Congressional budget office(CBO)'s take on a Single-Payer System
Summarized by Tashrique Rahman, PharmD, MBA, Daniel Salas, PharmD, Thomas Cook PhD, RPh, Mamta Karani PharmD, BCPS, MPH
Congressional Budget Office’s (CBO’s) Single-Payer Health Care Systems Team. How CBO analyzes the costs of proposals for single-payer health care systems that are based on Medicare’s fee-for-service program. Washington (DC): CBO; 2020 Dec. https://www.cbo.gov/system/files/2020-12/56811-Single-Payer.pdf
Published December 2020. Accessed March 9, 2021
In December 2020, CBO released a paper in which it analyzed the federal budgetary costs of proposals for single-payer health care systems that are based on the Medicare fee-for-service(FFS) program. CBO developed scenarios such as payment rates (higher and lower), cost sharing (higher and lower) and Long term services and supports(LTSS) coverage and combined these features to produce the following five options:
Option 1. Higher payment rates, higher cost sharing, no LTSS
Option 2. Lower payment rates, higher cost sharing, no LTSS
Option 3. Lower payment rates, lower cost sharing, no LTSS
Option 4. Higher payment rates, lower cost sharing, no LTSS
Option 5. Higher payment rates, lower cost sharing, coverage of LTSS
All U.S. residents would be enrolled in the single-payer system under each of the options. The single payer system would cover all of the services currently covered by Medicare, including hospital services, physician and clinical services, prescription drugs, and other services not typically used by Medicare beneficiaries (i.e. prenatal care and infant care). Additional services such as dental, vision, and hearing care and school health services will also be included. Option 5 includes an LTSS benefit under the illustrative single-payer system replacing Medicaid
What would the payment rates look like for providers in a single-payer system?
Providers would be paid on the basis of a single national rate for a given service, with adjustment factors applied similar to those used in the Medicare FFS program
Specialists are projected to be paid much more than general practitioners.
In the scenario with higher payment rates, the average payment rates for health care providers under the single-payer system would be close to the average of the rates that CBO projects for all payers (including government programs and private insurers) in 2030 under current law.
In the lower scenario, average payment rates for providers would be lower than the average of the rates that CBO projects for all payers in 2030 under current law.
What would prescription drug prices look like in a single-payer system?
Prices for retail prescription drugs would equal the average of Medicare and Medicaid projected drug prices under current law in 2025 and they would grow more slowly thereafter
With a single-payer system in 2030, prescription drug prices would be lower than the prices that Medicare would pay in 2030 under current law, and lower than the average prices that private insurers would pay.
What would cost sharing look like in a single-payer system?
In the higher cost-sharing scenario, people with income below 150 percent of the federal poverty level would pay nothing out of pocket for covered medical services or retail prescription drugs. Everyone else would pay 7.5 percent of the total amount spent on those services, on average—with the exception that certain preventive services would be exempt from cost sharing.
Out-of-pocket payments would cover about 5 percent of total spending on covered services and retail prescription drugs in the higher scenario, on average.
In the lower scenario, no one would pay out of pocket for covered medical services. Low-income people would also pay nothing out of pocket for prescription drugs, whereas other people would pay about 3 percent of drug costs
Out-of-pocket payments would cover about 2 percent of total spending on retail prescription drugs in the lower scenario, on average.
What about Long term services and supports?
In the option that includes LTSS, benefits would be much broader than the benefits provided under current law through Medicaid or private insurers
What would it mean for employer-sponsored health insurance?
As employer-sponsored health insurance will cease to exist, employers will no longer partially compensate some workers by providing them with health insurance, so compensation for those workers would shift toward higher wages.
Eliminating the link between employment and health insurance will let people make decisions about work without feeling constrained to stay with a particular employer to maintain health insurance coverage.
Ending the link between employment and health insurance will also encourage entrepreneurship and could boost productivity. People would be less concerned about paying for future medical expenses.
How will the single-payer system save on expenses?
The single-payer system would spend less on administration than the total amount that all payers would spend on administration under current law
The Medicare FFS program does not face the fragmentation, complexity, and duplication that stem from complying with different state regulations, providing different employment-based benefits, and negotiating different payment rates with many groups of providers.
Administering a single benefit package using a common process for setting payment rates nationwide is much simpler than a system in which many private insurers set their own payment rates and use their own processes.
It does not pay state taxes and regulatory fees, incur costs for salespeople and brokers, or earn profits. In addition, a smaller percentage of its spending is devoted to activities such as utilization management.
It experiences greater economies of scale than most private insurers from spreading the fixed costs of information technology across a larger total amount of spending and from being able to specialize more in its claims processing.
Will a single-payer system lead to a decrease in the supply of care?
With fewer restrictions on patients’ use of health care and on billing—such as fewer requirements for prior approval before patients could receive intensive procedures or for a referral before patients could see specialists—providers would tend to furnish a greater volume and intensity of care. That increase would stem mainly from providers’ recommending greater use of care, providing more-intensive services, and coding services as more intensive, in CBO’s assessment.
Providers would spend less money and time on administrative activities, which would free up resources to provide more care.
In response to the upsurge in demand under a single-payer system, manufacturers would increase the supply of prescription drugs they produced, and providers would increase the amount of care they supplied (within constraints on their labor and other capacities).
What will it mean for access to healthcare?
Total amount of health care that people use would rise under all of the options, and in that sense, overall access to care would increase.
Access would increase for some of the people who would have been uninsured or had high cost sharing under current law
Access would decline for some of the people who would have had private insurance with low cost sharing under current law