growth of total health care expenditures (THCEs). The THCE includes all medical expenses paid to “providers” by public and private payers, all patient cost-sharing amounts, and the net cost of private insurance. The THCE is calculated on a per capita basis to account for population growth and includes both public and private payers to reduce the likelihood of cost shifting. The law also established the Health Policy Commission (HPC) responsible for regulating costs and setting annual limits on health care cost growth for providers and payers. The HPC does not set rates, instead relying on transparency to steer the market. The HPC monitors the health care market and develops policy to support a sustainable health care system. Since 2016, the HPC has had the authority to require health care entities, including physicians, hospitals, physician groups, and insurance carriers, with excessive cost growth that threatens the cost growth benchmark to implement performance improvement plans and submit to ongoing monitoring (209).

In 2014, statewide health care spending increased by 2.3%, which was 1.3% below the 2013 benchmark. In the second year, statewide health care expenditures increased 1.2% over the benchmark. The HPC found that over one half of this growth was due to prescription drug spending and higher Medicaid enrollment from the ACA's eligibility expansion. As a result, no health care entities have been required to implement performance improvement plans (210).

The ACP believes that all-payer models, global budgets, or health care cost benchmarks play a role in reducing health care cost expenditures. However, implementing these types of policies alone cannot address unsustainable cost trends. For these models to be successful, stakeholders, including physicians, policymakers, patients, and the public, must be supportive of the effort and work to assess, identify, and align the needs of all parties, and include appropriate funding levels and merits for success.

12. The American College of Physicians recommends ongoing study of implemented health system budget reforms that measure the potential effects of the policy changes and identify and mitigate unintended consequences.

The ACP believes that when developing or implementing strategies to reduce health care costs and promote high-value care, efforts should aim to mitigate potential negative downstream effects. Policymakers should be committed to continuously refining strategies implemented to reflect consumers' needs and the health system landscape.

Hospitals and physicians look to consolidate in order to increase market share or expand capabilities. One study showed that hospital consolidation improved integration and reduced duplicative practices and costs, leading to operating cost reductions of 15% to 30% (211). Other literature has shown that the merging of 2 hospitals results in substantial price increases, especially in concentrated markets (212). Since 2010, health care markets have become more concentrated, physicians have joined larger physician groups and organizations, and more physicians are employed by hospitals (213). Although consolidation in the health care market is not inherently negative, too much market concentration as the result of consolidation may result in increased costs. The same study that found cost reductions resulting from hospital consolidation also found that these lower operating costs did not translate to lower prices paid by patients. In fact, it found that hospital consolidation led to price increases of 6% to 18%. If implementation of a global budget or all-payer system is being attempted, special attention should be paid to whether the program is structured in such a way that it could result in consolidation of hospitals or health systems and that creates market concentration negatively affecting patient costs and access, particularly in rural communities. Such effects were seen in Taiwan after the introduction of global budgets (214).

There are many policies that do not prohibit consolidation but would add additional layers of transparency and regulation to mergers needed to evaluate and modify policies as needed. These include requiring data transparency, cost containment, and leveling of prices that align with other ACP recommendations on reducing the cost of care. For example, private and public insurers should make detailed claims data readily available to public agencies and private researchers, enabling researchers and government officials to assess how the latest types of consolidations affect both costs and quality (215). In addition, regulatory agencies that are tasked with enforcing antitrust law could focus explicitly on this trade-off when they examine health care and health insurance markets (216).

Special attention should be paid to underserved or disadvantaged communities and populations, such as those in rural areas, health professional shortage areas, or communities with a high prevalence of negative health outcomes associated with social determinants of health. Access to care is a social determinant, because areas negatively affected by social determinants can lack health care facilities or physicians. Hospitals and physicians are moving away from urban areas and areas with low-income populations into more affluent areas, affecting the ability of patients in these areas to access care. The number of hospitals in 52 major U.S. cities dropped by nearly one half, and more than one half of federally designated primary care shortage areas in those major metropolitan areas have high poverty rates (217). Underlying social and economic conditions are primary drivers of social determinants of health, and ensuring that all-payer models, global budgeting models, or other approaches consider the needs of the community at large will be critical to the success of these programs and population health.

Reference Pricing

13. The American College of Physicians supports the adoption of well-designed reference pricing programs for certain elective health care goods and services based on timely, accurate, and accessible local market pricing data supported by all-payer claims databases (APCDs).

The price of health care goods and services in the United States is highly variable. Reference pricing, a cost-containment tool where a payer or employer sets a maximum amount that it will contribute to a good or service and the enrollee pays the remainder, has been used by a number of European Union countries and tested in the United States. Reference pricing i