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How to Pay for Single Payer Health Insurance, Part Three

Tuesday, 07 August 2012 15:39 By Paul Jay, The Real News Network | Video

Guest: Gerald Friedman is a Professor of Economics at the University of Massachusetts Amherst and a member of its Political Economy Research Institute (PERI).

Transcript

Paul Jay, Senior Editor, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.

This is a continuation of our series of interviews looking at single-payer or government-run health insurance plan and focusing particularly on Maryland. And as I said, I'm in Baltimore, and I guess I should have said earlier in this series of interviews that I guess we have some kind of conflict of interest here because we live in Maryland and if there was a single-payer plan system, I guess we would benefit from it. Oh, we're ordinary people. We would benefit from this. Oh, terrible thing, isn't it that? Okay.

So now we're going to continue our series of interview, and now joining us again is Gerald Friedman. Gerald is a professor of economics at the University of Massachusetts Amherst and we're—if you haven't watched part ones and two and—. I can't remember. Are we three or four now? Anyway, you'll see all the other parts down below this video player. So thanks for joining us again, Gerald.

Gerald Friedman, Prof. Economics, UMass Amherst: Thank you.

Also See: What a Single-Payer Health Insurance Plan Looks Like (Part 1)

What a Single-Payer Health Insurance Plan Looks Like (Part 2)

Jay: Alright. So in the last segment we went through your report and we looked at the savings, which came to just over 24 percent over existing insurance coverage and health care expenditure. But that doesn't cover everything, does it? And then so what isn't paid for out of these cost savings, and how are you going to pay for it?

Friedman: Okay. Well, first of all, the cost savings are there. There are also extra expenses, as we were saying, with the Medicaid rate fix. Also, we would be covering everybody. Now, 15 percent of the population of Maryland is currently without health insurance. Extend health insurance to them, they're extra expenses. Also, the plan for the Maryland Health Security Act does away with copayments, deductibles, and all of those expenses. We expect that people would use health services more.

Jay: And let me just—I may not have made this clear enough in the earlier segments, or I may have missed in one of the segment, but this Maryland Health Security Act is an actual piece of legislation. It's been proposed in the Maryland assembly. It's not been passed yet, and this debate is sort of going on. Okay, go on, Gerald.

Friedman: Okay. Yeah. Yeah. The study I did projects that it would be enacted this year and looks at the savings and expenses for next year. And as I said, covering everybody, doing away with copayments would lead to greater utilization of health care. That's a good thing. You know. So, you know, people would be healthier. They would live longer. They would be more productive. They wouldn't be sick as much, so they wouldn't miss as much work. Kids would be healthier in school and would do better.

Jay: And if I understand correctly, infant mortality amongst the poor in Maryland is actually getting worse.

Friedman: Yes. Yes. It's really quite appalling. Overall the United States is about 45th in the world in life expectancy and infant mortality with one of the richest countries in the world. How is it that we've gotten to a position where we've gone from second or third in the world 35, 40 years ago to 45th? We're obviously doing something wrong. We're putting tons of money inefficiently into the health care system. So fixing that would involve spending some extra money.

Now, even taking account of those extra costs, there would be savings of billions of dollars for Maryland, but we'd also be reallocating what we're spending. Much of the spending now comes through premium dollars paid by individuals or companies. We would do away with those. There would be no private insurance. You wouldn't be buying private insurance. Instead, that bill for that, for what used to be paid for by the private insurance, would be picked up by the government, by this health security trust, which would be funded through taxes. We could try to use a better word, a general word than taxes, but that's—.

Jay: [unintel.] I mean, it's funded through taxes, and where I—you know, I still spend a lot of my time and grew up in Ontario. Yeah, you pay your taxes, you get a health card, you go see the doctor. And it's a progressive tax system, so that people that are richer pay a little more—or, hopefully, a lot more, one wishes.

Friedman: That's right. And, in fact, what we've proposed here would be we would use payroll taxes and progressive income taxes to pay for the health insurance plan. What happens now is if you have health insurance, you buy it yourself or you pay for it through work, a certain fixed amount gets paid for everybody. And that is a trivial amount for the heads of large companies but is a very large amount for people who are earning minimum wage or something close to it. So what happens now is poor people and working people pay a very high proportion of their earnings for health coverage. We would switch that by taking a percentage of people's payroll and then a percentage of your earnings. We would be taxing the rich more than the poor. It would be a little bit progressive. But compared to the current system, it would be a huge gain for working people and certain loss for people at the very highest income.

