NCPA - National Center for Policy Analysis

SINGLE-PAYER SYSTEM DOESN'T SAVE ENOUGH

November 12, 2007

Savings in administrative costs as a result of adopting a single-payer health system similar to Medicare would not be sufficient to provide to all of the uninsured, says Benjamin Zycher, a senior fellow with the Manhattan Institute. 

Consider:

  • A shift to a single-payer system would yield net savings of about $99.6 billion (as of 2006) annually in reported administrative costs.
  • That equals about $2,100 in potential health-care benefits for each of the 47 million individuals currently uninsured.

However:

  • Under a single-payer system, the increase (from about $2,262) in average health-care consumption by those currently uninsured would be in the range of about $1,700 to $3,400.
  • This results in an annual impact on government costs, as measured, between a saving of about $19 billion to a funding shortfall of about $61 billion.
  • The midpoint estimate thus is an approximate funding shortfall of $21 billion annually.

Accordingly, the argument that the administrative cost savings yielded by a shift to a single-payer system would be sufficient to cover the uninsured is highly problematic, says Zycher. 

In addition, the federal government must acquire revenues through a tax system that imposes economic costs upon the economy in addition to the revenues generated.  The lowest plausible assumption about the magnitude of that "excess burden" of the tax system raises the true cost of delivering Medicare benefits to 24-25 percent of Medicare outlays, or about double the net cost of private health insurance.

Source: Benjamin Zycher, "Comparing Public and Private Health Insurance," Manhattan Institute, October 2007.

For text:

http://www.manhattan-institute.org/html/mpr_05.htm

 

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