Congressional Budget Office: Here's what would happen if the US implemented single payer 

Congressional Budget Office Director Phillip Swagel testified before the Senate Budget Committee May 12 to discuss how implementing a single-payer healthcare system based on the Medicare fee-for-service program would affect the nation's healthcare, budget and economy.

The CBO analyzed five potential options where the single-payer system would replace private health insurance plans and Medicare. It would also replace all of the coverage provided by Medicaid — except that under most of the options, Medicaid would continue to provide long-term services and support.

Option 1: Higher payment rates, higher cost sharing, no long-term services and support.

Option 2: Lower payment rates, higher cost sharing, no long-term services and support.

Option 3: Lower payment rates, lower cost sharing, no long-term services and support.

Option 4: Higher payment rates, lower cost sharing, no long-term services and support.

Option 5: Higher payment rates, lower cost sharing, coverage of long-term services and support.

Effects on healthcare and the budget relative to what would occur under current law:

  • Federal subsidies for healthcare in 2030 would see an increase ranging from $1.5 trillion to $3 trillion.

  • National health expenditures would change by amounts ranging from a decrease of $700 billion to an increase of $300 billion depending on the system's design. 

  • Health insurance coverage would increase, as virtually all U.S. residents would be enrolled in the system.

  • The total amount of out-of-pocket costs would be smaller.

  • The supply of personal healthcare — medical services and goods provided to individuals — would increase because of fewer restrictions on utilization, less money and time spent by providers on administration, and providers' responses to increased demand for care. The amount of care used would rise, and overall access to care would be greater.

  • The increase in demand for personal healthcare would exceed the increase in supply, resulting in greater unmet demand than the amount under current law. Those effects would occur simultaneously because people would use more care and would have used even more if it were supplied. The increase in unmet demand would correspond to increased congestion in the healthcare system, including delays and forgone care.

In a system with high payment rates, the average provider rates would be close to the average of the rates the CBO projects for all payers in 2030 under current law. In a lower-rate system, rates would be 13 percent lower for hospitals and 7 percent lower for physicians, on average. Prices for prescription drugs would be 23 percent lower, on average. 

Outcomes under a lower-rate system:

  • Federal subsidies for healthcare would be 12 percent lower.

  • National health expenditures would be 9 percent lower.

  • The supply of personal healthcare would be 2 percent lower, with the demand for such care roughly unchanged.

  • The demand for personal healthcare that was not met would increase by 2 percentage points.

  • In the long term, payments lower than those projected under current law might cause fewer people to enter healthcare professions and fewer new drugs to be developed. 

  • If providers are unable to adjust to slower growth in payment rates by operating more efficiently and remaining financially viable, they could cease to operate and lead to greater congestion in the system.

Effects on the economy if the system was financed by a payroll or income tax:

  • Gross domestic product would be approximately 1 percent to 10 percent lower by 2030 than the amount projected under current law, and aggregate non-health consumption per capita would change by amounts ranging from an increase of 3 percent to a decline of 7 percent.

  • Lifetime non-health consumption would rise among lower-income households and decline among higher-income households relative to the levels under current law, and the number of lifetime hours people choose to work would be lower for most households across the income distribution.

  • The composition of workers' labor compensation would change because employers would no longer provide healthcare benefits and would pass along the savings to employees, increasing their taxable wages.

  • Health insurance premiums would be eliminated and out-of-pocket healthcare costs would decline.

  • Because administrative expenses in the healthcare sector would decline, productive resources for other sectors would be freed up and would ultimately increase economywide productivity.

  • Reduced payment rates would cause providers to find ways of providing care with fewer resources. A reduction in payment rates would initially lower wages for workers in the healthcare sector and throughout the supply chain. In the long term, the effect on wages would diminish as labor markets adjusted.

  • Longevity and labor productivity would increase as health outcomes improved.

  • Long-term services and supports, if included in the new system, would further reduce out-of-pocket spending, provide payments for care that is currently unpaid, increase wages among workers providing care and allow some unpaid caregivers to increase the hours they work at their primary occupation.

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