In recent weeks, single-payer healthcare proposals have begun to emerge in Congress. While much of the attention during the single-payer discussion has been on specific proposals, Milliman has tried to take a broader view—via questions from a Congressman. On January 8, 2019, Rep. John Yarmuth (D-Ky.), the Chairman of the House Budget Committee, sent a letter to the Congressional Budget Office (CBO) posing questions about a potential single-payer system in the United States.1 The Congressman’s questions offer a useful lens for considering the broad spectrum of single-payer proposals, both those already on the table and those that may emerge. So we set out to field the nine questions posed in Rep. Yarmuth’s letter. But we quickly realized that we could not answer the nine questions with only nine answers, because there are so many different potential flavors of single-payer systems. So we developed three distinct scenarios as ways of showing the varied answers to the Congressman’s nine questions.
At its core, a single-payer system is one in which the system’s primary financing (and oftentimes the primary enrollment) comes from a single payer, which is typically the government. Reflecting the many unique ways that the federal and state governments fund and regulate American healthcare, we have identified three different single-payer scenarios, ranging from least disruptive to most disruptive compared to the status quo.2 These three options provide lenses through which to view Congressman Yarmuth’s questions.
1) Least disruptive—Fill the gap scenario (Gap). In this scenario, many of the insurance mechanisms that exist today would continue, with the single-payer system filling in coverage gaps and providing consumers with additional options. There would still be commercial insurance options and many people would still receive coverage through their employers. Medicaid would continue as a program for covering those with low incomes and the disabled. An example of such a fill the gap scenario is the proposal in Washington state to provide a public option that reimburses healthcare providers at Medicare rates (lower than typical commercial reimbursement) and gives consumers a silver or gold plan.3 A Gap scenario would likely work better in a state that has already expanded Medicaid and developed an exchange, as is the case in Washington.
2) Medium disruptive—Current government programs with enhancements (Gov+). This scenario includes a lot of Medicare Advantage types of coverage. All people would have access to a basic basket of government-funded benefits that would include catastrophic coverage. Not all services would necessarily be covered. Many people would opt to purchase supplemental policies to access richer benefits, potentially through any of the existing channels. The Gov+ scenario would include a consolidation of existing government programs. Employers would have an option to buy in, but wouldn’t be required to do so and might choose to continue providing the existing plan to their employees.
3) Most disruptive—“Medicare for All” (M4A). All health coverage would run through a single federal entity. There would be no Medicare Advantage. A full scope of benefits would be covered. Such a system might incorporate consumerist concepts, such as cost sharing, but the only option would be the single federal system. There would be no private insurers, including no employer-sponsored insurance. This is the closest to the “Medicare for All” program being broadly discussed, but as others have written this might be something of a misnomer.4 The Gov+ scenario more closely resembles Medicare as it currently exists than the proposed M4A approach to universal healthcare.
None of these scenarios contemplate expanding the system to include nonmajor medical services, including nursing home care, long-term care (LTC), dental, or other healthcare needs. Nor do we contemplate the possibility of a new paradigm of government-run hospitals and government-employed medical professionals.
With that, first, here are short-form answers to the Congressman’s questions. For those seeking a deep dive, there are more exhaustive responses to each of the questions in the Appendix. Note that these are three potential visions of single-payer systems and responses; combinations of these answers create significant numbers of possible approaches.
| Fill the gap scenario (Gap) | Current government programs enhanced scenario (Gov+) | Universal healthcare scenario (M4A) | |
| 1. How would the system be administered? | The Gap scenario would be administered by a national or regional administrator(s). Public sector entities could be formed for this purpose, or the government could contract with existing private sector entities. Administrative requirements would resemble the current market. | The Gov+ scenario would be administered by a national or regional administrator(s). Functions could be carved out to specialty vendors (e.g., claims processing only, care management only, pharmacy benefit management only). Some administrative requirements would be eliminated, reducing administrative costs. | The M4A scenario would be administered by a national or regional administrator(s). |
| 2. Who will be eligible for coverage and how would they be enrolled? | The Gap scenario seeks to preserve a robust employer-sponsored market and government programs. Eligibility requirements would be important as the federal government must weigh the cost of covering the gap population against the cost of tax-deductible employer-sponsored coverage. Allowing for employer-sponsored insurance to exist alongside a broad single-payer system could foster innovation among employer plans while retaining a viable fallback for individuals who do not have access to meaningful, affordable coverage. | Everyone would be eligible and would have the option to buy up to a richer benefit. The baseline tier would probably have tighter prescription drug formularies and might have narrower provider networks. | Everyone would be in the same system. Would there be a mandate requiring participation? With the government providing coverage at low direct cost to the member, and premiums potentially varying based on income, there would seemingly be incentive for most people to participate. Possible penalties for delaying enrollment could also encourage participation. |
