Predicting Health Care Spending under National Health Insurance Alternatives

The Affordable Care Act (ACA) has reduced the number of uninsured and established new cost-containment initiatives. However, interest in more comprehensive health care reform such as a single-payer system has persisted. There is no agreed upon definition of a single-payer system: it varies, for example, by the type of payer, eligibility of beneficiaries, jurisdiction, benefits, cost sharing, and cost controls. In this paper, we used microsimulation and developed a cost tool to explore health care spending under single-payer scenarios while accounting for and making explicit the range of uncertainties underlying the estimates.

We analyzed two scenarios based on recent proposals involving a national single payer providing tax-financed coverage – one labeled comprehensive and the other catastrophic – relative to the ACA. The comprehensive scenario offers citizens and legal residents coverage with limited cost sharing; private coverage duplicating the single-payer plan would be prohibited. In the catastrophic scenario, Medicare and Medicaid continue and all other citizens and legal residents would have income-dependent catastrophic coverage to protect against large financial losses. The tax exclusion for employer-sponsored insurance would be eliminated but individuals could supplement the catastrophic coverage with private insurance.

Health insurance coverage and medical expenditures were simulated using the COMPARE microsimulation model. For other estimates such as potential administrative efficiency, negotiating power, provider payment reform, and implementation costs under a single payer, we reviewed the literature to gather a range of possible effects and incorporated them into an interactive cost tool.

Premium payments under the ACA are largely replaced by taxes in the single-payer scenarios. In the catastrophic scenario, we estimate that individuals would supplement the single-payer coverage with private insurance, resulting in a similar level of medical expenditures. Financing in both the comprehensive and catastrophic scenarios are more progressive than the ACA.

Accounting for the induced demand given cost sharing and the estimated tax revenue, we estimate that federal expenditures in both the comprehensive and catastrophic single-payer scenarios would be higher than expenditures under the ACA. Using the interactive cost tool, we demonstrate a range of possible reductions to federal expenditures. We conclude that it is unlikely that savings associated with a single payer would fully offset the additional federal revenue needed in these scenarios.