Jay: And what would it mean for businesses? One of the arguments that's often given against this is that it would make, for example, Maryland uncompetitive compared to other states that don't have this.

Friedman: I so want to go to chambers of commerce and to businesses and talk to them about what a great savings this is for them. This is the best thing that could happen for Maryland business that the Maryland state government could do, because, first of all, businesses would get this off their to-do list. Small businesses around Amherst that I talked to, they hate having to do health insurance. They feel obligated to provide health insurance to their workers. They've been providing it. They have to keep providing it. But dealing with it is a gigantic hassle. Also, it's a big expense and it's an unknown expense. Every year you find out, oh my God, my insurance premiums are going to go like this.

We would take care of that. It would be handled every year by the state. It would be—you wouldn't have to think about it. You wouldn't have to explain to your worker why this thing is not covered. Also, because it would be more efficient—remember the 24 percent savings—because it would be more efficient, Maryland would be able to provide health care to its population at lower cost than their businesses are paying now. Businesses in Maryland would save several percentage points of payroll every year because of this, the single-payer system.

Jay: Yeah. If people want some evidence of this, they should go look at—one of the biggest supporters of the Ontario health care plan was General Motors, which found that their costs towards health care and their costs per employee in Ontario was far lower than it was, like, for example, in Windsor, right across the border in Detroit. And General Motors was very much in favor of this kind of system.

Friedman: That's right, because it's saving them money. And I would expect that businesses in Maryland, when they realize how much they'd be saving and how they would be able to outcompete businesses in Virginia or Pennsylvania—I mean, a restaurant in Maryland would be less expensive to operate than a restaurant across the border in D.C. or in Virginia.

Jay: Well, one of the arguments will be is that there's a lot of businesses that don't provide health care at all and they will become less competitive if all of a sudden they have to start making some payments towards this plan.

Friedman: That's right. That's right. Small businesses and some large businesses don't provide health care. Now their workers are getting free care, are getting Medicaid, are getting some sort of subsidized care, and their workers are not getting care at all and are being unhealthy and sick. They would benefit if their employees were healthier and had a more reliable source of care. On the other hand, they would be paying somewhat more in the payroll tax than they're paying now.

Jay: But in your study you looked at the overall jobs affect. What did you find?

Friedman: Oh, the overall jobs—Maryland would benefit. It's a little hard to say exactly, but I would estimate over 100,000 additional jobs would be created by this because of this competitive interstate effect that Maryland employers would be able to outcompete employers in Pennsylvania and Virginia and elsewhere.

Probably some businesses would move to Maryland. You know, if you are in Northern Virginia, hey, locate in Montgomery County, get the cheaper health insurance—your life is easier and it's cheaper. So you'd get maybe 100,000 extra jobs. And also, though I didn't put this in, I didn't factor this in, if you actually did get those 100,000 extra jobs, the tax rate could be lower for health care. So that would—the effects would become more [crosstalk]

Jay: Because the bigger the pool, the more economy of scale.

Friedman: As the economy expands, yes, exactly, exactly, costs become lower and you get on this virtuous cycle.

The biggest beneficiaries would be employers who are currently providing health care, and the biggest group there are local governments, because local governments not only provide health care to their workers, but they provide health care to their dependents. What I found was the so-called pickup rate, the proportion of people actually using the health insurance that's offered, it's only about 60 percent of private employers, but it's over 90 percent for public employers. So local governments would be benefiting even more, which would mean lower taxes, lower [inaud.] and better-supported public schools.

Jay: Okay. So this whole thing's a no-brainer. I mean, if you look at the data, it's really a no-brainer. And, you know, as someone who, again, grew up in Canada, we always shook our heads and just could not understand how Americans can live with the system they have. But what are the politics of this in Maryland now? What do you get a sense of? Is there support for this? And what's the role of the insurance companies?

Friedman: Well, what I hear in Maryland, what I hear in other places as well, is politicians saying, yes, yes, you're right, this has been studied before. I'm not the first one to find these sorts of savings. And we'll get there eventually, but we need incremental steps.

