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Saturday, August 11, 2018

The economics of single payer health coverage in Rhode Island

Savings under a proposed single-payer
health-care system in RI
Would health care in Rhode Island cost less if everyone had access to it? 

The question, brought to the national stage in arguments surrounding Sen. Bernie Sanders’s Medicare for All plan, came to Rhode Island repeatedly, whether it was when Democratic gubernatorial candidate Matt Brown announced his own Medicare for All plan, or in reactions to Ted Nesi’s report that a Blue Cross & Blue Shield CEO received a $1.15 million payout a full year after he stepped down.

Two days before the state learned of that exorbitant sum, a spokeswoman for Governor Raimondo told the Providence Journal that the Affordable Care Act “is working in Rhode Island.” 

But for Jerry Friedman, an Economics professor at the University of Massachusetts who has been studying Rhode Island’s health-care costs, massive administrative bonuses are just one reason why he doesn’t think that’s the case.

“I don’t know what she means by working,” Friedman told me on Thursday. 

“Yeah, Rhode Island has done a good job compared to the rest of the country, but there’s still a lot of uninsured people and a lot of underinsured people. So a lot of people are dying in the state because they don’t have health care or they don’t have access to health care.”

In 2015, Friedman authored a study on the potential savings and costs of a single-payer system in Rhode Island for the group Physicians for a National Health Program (PNHP). He told me Matt Brown’s campaign reached out to him last week to ask him questions about the report’s findings. 

In it, Friedman argues that even under the ACA, and even while the state has one of the lowest rates of uninsured residents in the country (4 percent in 2015, and 4.8 percent in 2016), 116 Rhode Islanders die every year due to lack of insurance coverage. 

Single-payer, guaranteeing protection for all residents, would also save the state approximately $4,000 per resident by 2024, save health-care providers $1 billion in administrative costs during the first year alone, and make the state’s businesses more profitable and competitive.

As previously reported on this site, the Mercatus Center, a Koch-funded think tank, released a report this week which generally aligns with Friedman’s emphasis on savings on a national scale, reporting that the country would save $2 trillion over a ten-year period using single-payer. 

Following the release of the Mercatus study, Friedman did a 10-year estimate making “reasonable changes in their [conservative] assumptions” on increases in health care utilization, savings in administrative costs, and reductions in drug prices. 

He also bent the curve of cost increases over time to align with other countries; Friedman says that it wasn’t until 1971 that the US began to be significantly more expensive, the year Canada adopted its single-payer program. 

In Canada, health-care prices have risen in line with the Consumer Price Index (CPI), Friedman points out. Even in the US, Medicare prices—as opposed to private insurance rates—rise only as fast as the CPI as well.

His own estimate after updating the Mercatus study: savings of $12 trillion over 10 years. His approach reveals what conditions in the US have led to skyrocketing prices compared to the rest of the world: “All increases in US prices is in the private insurance sector, where all the administrative bloat is built up and monopoly pricing has come.” 

He gave an example of the Partners HealthCare network in his home state in Massachusetts, which has jacked up prices for select procedures to be four times as much as comparable institutions, targeting those with serious health concerns who may have no other choice than to go to an elite hospital equipped for their needs.

These exploitative price hikes are built into costs like the enormous Blue Cross payout revealed Wednesday, as well as comparably large payment packages for hospital executives across the state, many of which exceeded $1 million in a list published by the Wall Street Journal last year

“All these people getting paid a lot of money—that’s waste and abuse,” Friedman said. In addition to countering administrator’s bonuses and monopoly pricing, he argues that single-payer will increase the accessibility of care by reducing the insurance paperwork required of providers. Currently many doctors spend upwards of 10 percent of their time on such paperwork, and RNs can spend all day on the phone with insurance companies, ”a complete waste of talented and trained people.”

Even in the face of such potential benefits, Friedman was forthright about the political barriers to a single-payer system. In order to fund the transition, you’d have to increase taxes—by a lot. 

“If you transfer the private insurance side to the public, you’re going to be raising taxes by 6 percent or 7 percent of the GDP,” Friedman admitted. 

“That’s a huge amount, and if you’re doing it on the state level, you’re basically doubling the size of the state budget and state tax revenues. It’s unavoidable.” 

And with the report’s proposal to index health-care costs by one’s ability to pay, and not by sickness—the opposite of a multi-payer system—the redistributed financial burden onto high-earners could be seen as a daunting restructuring of the country’s economic safety nets.

Many of the Friedman’s savings, however, are ones that you wouldn’t even stop to think about on a daily basis: the hidden costs of goods and services associated with businesses’ health-care expenses, or the potential for higher wages when employees’ health care is paid through a payroll income tax, rather than as a separate (and costly) expense. 

If Rhode Island adopted universal coverage before Massachusetts or Connecticut, he says, businesses would flock over our state borders due lower labor costs, and those businesses currently in Rhode Island would expand. Friedman is confident that, in total, these combined savings would more than offset the increase in taxes for all but the wealthiest Rhode Islanders.

For all Friedman’s number crunching, however, one of his most central arguments for protecting the health of every citizen can’t be reduced to his field of economics. “It really changes society to know that you’ll be safe if something happens—that I’ll be OK, my family will be OK. I won’t bankrupt my kids.”

Will Weatherly is a contributor to RI Future and a senior editor at the College Hill Independent. He lives in Providence, RI. You can follow him on Twitter @willbweatherly.