| 3. What services should be covered and what cost-sharing requirements should be imposed? | The Gap scenario could build on the essential health benefits of the Patient Protection and Affordable Care Act (ACA) and could include cost sharing similar to Medicare Advantage (MA), which could be subject to means testing. | The Gov+ scenario could also build on the ACA’s essential health benefits. This scenario also allows for a premium-support approach similar to Medicare Advantage. The same considerations from the Gap scenario also apply here. | Everyone gets the same care as determined by a federal entity, with minimal covered benefit and formulary restrictions. This scenario could incorporate cost sharing, depending on whether or not cost control was a priority. |
| 4. What role should private insurers play? | Insurers would play a significant role in continuing existing systems and in facilitating the new Gap system. | Insurers would be central to providing supplemental and/or enhanced primary policies that could be purchased. Depending on how this is implemented, insurers could provide expanded services. | There would no longer be a commercial insurance market, but there might still be a need for private sector entities to administer the system. |
| 5. What other programs (Medicaid, Veterans Health Administration, Indian Health Service, Military Health System) would continue to exist? | These programs would all continue under the Gap scenario. | Given that these programs all cover unique populations, they might persist in the Gov+ scenario. Or, because these programs retain specialized services and professional staff, they could be incorporated into the single-payer system. | Some of these programs would be folded into the larger single-payer system; however, they could remain. The Indian Health Service (IHS) has unique treaty requirements. The Military Health System has its own structure to ensure troop readiness. |
| 6. How would provider payment rates be established? | There would continue to be negotiations between insurers and providers. It may be anticipated that payment rates would remain consistent with the current markets, given the low number of lives transitioning into new government programs. | The federal government would have control to set rates on the basic coverage, but there would be negotiations between providers and insurers providing supplemental policies. The expansion of the Medicare program and public option plans might put financial pressure on providers without a reevaluation of Medicare reimbursement rates. | The government would have control over rates. The M4A scenario creates the most uncertainty for provider reimbursement, and could pose significant financial risk for hospitals and medical systems if provider payment isn’t properly calibrated. Current major publicly funded programs (i.e., Medicare and Medicaid) are often seen to have provider reimbursement that is too low and only offset by commercial health plans. Reimbursement rates would need to be reevaluated. |
| 7. What participation rules should be established for providers? | Networks would be established by private payers and there would be no requirement for providers to participate. A system that leverages private payers is likely to have more variation in network types than a system in which the government handles all reimbursements directly. | There would be significant incentive for providers to participate and there could be penalties for providers that do not participate. In our Gov+ and M4A scenarios, most providers will need to accept single-payer coverage in order to have enough patient volume to remain in business. In this case more attention would need to be paid to reimbursement levels to avoid regional or national provider shortages, both in the present and in the future. | A single payer does not necessarily mean a single network. Some countries with single-payer systems have vibrant, parallel private insurance markets with variation in network composition. In our M4A scenario, with literally only one payer, everyone would essentially be in the same provider network and all providers would be expected to participate. |
| 8. What methods should be used to contain costs? | With the single-payer system filling in the gaps and other programs continuing, the Gap scenario would have a smaller risk pool that might be selected against unless eligibility is carefully defined to avoid anti-selection. This creates cost control challenges. That said, private insurers have the incentive to control cost because they are taking risk. | The cost control mechanisms that exist in Medicare and Medicare Advantage today would still be available in the Gov+ scenario. Private insurers providing the MA-type policies would have the incentive to control cost because they are taking risk. Members could be incentivized to be efficient healthcare consumers through coinsurance, copays, and other cost sharing. | As the only payer, the government would wield significant influence over dictating unit costs and utilization requirements. Some form of cost sharing would help control costs, as would initiatives to incentivize providers. That said, the primary cost control would be centralized rationing of care through coverage decisions (which benefits are covered, or who is eligible for treatments). |
| 9. How would the system be financed? | Much of the current healthcare financial status quo would remain the same. The Gap scenario would be funded by a mix of tax revenue and premium support. | Much of this would be paid for through tax revenues. The richer tier of coverage would include premium support from members. | Fully funded through tax revenues. |
Other lingering questions
A few other questions come to mind that did not make the Congressman’s letter.
What are the primary goals of a single-payer system? Before any approach can be selected, policymakers first need to understand what problems the single-payer system is trying to address. Is the primary focus access to care? Or is it affordability of care? Is the focus on the scope of coverage? Is the single-payer system aiming to reduce cost trends? Does it aim to redistribute income? Is it attempting to address cost and benefit disparities between current coverages, including commercial coverage, Medicare, and Medicaid? Is it primarily aiming to reduce the number of uninsured? Is it trying to address coverage continuity and portability of coverage? Each of these goals has a significant impact on what approaches and considerations are viable and any solution that prioritizes one of these goals will almost certainly have to make trade-offs that negatively impact others.