And right now the major focus is on working out how to implement the Affordable Care Act, which is a little bit of a step towards universal coverage and single-payer, but it's a small step in that direction. What I think will happen in the next couple of years is people are going to learn that the Affordable Care Act covers a lot of people; it doesn't cover everybody, so it doesn't provide the universal coverage that we want. And it doesn't control costs, which is something that the people involved in writing the Affordable Care Act admitted. You know, they have a lot of things in there that they hope will maybe help control costs, but it's not expected to control costs very much, with the result that the share of income going to health insurance and health care is going to keep on rising. We'll still have the private insurers with rising administrative burden, and in five years were going to be back where we are now, except instead of 17 percent of our income going to health care, it will be 25 percent.

Jay: And one of the points you make in your paper is that one way or the other these costs are going to have to be contained. So if you're not getting this out of the private insurance plan, you're going to have to get it by not providing as much health care.

Friedman: Yes, which is the point we're getting to in Massachusetts, where there's talk about ways to cut back on health care. A lot of the talk about consumer-driven health care is basically how can we get people to stop asking for health care. As it is, Americans go to the doctor and go to dentists less often than people in other countries. We're less healthy. We go to the doctor less often. I mean, it's like, put the two together and it starts to make sense.

But it's—we're already underserved as a population, and we will be in a worse position in several years, spending more, getting worse service. And I think at that point a lot of the people who have been looking for incremental gains will say we've got to go all out.

Jay: Okay. And we're going to—you'll find below this video player a link to Gerald's report, and it's worth looking at the detail of this, because it's about time we had this discussion based on public policy with research and not just some rhetoric in either direction. Thanks very much for joining us, Gerald.

Friedman: Thank you. Bye-bye.

Jay: And thank you for joining us on The Real News Network. And don't forget there's a "Donate" button over here, and if you don't click on that, we can't do this.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Paul Jay

Paul Jay is CEO and Senior Editor of The Real News Network. As Senior Editor of TRNN Paul has overseen the production of over 4,500 news stories and is the Host of our news analysis programming. As Executive Producer of CBC Newsworld's independent flagship debate show counterSpin he produced over 2,000 shows during its 10 yrs on air. He is an award-winning documentary filmmaker with over 20 films under his belt and was founding Chair of Hot Docs!, the Canadian International Documentary Film Festival (now the largest in North America).


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How to Pay for Single Payer Health Insurance, Part Three

Tuesday, 07 August 2012 15:39 By Paul Jay, The Real News Network | Video

Guest: Gerald Friedman is a Professor of Economics at the University of Massachusetts Amherst and a member of its Political Economy Research Institute (PERI).

Transcript

Paul Jay, Senior Editor, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.

This is a continuation of our series of interviews looking at single-payer or government-run health insurance plan and focusing particularly on Maryland. And as I said, I'm in Baltimore, and I guess I should have said earlier in this series of interviews that I guess we have some kind of conflict of interest here because we live in Maryland and if there was a single-payer plan system, I guess we would benefit from it. Oh, we're ordinary people. We would benefit from this. Oh, terrible thing, isn't it that? Okay.

So now we're going to continue our series of interview, and now joining us again is Gerald Friedman. Gerald is a professor of economics at the University of Massachusetts Amherst and we're—if you haven't watched part ones and two and—. I can't remember. Are we three or four now? Anyway, you'll see all the other parts down below this video player. So thanks for joining us again, Gerald.

Gerald Friedman, Prof. Economics, UMass Amherst: Thank you.

Also See: What a Single-Payer Health Insurance Plan Looks Like (Part 1)

What a Single-Payer Health Insurance Plan Looks Like (Part 2)

Jay: Alright. So in the last segment we went through your report and we looked at the savings, which came to just over 24 percent over existing insurance coverage and health care expenditure. But that doesn't cover everything, does it? And then so what isn't paid for out of these cost savings, and how are you going to pay for it?

Friedman: Okay. Well, first of all, the cost savings are there. There are also extra expenses, as we were saying, with the Medicaid rate fix. Also, we would be covering everybody. Now, 15 percent of the population of Maryland is currently without health insurance. Extend health insurance to them, they're extra expenses. Also, the plan for the Maryland Health Security Act does away with copayments, deductibles, and all of those expenses. We expect that people would use health services more.

Jay: And let me just—I may not have made this clear enough in the earlier segments, or I may have missed in one of the segment, but this Maryland Health Security Act is an actual piece of legislation. It's been proposed in the Maryland assembly. It's not been passed yet, and this debate is sort of going on. Okay, go on, Gerald.

