Boyd: The economic case for universal healthcare

Ryan Boyd, Columnist

As the 2020 campaign gets underway, it’s increasingly clear that almost all serious Democratic candidates are going to support universal healthcare coverage in one form or another.

There are many ways to achieve universal coverage — from single-payer proposals like Medicare for All to multi-payer models like those found in Germany and Switzerland. Once all candidates jump into the race and release their specific proposals, it will be important to analyze their plans. But for now, it is important to first examine the economic logic behind universal coverage as a policy goal and to understand why the Democratic Party’s long-overdue embrace of socialized medicine is such a promising development.

Beyond the compelling moral reasons for implementing a universal coverage scheme, the economic rationale is more than convincing. Comparing the current American system — which is really a bunch of different systems for different groups of people (people over 65, veterans, children, low-income, etc.) — to a single-payer system highlights how universal coverage is cheaper and more efficient than the status quo.

There are three questions to ask when evaluating each system: How much will the U.S. spend on healthcare, how many people will be covered and what will the quality of care be? A single-payer system achieves better results in every respect.

Proponents of single-payer systems typically tout two primary cost efficiencies that single-payer has over private insurance. First, administrative costs are lower — as highlighted in the New York Times, the New England Journal of Medicine estimated in 1999 that administrative costs make up 30 percent of healthcare expenditures in the U.S., but only 16.7 percent in Canada.

A more recent study from Health Affairs notes that administrative costs make up 25 percent of U.S. hospital spending; in Canada, that number is just 12 percent. These studies highlight a central advantage of single-payer — there is only one health insurance provider, which is the government. As the Times further notes, this means hospitals don’t need to employ massive billing departments that try to sort claims with many different health insurers, each of which has its own procedures, requirements and paperwork. Moreover, in a single-payer system, insurer marketing costs are almost completely eliminated from healthcare expenditures. In the current system, health insurers compete for customers, which requires significant advertising spending — but if the government is the only insurer, that expenditure is unnecessary.

The second main cost efficiency from single-payer systems comes from reduced prices for healthcare services through increased insurer bargaining power. The American health insurance industry is fragmented with many different players competing for market share. The result of this fragmentation is reduced bargaining power for each insurer. Because there is only one insurer in a single-payer system, there is massively increased bargaining power and, consequently, drastically reduced prices for healthcare services.

In testimony to the Ohio legislature, economics professor Gerald Friedman notes that “hospital prices paid by private health insurance are now nearly double what hospitals get from Medicare.” The reason is simple: The U.S. government can negotiate down Medicare reimbursement rates to a much greater degree than private insurers, resulting in significant cost savings for consumers of healthcare.

Even a study from the Koch-funded Mercatus Center recognizes these efficiencies. The Mercatus Center estimates that Bernie Sanders’ Medicare for All bill would cost $32.6 trillion over ten years, which The New Republic notes is a saving of $2.054 trillion compared to the current system.

Under the current, more expensive system, 12.2 percent of Americans are uninsured — more than 30 million people. A single-payer universal coverage scheme would bring that number to zero. That means nobody would have to put off visits to the doctor’s office, letting treatable illnesses fester into severe (and expensive) health episodes. It means no one would have to worry about a layoff costing them their health insurance. And it means that no one would have to rely on their GoFundMe going viral to pay for cancer treatment.

Amazingly, a single-payer system can achieve this universality while improving quality of care. Indeed, people who like their current doctors could keep their current doctors. And people who don’t have doctors would be free to choose whoever they feel is best for their healthcare needs, not whoever is cheapest. Because everyone is always insured — without interruption from job losses or financial issues — there is continuity of care, allowing doctors to develop trusting and informed relationships with their patients. With the government picking up the tab, people can get this better coverage without ever having to look at a bill or spend hours on the phone arguing with their insurance company.

As the healthcare debate heats up heading into 2020, it’s important to remember that the question is not whether single-payer makes more economic sense than the current system — we already know that answer. The real question in the debate over universal coverage is, “When will the U.S. finally do something every other industrialized nation has already done?”

Ryan Boyd is a Weinberg sophomore. He can be contacted at [email protected]. If you would like to respond publicly to this op-ed, send a Letter to the Editor to [email protected]. The views expressed in this piece do not necessarily reflect the views of all staff members of The Daily Northwestern.