Testimony Key Design Components and Considerations for Establishing a Single-Payer Health Care System Mark Hadley Deputy Director Before the Committee on the Budget United States House of Representatives May 22, 2019 This document is embargoed until it is delivered at 10:00 a.m. (EDT) on Wednesday, May 22, 2019. The contents may not be published, transmitted, or otherwise communicated by any print, broadcast, or electronic media before that time. Chairman Yarmuth, Ranking Member Womack, and With the balance of my time, I will focus on three sets of Members of the Committee, thank you for inviting me issues that illustrate the complexities involved in design- and my colleagues to testify about the Congressional ing a single-payer system. Budget Office’s recent work on single-payer health care systems. Coverage In a single-payer system that achieved universal coverage, Some Members of Congress have proposed establishing everyone eligible would receive health insurance coverage a single-payer health care system in the United States. with a specified set of benefits regardless of their health Many more people would probably have health insur- status. People who currently have private insurance ance as a result—but the government would take much would enroll in a public plan. more control over the health care system. The effects of such a system on its participants and total health care Under the current system, an average of 30 million spending could vary greatly depending on the details of people per month are projected to be uninsured in 2019. the system’s structure and operation. Most of those people are U.S. citizens and would be covered by a public plan under a single-payer system. Earlier this month, CBO released a report on Policymakers would have a lot of choices to make about single-payer health care systems.1 That report describes how to extend coverage, particularly if each state admin- the primary features of single-payer health care systems istered a separate plan. One of those choices would be and discusses some of the considerations for establishing whether noncitizens who are not lawfully present would such a system in the United States. It represents our first be eligible. An average of 11 million people per month step in a broader effort to support you as you consider are expected to be in that category in 2019, and about the issue and to build our capacity to estimate the costs half of them have health insurance under the current of specific proposals. system. I want to convey two main points this morning. Costs Under a single-payer system, the government (federal or First, moving to a single-payer system would be a major state) would pay a larger share of all national health care undertaking. It would involve significant changes for all costs. In 2017, private sources such as businesses and participants—individuals, providers, insurers, employers, households contributed just under half of the $3.5 tril- and manufacturers of drugs and medical devices. Because lion of total national health care spending. Shifting health care spending currently accounts for about one- such a large amount of expenditures from private to sixth of the nation’s economic activity, those changes public sources would significantly increase government could significantly affect the overall U.S. economy. And spending and require substantial additional government the transition toward a single-payer system could be resources. complicated, challenging, and potentially disruptive. Total national health care spending under a single-payer Second, to establish a single-payer system, lawmakers system might be more or less than it is under the current would need to make many decisions and would face system depending on the key features of the new system, complex trade-offs. including the services covered, patients’ cost-sharing requirements, provider payment rates, and administrative The first figure in our report, which you also have in costs: front of you as a handout, identifies some of the major questions that would need to be answered (see Figure 1). • Services Covered. The benefit package could be designed to cover services that are typically covered by private insurance or by Medicare. Alternatively, it could be expanded to cover additional services, such as long-term services and supports. Expanding the 1. Congressional Budget Office, Key Design Components and benefit package to cover additional services would Considerations for Establishing a Single-Payer Health Care System (May 2019), www.cbo.gov/publication/55150. tend to increase health care spending. A single-payer 2 Key Design Components and Considerations for Establishing a Single-Payer Health Care System MAY 22, 2019 Figure 1 . Designing a Single-Payer Health Care System Would the federal government, Would the system the states, or a third party use a standardized administer the system? IT infrastructure? How would the system contain health care costs? Who would be eligible, and how would the system verify eligibility? Would the system use global budgets or utilization How would people enroll? management? Administration Could people opt out? Would the government finance the system through premiums, cost Cost Containment Eligibility and sharing, taxes, or borrowing? and Financing Enrollment Which services would the system cover, and would it include Components of a long-term services and supports? Single-Payer How would the system address new treatments and technologies? Covered Services How would the system Payment Rates System and Cost Sharing What cost sharing, if any, would pay providers and set provider payment rates? the plan require? How would the system Provider Roles Role of Current purchase and determine the and Rules Systems prices of prescription drugs? What role would private health insurance have? What role would current public programs have? Who would own the hospitals Could providers offer services Could providers and employ the providers? that the public plan covers to “balance bill” patients? private-pay patients? Source: Congressional Budget Office. IT = information technology. system would also need a way to decide which new insurers—or they could be set at some other level. treatments and technologies it would cover. Medicare payment rates are substantially lower than commercial payment rates, on average. If provider • Cost-Sharing Requirements. Cost sharing affects payment rates were set at Medicare’s rates rather than beneficiaries’ financial well-being and total health average commercial rates, then total national health care spending. People use more care when their cost care spending would be lower. But the amount of care is lower, so no cost sharing would tend to increase supplied and the quality of that care might diminish. the use of services and lead to additional health care spending. • Administrative Costs. When fully implemented, a single-payer system would probably have lower • Payment Rates. Under a single-payer system, administrative costs than the current system, because provider payment rates could be based on the it would consolidate administrative tasks and rates paid by Medicare, Medicaid, or commercial eliminate insurers’ profits. To give a sense of scale, TESTIMONY Key Design Components and Considerations for Establishing a Single-Payer Health Care System 3 the federal government’s cost of administering the services, and in the longer run, providers might deliver Medicare program accounted for 1.4 percent of total care more efficiently. Medicare expenditures in 2017. When the admin- istrative costs of Medicare Advantage and Part D Under a single-payer system, people who are currently plans are included, total administrative costs for the covered by private insurance might have more providers Medicare program accounted for about 6 percent available to choose from. Participants would not have a of its expenditures. By comparison, private insurers’ choice of insurer or health benefits, however. The public administrative costs averaged about 12 percent in plan would provide the same set of health care services 2017. But other possible features of a single-payer to everyone eligible, so it might not address the needs system, including efforts to coordinate patient care of some people. For example, the public plan might and eliminate fraudulent spending, could add to not be as quick to cover new treatments and technolo- administrative costs. gies as would a system with competing private insurers. Policymakers could try to design the single-payer system A single-payer system could affect costs to providers and to mitigate such risks. individuals in other ways. It could reduce the amount of uncompensated care, for example. Moreover, unlike pri- As I said at the start of my testimony, CBO has worked vate insurers, which can experience substantial enrollee to build our capacity to support this committee and turnover, a single-payer system would have no turnover. the Congress as you consider these issues, and we look For that reason, a single-payer system would have a forward to being helpful to you and your staff. My greater incentive to invest in preventive measures that colleagues and I are happy to answer your questions. have been shown to reduce costs. Whether the system Thank you. would act on that incentive is unknown. This testimony was prepared by Mark Hadley, Access to Health Care Services Jared Maeda, and Xiaotong Niu. Helpful An expansion of insurance coverage under a single-payer contributions were made by Jessica Banthin, system would help more people receive more health care. Sarah Masi, and Lyle Nelson. In keeping with the People who are currently uninsured would receive cover- Congressional Budget Office’s mandate to provide age, and some people who already have coverage would objective, impartial analysis, the testimony contains use additional services if benefits were more generous no recommendations. than under their current coverage. Whether the supply of providers would be adequate to meet the greater demand Keith Hall, Jeffrey Kling, and Robert Sunshine would depend on various components of the system. reviewed the testimony, Christine Bogusz edited it, If the supply of services was not sufficient to meet the and Robert Rebach prepared it for publication. An demand for care, patients might face increased wait times electronic version is available on CBO’s website at and reduced access to care. The government, however, www.cbo.gov/publication/55258. could implement policies to encourage the provision of