The Case for a Single Payer System

Posted by Stephen Weinberg, MD FACC FACP

In an effort to discuss the healthcare system and options to finance it, this post will detail the costs associated with the delivery of care.

Each year the government publishes several large databases that detail the expenditures and revenues of the entire country. The data I will provide is for 2013, the year prior to the inception of “Obamacare” in an effort to simplify the analysis. The numbers are drawn directly from the databases. National Health Expenditure Accounts

	$Billion	# people  in millions	$/person
Total personal HC costs	2,725	316	8,623
Govt Admin (Medicare and Medicaid) expenses	37	108	343
Private Health Insurance Admin expenses	174	165	1,055
Govt Public Health	75
Personal Care costs Net of Expenses	2,439	316	7,810
Out of Pocket	325	316	1,028
Private Health Insurance	834	165	5,055
Medicare	561	52	10,788
Medicaid	407	49	8,306
CHIP	11	8	1,375
VA/Military	89
Other Indian, workers comp, etc	212
Uninsured		45

This chart shows total personal healthcare costs were about $2.7 Trillion with overhead of about $286B leaving net personal healthcare costs (the amount actually spent on care) of about $2.4Trillion.

Medicare overhead was about 1.5% of total expenditures (from the Medicare Trustee Report) or $160/person. As you can see, private insurance overhead was about $1,055/person, or approximately 6.6 times that of Medicare. (Remember the prior post regarding the excess costs of private insurers.) If private insurance overhead was the same as Medicare, the total private insurance overhead would be $160x165M people or $26.4B instead of $174B. The savings would be about $148B annually. Additionally, several studies, (Insurance driven overhead, NEJM insurance overhead) have demonstrated that the excess overhead of hospitals, physicians offices, nursing homes, employers, clinical labs, and home care was about $172B in order to deal with the numerous private insurance companies. The total annual cost of excess overhead of our multipayer system was about $320B in 2013.

The real question is “what are we getting for this additional cost?” I would argue, nothing!

There is also a substantial amount of money being spent by individual states and the federal government in order to provide care for the uninsured, as outlined below.  (Also from 2013)

	$B	# people	$/person
Charity care from states, indigent clinics	20
Federal Govt	33
Other public money	10
Increased private insurance premiums*	66	165	400
Subtotal	129
Total Admin savings from 1.5% overhead	320
Total money available	449

*A study by Families USA demonstrated that private insurance premiums are increased by about $400/person per year as a result of providers (predominantly hospitals) obtaining higher reimbursements to offset the losses from Medicare, Medicaid, and the uninsured. Families USA, Hidden Tax

The cost to provide private insurance to all 45M uninsured (including children) was about $188B annually using the private insurance cost numbers from above. As you can see, there is about $449B available and currently being spent. If everyone had health insurance with a single payer at the current overhead of Medicare (1.5%), we would save about $449-$188 = $260B annually and everyone would have comprehensive health insurance. 

Seems like a good deal to me!

More to come.