NCPA - National Center for Policy Analysis


October 17, 2007

In the ongoing debate over U.S. health care reform, the universal coverage mantra has collided, inevitably, with the cost issue: How would a substantial expansion of health care coverage be financed?

Some proponents of a single-payer (government) system of health insurance have responded: Not to worry. "Administrative costs" are so much higher for private insurance than for such systems as Medicare that a shift to a single-payer system would yield savings sufficient to provide coverage for all of the uninsured.

According to Benjamin Zycher, senior fellow at the Manhattan Institute:

  • Under a full accounting, the argument that savings in administrative costs would be sufficient to cover the uninsured is highly problematic at best.
  • The distortions created by the tax system make the true economic cost of delivering health insurance benefits under a single-payer system at least double those of private insurance.
  • In addition, Medicare receives services not shown in its budget from other parts of the federal government.


  • A shift to a single-payer system for all Americans would yield net savings in reported administrative costs of about $100 billion annually, or $2,100 in additional health care benefits for each of the 47 million individuals estimated as uninsured.
  • The academic literature suggests that the average increase in health care consumption by the uninsured would be in the range of about $1,700-$3,400.
  • So the annual change in total health care spending would range from a funding surplus of $19 billion to a funding shortfall of $61 billion; the midpoint is a $21 billion shortfall.

This estimate is likely to be too optimistic because not all of the current health care consumption by the uninsured is funded by the public sector, and because these estimates assume away increases in the prices of medical goods and services attendant upon a doubling of the population eligible for a Medicare-type program.

Source: Benjamin Zycher, "False Accounting And Free Lunches Under A Single-Payer Health System," Investor's Business Daily, October 16, 2007.


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