Friedman: Okay. Yeah. Yeah. The study I did projects that it would be enacted this year and looks at the savings and expenses for next year. And as I said, covering everybody, doing away with copayments would lead to greater utilization of health care. That's a good thing. You know. So, you know, people would be healthier. They would live longer. They would be more productive. They wouldn't be sick as much, so they wouldn't miss as much work. Kids would be healthier in school and would do better.

Jay: And if I understand correctly, infant mortality amongst the poor in Maryland is actually getting worse.

Friedman: Yes. Yes. It's really quite appalling. Overall the United States is about 45th in the world in life expectancy and infant mortality with one of the richest countries in the world. How is it that we've gotten to a position where we've gone from second or third in the world 35, 40 years ago to 45th? We're obviously doing something wrong. We're putting tons of money inefficiently into the health care system. So fixing that would involve spending some extra money.

Now, even taking account of those extra costs, there would be savings of billions of dollars for Maryland, but we'd also be reallocating what we're spending. Much of the spending now comes through premium dollars paid by individuals or companies. We would do away with those. There would be no private insurance. You wouldn't be buying private insurance. Instead, that bill for that, for what used to be paid for by the private insurance, would be picked up by the government, by this health security trust, which would be funded through taxes. We could try to use a better word, a general word than taxes, but that's—.

Jay: [unintel.] I mean, it's funded through taxes, and where I—you know, I still spend a lot of my time and grew up in Ontario. Yeah, you pay your taxes, you get a health card, you go see the doctor. And it's a progressive tax system, so that people that are richer pay a little more—or, hopefully, a lot more, one wishes.

Friedman: That's right. And, in fact, what we've proposed here would be we would use payroll taxes and progressive income taxes to pay for the health insurance plan. What happens now is if you have health insurance, you buy it yourself or you pay for it through work, a certain fixed amount gets paid for everybody. And that is a trivial amount for the heads of large companies but is a very large amount for people who are earning minimum wage or something close to it. So what happens now is poor people and working people pay a very high proportion of their earnings for health coverage. We would switch that by taking a percentage of people's payroll and then a percentage of your earnings. We would be taxing the rich more than the poor. It would be a little bit progressive. But compared to the current system, it would be a huge gain for working people and certain loss for people at the very highest income.

Jay: And what would it mean for businesses? One of the arguments that's often given against this is that it would make, for example, Maryland uncompetitive compared to other states that don't have this.

Friedman: I so want to go to chambers of commerce and to businesses and talk to them about what a great savings this is for them. This is the best thing that could happen for Maryland business that the Maryland state government could do, because, first of all, businesses would get this off their to-do list. Small businesses around Amherst that I talked to, they hate having to do health insurance. They feel obligated to provide health insurance to their workers. They've been providing it. They have to keep providing it. But dealing with it is a gigantic hassle. Also, it's a big expense and it's an unknown expense. Every year you find out, oh my God, my insurance premiums are going to go like this.

We would take care of that. It would be handled every year by the state. It would be—you wouldn't have to think about it. You wouldn't have to explain to your worker why this thing is not covered. Also, because it would be more efficient—remember the 24 percent savings—because it would be more efficient, Maryland would be able to provide health care to its population at lower cost than their businesses are paying now. Businesses in Maryland would save several percentage points of payroll every year because of this, the single-payer system.

Jay: Yeah. If people want some evidence of this, they should go look at—one of the biggest supporters of the Ontario health care plan was General Motors, which found that their costs towards health care and their costs per employee in Ontario was far lower than it was, like, for example, in Windsor, right across the border in Detroit. And General Motors was very much in favor of this kind of system.

Friedman: That's right, because it's saving them money. And I would expect that businesses in Maryland, when they realize how much they'd be saving and how they would be able to outcompete businesses in Virginia or Pennsylvania—I mean, a restaurant in Maryland would be less expensive to operate than a restaurant across the border in D.C. or in Virginia.

Jay: Well, one of the arguments will be is that there's a lot of businesses that don't provide health care at all and they will become less competitive if all of a sudden they have to start making some payments towards this plan.

Friedman: That's right. That's right. Small businesses and some large businesses don't provide health care. Now their workers are getting free care, are getting Medicaid, are getting some sort of subsidized care, and their workers are not getting care at all and are being unhealthy and sick. They would benefit if their employees were healthier and had a more reliable source of care. On the other hand, they would be paying somewhat more in the payroll tax than they're paying now.

