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Congressional Budget Office looks at impact of Medicare for All

Two primary concerns of a single-payer system are how providers would be paid and the rate they would get, both of which would affect revenue.

Susan Morse, Managing Editor

Establishing a single-payer system would be a major undertaking that would involve substantial changes in the extent of coverage, provider payment rates, and the financing methods of healthcare, the Congressional Budget Office said in a report released this week.

Medicare for All would involve significant changes for all participants -- individuals, providers, insurers, employers, and manufacturers of drugs and medical devices.

The CBO gave no cost estimates for Medicare for All because it said there are too many unknowns, but government spending on healthcare would increase substantially under a single-payer system because the government, both federal and possibly state, would pay a large share of all national healthcare costs directly.

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Total national healthcare spending under a single-payer system might be higher or lower than under the current system, depending on its key features, such as the services covered, the provider payment rates, and patient cost-sharing requirements, the CBO said.

The federal government could administer a single-payer health plan at the national level; it could administer some functions and delegate other functions to state and local governments; or state governments could administer the single-payer health plan with broad federal oversight.


A single payer system in Medicare for All, or a combination of a private and public option, are plans being considered by Democrats to ensure all Americans have healthcare coverage.


Two primary concerns of a single-payer healthcare system are the methods it would use to pay providers and set their payment rates, both of which would directly affect government spending, national healthcare spending, and providers' revenues. The impact on providers' revenues would, in turn, affect their incentives to deliver services, the CBO said.

Under the current healthcare system, the rates commercial insurers pay providers for most services are higher than Medicare fee-for-service rates--sometimes substantially higher, the CBO said. Three major insurers' commercial payment rates for hospital inpatient admissions in 2013 were 89 percent higher, on average, than Medicare FFS payment rates for the same types of admissions.


The single-payer system would eliminate insurers' profits.

Because of this and due to the consolidation of administrative tasks, Medicare for All would have lower administrative costs than the current system.

A single-payer system offering comprehensive benefits would probably limit the role of private insurance to three main categories: supplemental insurance for services not included in the single-payer plan such as dental, vision, or hearing; substitutive insurance for people who are not eligible for the single-payer system, such as noncitizens who have recently entered the country or temporary visitors; and other types of private insurance for benefit enhancements, such as faster access to care, private rooms instead of semi-private rooms for inpatient stays, and a greater choice of providers that do not participate in the single-payer system.

If such private insurance was allowed, policymakers would need to decide whether it would be required to cover people with preexisting conditions and whether premiums could vary by health status, age, sex, or other factors, the CBO said.


About 70 percent of U.S. hospitals are privately owned with about half being  private, nonprofit entities; another 20 percent are for-profit. Almost all physicians are self-employed or privately employed.

A single-payer system could retain current ownership structures, or the government could play a larger role in owning hospitals and employing providers. In one scenario, the government could own the hospitals and employ the physicians, as it currently does in most of the Veterans Health Administration system, the CBO said.

A greater government role could also include converting for-profit hospitals to nonprofit hospitals or quasi-public providers. In quasi-public organizations, the government or its appointees would oversee or manage daily operations

A single-payer system could pay participating providers on a fee-for-service basis, with bundled and episode-based payments, through global budgets, by capitation, with a salary, or through a combination of those methods.


Another consideration is whether the government would encourage the use of private insurance through tax credits, tax deductions, or penalties. If employers sponsored the private insurance, policymakers would need to determine whether to exclude employers' premium contributions from taxation.


The benefits of a single-payer system include a substantial reduction in the number of people without health insurance. About 29 million people under the age of 65 were uninsured in an average month in 2018, according to estimates by CBO and the staff of the Joint Committee on Taxation.

Under a single-payer system, enrollees could pay nothing or pay a portion of the cost when they receive care.

Financing for a single-payer system could come from several sources:  Premiums; cost sharing--that is, out-of-pocket payments for services covered by health insurance; and taxes, including taxes that individuals or organizations pay directly to the government, such as income and payroll taxes, as well as taxes on goods and services such as alcohol and cigarettes.

Drawbacks of Medicare for All include: no choice of insurer or health benefits; the benefits provided might not address the needs of some people; and without competition, the public plan might not be as quick to meet patients' needs, such as covering new treatments, the CBO said.


Decisions about which new treatments and technologies would be covered would have a significant effect on patients' access to those innovations, as well as on the development of new treatments and technologies over time and the costs of the single-payer system. An independent board could recommend whether or not new treatments and drugs should be covered after their clinical and cost-effectiveness had been demonstrated--a role fulfilled in England by the National Institute for Health Care and Excellence, the CBO said.


Currently, healthcare spending in the United States accounts for about one-sixth of the nation's gross domestic product.

Almost all people age 65 or older, or about one-sixth of the population, receive coverage through the Medicare program.

CBO and the Joint Committee on Taxation estimated that in 2018, a monthly average of about 243 million people under age 65 had health insurance. About two-thirds of them, or an estimated 160 million people, had health insurance through an employer.

Another quarter of that population, or about 69 million people, are estimated to have been enrolled in Medicaid or the Children's Health Insurance Program (CHIP). A smaller proportion of people under age 65 had non-group coverage, Medicare, or coverage through other sources.

Twitter: @SusanJMorse
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