I've been working for a while on trying to itemize what the savings would be if America were to move to a single payer system for its health care. So far, I've diaried about
insurer administrative savings,
physician and hospital administrative savings,
prescription drug bulk purchase savings, and savings from
avoidable ER visits and hospitalizations.
From a recent Grey's Anatomy, ("Break On Through"):
Webber: That's 2 million dollars a year we don't have.
Shepherd: Have you checked under the couch? I always find spare change under the cushions.
- Pharmaceutical Marketing. Because there are so many payers for pharmaceuticals, there are many opportunities to increase sales. With a single payer, you only have to sell one customer, and that's a huge savings. In 2004, there was over 27.7B of promotional spending. Some of it makes sense, like professional journal advertising (which is often where I learn about new medications first). Some of it is direct to consumer advertising like the commercials you see for drugs on TV. There is an absolute swarm of marketing people who descend like a plague of Fuller-Brush wielding salesmen on doctors' offices, and then there's the free samples, which the pharmaceutical companies write off against their profits at the retail cost, remarkably enough. Despite all this spending, though, pharmaceutical manufacturing remains one of the most profitable industries in the US, at 15.8%. It's so profitable that Merck (in which, in the interests of disclosure, I have some shares, sadly still underwater) can set aside nearly a billion dollars just to fight Vioxx litigation. In a single payer system, I will assert that we can save perhaps 20B over this amount.
- Fraud. Reagan used to claim that the budget could be balanced by eliminating all the waste, fraud, and mismanagement, but there is one key distinction in health care: under a single payer system, the governmental single payer agency could have the power to subpoena records from any provider who is receiving reimbursement under the program. I've read estimates (such as one from the Center from Medicaid and Medicare Services) that as many as one claim in twenty is fraudulent in some way, and I've seen charges show up on my patients' bills that I caught before they were presented. Subpoena power gives the government a quicker means of resolving matters, and without getting into too much detail, I'm going to assume we can save 0.5% of spending, or 9B, by this mechanism.
- Increased emphasis on primary care. This is what HMOs were supposed to do as originally conceived. You saw a primary care physician first before a specialist referral. These days, HMOs reduce costs by denying care and by selective contracting, but the idea of eliminating unnecessary tests, reducing expensive diagnostics, and emphasizing preventive care has some soundness to it. The best estimate for the savings I've run across is a report to the Healthcare Leadership Council by the Lewin group, who have done much of the analysis for the proposed California Single Payer Health Care Plan, which suggests a reduction of 4% in total utilization of health care services. I'm going to assume that figure is optimistic, and reduce it to 2%. Still, that's another 34B.
- I have a small sofa in my office and did just look under the cushions. There was a shiny nickel. Five more cents.
- Total savings in these four areas is 63B and five cents.
The next health care diary I post is going to be how to pay for it. I've tried to be thorough and defensible about the estimates I made for health care savings, although I'd be very surprised if the figures I derived were accurate to within ten percent. I do think there are some good numbers in this series of diaries, though, and I want to use them as a starting point for my next health care diary: How To Pay For Single Payer.
Before signing off, though, I want to make a couple of observations.
- Canada's single payer system doesn't do dental or vision care. That reduces its cost advantage over the US system somewhat. You have to make a judgment about what care needs to be funded nationally and what doesn't.
- Canada's life expectancy and infant mortality are the same as ours - if you exclude the poorest twenty percent of Americans Isn't it time to stop doing that?
- Canada has really squeezed physician fees - they decided at some point in the past that doctors were the reason health care cost too much, and it's reflected in compensation, working conditions and other areas. I personally think the problem is insurance companies and big pharma. Going to single payer will oblige us to be very clear about the fact that both groups will make less money after the shift. I personally don't have a problem with that.
- For my part, 75% of my practice is cosmetic surgery, and there's no reason the government should ever pay a dime of that (burn victims, accident survivors, and the occasional obstructed nasal passage patient being exceptions). Clearly what I do is a luxury good.
- Ditto, LASIK and similar procedures. I'd be willing to pay out of the public purse for glasses and even go as far as non-dorky looking frames, but contacts or surgery are your own problem.
- I personally don't think dental care, mental health, or orthodontics fall into the luxury category, but there's surely room for intelligent debate on that subject.
- There's a definite problem with medical education and capital spending on facilities. We should make sure that whatever depoliticized, independent entity winds up running the hypothetical single payer system has some budget for "Medical ROTC" or something like that, and for capital investment in both hospitals and research.