Executive Intelligence Review


Conyers’ Single-Payer Health-Care Bill Now Grows in Importance

March 26, 2017 (EIRNS)—To the failure of Obamacare has now been added the failure of the Republican attempt to make a cut-price version, while claiming to be "repealing and replacing" it. The quest of the health insurance companies to keep extracting major private profits from what is a public utility in nearly every other advanced economy—and from an increasingly sick and self-abusive American population as well—caused failure of both Obamacare and GOP "not-Obamacare." (Big Pharma-related businesses remain far more successful at this perverse pursuit, but that should be ended.)

President Trump now says he expects to work with Democrats at some future point to legislate a better health-care system; and some close associates have indicated that the bill he supported in hopes of a Republican legislative victory, was not his idea of a good healthcare system.

Rep. John Conyers’ (D-Mich.) H.R. 676, "The Expanded and Improved Medicare for All Act," which in concept enjoys wide public support and has 70 House Democrats sponsoring it, now becomes more important. It is the only healthcare system, of those now used or proposed in the United States, which can work for the American population as a whole.

The failures of current American health care are so widely known they need not be repeated, and even its few, great supposed strengths—fast access to care, high quality of hospitals and specialists—are only middle-ranking among 35 member countries in the Organization for Economic Cooperation and Development. Americans are in worse health, and kill themselves and each other, accidentally or deliberately, much more often than the people of other advanced economies; so until that can be changed, U.S. health-care costs must be higher per capita and as a share of GDP. But not double! And prescription drugs—the same prescription drugs, for the same conditions—cost far more in the United States, because of the tens of thousands of opaque "pricing deals" that Pharma makes with separate health plans, drug distribution and management companies, hospital systems, government agencies at all levels, and pharmacies.

Total U.S. health-care spending was $3.3 trillion in 2016. The largest government health insurance programs Medicare and Medicaid cover about 42% (125 million) of the 300 million Americans with health insurance, with about 39% of the nation’s total expenditure. But those 125 million are either over 65, of low income, or both, and therefore collectively have more health conditions to treat than those on public or private employer plans, Obamacare exchanges, etc. The case is even clearer with Medicare alone, which provides better coverage than Medicaid, and spends 50% more per beneficiary than Medicaid. Without Medicare, large numbers of seniors, as individuals, would be absolutely uninsurable on private insurance markets despite subsidies, vouchers, etc. because of their health conditions. Yet it covers the oldest 18% of the American population with just 19% of national health expenditures.

Conyers’ H.R. 676 rests on the starting premise that Medicare could clearly cover the 80-plus percent of Americans under 65, for less than the $2.7 trillion in expenditures now spent by and on them, even with Medicaid benefits greatly improved. Medicare administrative overhead costs are about 2% (so are Medicaid’s), while private insurers’ overhead costs are 12-15%. Conservatively $200 billion annually would be saved there. If a single-payer national insurer with, say, 250 million beneficiaries bargained with Pharma on drug prices (Medicare is not permitted to bargain by the 2003 law for seniors’ drug coverage, but the Veterans’ Administration does; other nations’ national plans do, and the results are undeniable), most estimates are that an additional $125-150 billion would be saved annually. And then there would be reduced physicians’ and hospitals’ administrative costs as well. $400 billion per year is a not-unreasonable assumption of savings, within the first few years.

Thus the national healthcare bill could be brought back down below $3 trillion to start with. Then further improvements would depend on growth and productivity in the economy.

Why? Because a single-payer healthcare system, or Medicare for all, should be funded primarily on a payroll tax, whose revenues will grow with economic, productivity, and wage/salary growth. The principle of H.R. 676, and of the single-payer idea generally, is that taxes rise, while premiums, copays, deductibles, etc. largely disappear for up to 200 million Americans and their employers. But then healthcare costs can slowly fall relative to the economy as a whole, only if the productive economy revives.

The additional condition, is that the Hill-Burton standards for hospital and specialist clinic facilities per capita be restored, because healthcare is held down now by the simple shortage of sufficient emergency room, hospital and clinic capacity.

Medicare has much broader bedrock support in the American population than Medicaid, fundamentally because Medicare recipients paid a payroll tax for it all their working lives. President Franklin Delano Roosevelt fully understood this principle—from the first (Social Security) payroll tax, to war bonds, to the patriotic March of Dimes to fight polio. Everybody pays in; everybody benefits. Lyndon Johnson and the 1965 Congress used it in creating Medicare.

Let us assume, as H.R. 676 does, that all the present public insurance programs, from Medicaid to Federal and State Employee Health Benefits plans, brought their beneficiaries and their current funding into Medicare-for-all or single-payer insurance. And assume single-payer produced the national savings reasonably named above. Then—though not specified in the H.R. 676 outline—a payroll tax of about 6% each for employees and employers, producing about $1.1 trillion in revenue to begin with, would complete the funding of the whole single-payer system. This means quadrupling the current Medicare payroll tax. Including the Social Security payroll tax of 6.2%, gives 12.2% total payroll tax, rather than the current 7.7% total.

An employee filing $40-60,000 in taxable income, then, would pay $2,400-3,600 payroll tax a year for healthcare (not for health insurance, for healthcare), or $200-300/month. The average U.S. employee in an employer plan now pays about $120/month toward the premium, and then shells out for a deductible, copays for doctor visits, prescription drugs, etc. The employer of that average employee typically pays significantly more, about $375/month toward the premium. That employer’s savings could partially go to higher wages.

This doesn’t rule out small "harm reduction" taxes on consumption like alcohol and soft drinks to ensure that everyone, including those unemployed or out of the workforce, is paying something in, getting healthcare benefits out. But the payroll tax can be its bedrock. Single-payer universal healthcare does not need to involve "taxing the rich."

Subscribe to EIR