Can a single-payer system improve health outcomes? Healthcare research and reporting continually show increasing rates of health conditions ranging from obesity to autism incidence, and recent trends even show a drop in life expectancy. To what extent, if at all, would a single-payer system be able to address these needs and improve the overall level of health in our country? Because many of these health cost drivers are unrelated to treatment (diet, housing, lifestyle), would the existence of a single-payer system directly lead to other laws and freedom restrictions in the name of single-payer budget goals?
What about pharmacy costs? Pharmaceutical trends have been significant cost drivers in recent years. That trend has ebbed, but the potential for drugs to drive up healthcare costs is established. How will drug trends be managed in the future? Possible scenarios include price lists that are dictated or the implementation of a bidding system similar to Medicare Part D. Pharmacy benefit managers (PBMs) could be leveraged or the federal government could negotiate directly with pharmacies as it essentially does with medical fees in the Medicare market today. Would this limit pharmaceutical innovation, leading to more deaths over time? Who would pick up the tab on pharmaceutical innovation?
How will this impact total national spending on healthcare? Much publicity is given to the annual Medicare report that tells us when the Medicare Trust Fund will run out of money. Healthcare expenses continue to be a major driver of federal and state spending. This is compounded by healthcare cost trends that exceed other indicators of economic growth. Can a single-payer system meaningfully bend the cost curve and put our healthcare system on a path to long-term financial sustainability? Can we bring healthcare costs in the United States more in line with those in the rest of the developed world?5
Will single-payer proposals crowd out other payers? Critics of government payer programs contend that many beneficiaries of these programs would otherwise have care funded by the private sector—that is to say, private payer care is crowded out. So would a single-payer system result in this crowding out? This question is more relevant to the Gap and Gov+ scenarios; after all, in the M4A scenario there would be no employer-sponsored market. The Gap program could be configured in a way to only fill the uninsured need, a true last resort program. This would require mechanisms to keep the Gap program from attracting all the worst risks.
What about state versus federal rights? The ACA proved the degree to which state rights can affect the original designs of a federal health reform law. Medicaid expansion was intended in 50 states but ultimately became a state decision. With different regulators in every state, any reform needs to navigate questions about state versus federal authority.
Will this upset or optimize the applecart? Today people migrate from one part of the system to another and it’s not uncommon to change insurance coverage regularly. Such coverage changes can result from changing jobs, where two employers might have significantly different plan designs, provider networks, or prescription drug formularies. The same can be true for a person becoming unemployed and eligible for Medicaid or simply aging into Medicare. It may also result from a change in personal needs, or finding a better option in price or coverage. It may result in a new entrant to the market, bringing an innovative approach, and better service or quality. A single-payer system could minimize (or limit) some of that churn if it means that people now know who is paying for their healthcare moving forward, which could in turn lead to longer-term relationships with providers, potentially incentivizing more preventive and wellness initiatives over the continuum of care. Alternatively, changes could disrupt 20% of the economy. Aetna, Cigna, United, and Humana employ a total of 400,000 people alone. The healthcare industry as a whole employs 2.6 million people. While 28.5 million Americans (8.8%) are currently uninsured, 295 million Americans (91.2%) are currently insured primarily through employer-sponsored and government-funded programs.6 Also, to the extent providers choose not to participate in the single-payer system, patient/doctor relationships may be severed. Fundamentally changing healthcare financing may have wide-ranging implications on job creation, the economy, and the health care coverages currently accessed by most Americans.
1The full text of Rep. Yarmuth’s letter may be found at https://budget.house.gov/Budget-Democrats-Single-Payer.
2The word “disruptive” was once largely pejorative, but has recently become synonymous with game-changing innovation. For the sake of our discussion, both meanings may apply.
3Walters, D. (January 17, 2019). Gov. Jay Inslee’s “public option” plan to reduce health care costs is ambitious – and untested. Inlander. Retrieved February 14, 2019, from https://www.inlander.com/spokane/gov-jay-inslees-public-option-plan-to-reduce-health-care-costs-is-ambitious-and-untested/Content?oid=16086068.
4Scott, D. (February 11, 2019). John Delaney has a plan for universal health care – but don’t call it “Medicare-for-all.” Vox. Retrieved February 14, 2019, from https://www.vox.com/2019/2/11/18220118/2020-presidential-campaign-medicare-for-all-john-delaney.
5The Society of Actuaries and the Kaiser Family Foundation recently released a white paper entitled “Initiative 18|11” that addresses this disparity and drivers of costs, and introduces future research seeking to better understand these drivers in order to meaningfully decrease health costs. It is available at https://www.soa.org/Files/static-pages/research/topics/initiative-1811.pdf (PDF download).
6Keith, K. (September 13, 2018). Two new federal surveys show stable uninsured rate. Health Affairs. Retrieved February 14, 2019, from https://www.healthaffairs.org/do/10.1377/hblog20180913.896261/full/.