Jay: But in your study you looked at the overall jobs affect. What did you find?

Friedman: Oh, the overall jobs—Maryland would benefit. It's a little hard to say exactly, but I would estimate over 100,000 additional jobs would be created by this because of this competitive interstate effect that Maryland employers would be able to outcompete employers in Pennsylvania and Virginia and elsewhere.

Probably some businesses would move to Maryland. You know, if you are in Northern Virginia, hey, locate in Montgomery County, get the cheaper health insurance—your life is easier and it's cheaper. So you'd get maybe 100,000 extra jobs. And also, though I didn't put this in, I didn't factor this in, if you actually did get those 100,000 extra jobs, the tax rate could be lower for health care. So that would—the effects would become more [crosstalk]

Jay: Because the bigger the pool, the more economy of scale.

Friedman: As the economy expands, yes, exactly, exactly, costs become lower and you get on this virtuous cycle.

The biggest beneficiaries would be employers who are currently providing health care, and the biggest group there are local governments, because local governments not only provide health care to their workers, but they provide health care to their dependents. What I found was the so-called pickup rate, the proportion of people actually using the health insurance that's offered, it's only about 60 percent of private employers, but it's over 90 percent for public employers. So local governments would be benefiting even more, which would mean lower taxes, lower [inaud.] and better-supported public schools.

Jay: Okay. So this whole thing's a no-brainer. I mean, if you look at the data, it's really a no-brainer. And, you know, as someone who, again, grew up in Canada, we always shook our heads and just could not understand how Americans can live with the system they have. But what are the politics of this in Maryland now? What do you get a sense of? Is there support for this? And what's the role of the insurance companies?

Friedman: Well, what I hear in Maryland, what I hear in other places as well, is politicians saying, yes, yes, you're right, this has been studied before. I'm not the first one to find these sorts of savings. And we'll get there eventually, but we need incremental steps.

And right now the major focus is on working out how to implement the Affordable Care Act, which is a little bit of a step towards universal coverage and single-payer, but it's a small step in that direction. What I think will happen in the next couple of years is people are going to learn that the Affordable Care Act covers a lot of people; it doesn't cover everybody, so it doesn't provide the universal coverage that we want. And it doesn't control costs, which is something that the people involved in writing the Affordable Care Act admitted. You know, they have a lot of things in there that they hope will maybe help control costs, but it's not expected to control costs very much, with the result that the share of income going to health insurance and health care is going to keep on rising. We'll still have the private insurers with rising administrative burden, and in five years were going to be back where we are now, except instead of 17 percent of our income going to health care, it will be 25 percent.

Jay: And one of the points you make in your paper is that one way or the other these costs are going to have to be contained. So if you're not getting this out of the private insurance plan, you're going to have to get it by not providing as much health care.

Friedman: Yes, which is the point we're getting to in Massachusetts, where there's talk about ways to cut back on health care. A lot of the talk about consumer-driven health care is basically how can we get people to stop asking for health care. As it is, Americans go to the doctor and go to dentists less often than people in other countries. We're less healthy. We go to the doctor less often. I mean, it's like, put the two together and it starts to make sense.

But it's—we're already underserved as a population, and we will be in a worse position in several years, spending more, getting worse service. And I think at that point a lot of the people who have been looking for incremental gains will say we've got to go all out.

Jay: Okay. And we're going to—you'll find below this video player a link to Gerald's report, and it's worth looking at the detail of this, because it's about time we had this discussion based on public policy with research and not just some rhetoric in either direction. Thanks very much for joining us, Gerald.

Friedman: Thank you. Bye-bye.

Jay: And thank you for joining us on The Real News Network. And don't forget there's a "Donate" button over here, and if you don't click on that, we can't do this.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Paul Jay

Paul Jay is CEO and Senior Editor of The Real News Network. As Senior Editor of TRNN Paul has overseen the production of over 4,500 news stories and is the Host of our news analysis programming. As Executive Producer of CBC Newsworld's independent flagship debate show counterSpin he produced over 2,000 shows during its 10 yrs on air. He is an award-winning documentary filmmaker with over 20 films under his belt and was founding Chair of Hot Docs!, the Canadian International Documentary Film Festival (now the largest in North America).


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