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Achieving Universal Coverage with a Unified System

What We Can Learn from Other Countries

The United States is the only wealthy industrialized nation that doesn’t guarantee health care to its entire population. Our counterparts boast universal coverage, lower costs, better outcomes and superior satisfaction ratings. Coverage is continuous throughout one’s lifetime regardless of changes in age, employment or health status. This contrasts with the United States and our patchwork of programs depending on age (Medicare), income (Medicaid), military service (TRICARE, VA), or employment (employer-based insurance).

Other common features of our peer nations’ health systems:

What is Meant By a Unified System

What Would This Look Like in Minnesota?

Though closing our uninsurance gap and eliminating underinsurance will increase spending, reducing fragmentation and thereby reducing administrative expenses, duplication, waste, fraud and cost shifting could allow for achieving universal and affordable access, without the cost explosion and rationing by income which will continue under current reforms.

The Lewin Group, a consulting firm with decades of experience in health care modeling, was hired to conduct an economic impact study of a unified, single-payer health care system for Minnesota. The system modeled by The Lewin Group would cover all Minnesota residents with comprehensive medical, mental health and dental benefits, and access to all licensed health care providers in the state. It was stipulated that there be no loss of income for providers in order to achieve universal coverage or cost savings, that cost sharing requirements for patients not erect financial barriers to necessary care and that financing of the system be stable.

The economic model used the specifications outlined below:

Eligibility: All residents of Minnesota are included. If Minnesota were to enact a unified plan, residency requirements would be established.

Benefit package: A benefit set was delineated that addresses the medical, rehabilitative, dental and mental health needs of Minnesotans, and is at least as comprehensive as both the state basic Medical Assistance benefits and the coverage provided to state employees.

Cost sharing: There are no deductibles and no coinsurance in the unified system, as removing cost barriers to primary care can lower overall costs and improve outcomes. There are no copays for primary care providers in pediatrics, internal medicine, family practice, psychiatry, dental and OB/GYN for health screenings and pregnancy. A modest copay of $20 is applied for specialist care, hospitalizations, diagnostic tests and procedures. Copays are eliminated for prescriptions for chronic conditions, as copays on medications reduce use and result in increased hospitalizations and adverse health consequences. The plan was modeled with a cap on copays equal to 3% of income for households at less than or equal to 200% of Federal Poverty Level (FPL), and 5% of income for those greater than 200% of FPL.

Global budgeting: Hospitals will be paid under a global operating budget based on historic utilization to reduce the administrative complexity of billing for each product and service and to promote efficient care delivery.

Provider Reimbursement: Income for providers is maintained in the transition to a unified system. Reimbursement rates are decreased only to compensate for the lower administrative costs of a unified system. Provider payment in the model is based on current average compensation. In actuality, changes in physician income will depend on their current payer mix (with uniform reimbursement, providers who only care for privately insured patients would see lower income, and providers with mostly publicly insured patients would see higher income). Over time, payment and delivery system reforms have the potential to change how providers are compensated.

Financing: There are numerous options for financing a unified system: community-rated premiums (regardless of income); sales, value-added or other consumption taxes; income-based premiums; payroll- and wage-based payments or a blend of these. In addition, there are unlimited options for income caps and floors, using flat or marginal rates, and varying the proportions paid by individuals and employers. What is most critical is that the financing be naturally appreciating, as increasing a premium or tax is politically unpopular. Three financing options were modeled; all assume that current federal and state taxes that support health care would continue:

  1. Employer payroll tax and individual income tax.
  2. Employer payroll tax and employee payroll tax.
  3. Employer payroll tax, individual income tax and a “sin tax” on tobacco and alcohol.
  4. These payments for financing would take the place of all current premiums, deductibles and coinsurance paid by individuals, and all premiums and HSA contributions currently paid by employers.

Growth of health care spending over time: The growth of spending over time was tied to expected wage and population growth, which allows for stable tax rates. Previous recommendations by the Minnesota Health Care Transformation Task Force aimed to keep health care inflation in line with the consumer price index. A unified system gives us the means to do so, by working within a global budget. A global budget provides a strong incentive to find efficiencies, reduce errors and to optimize the delivery of effective health care so as to avoid cutting provider reimbursement, reducing benefits or raising income-based premiums. Decisions to raise additional revenue through increasing tax rates or broadening the tax base, if needed to meet the population’s health care needs, would happen in a transparent, accountable way in a unified, publicly-financed system.

Pertinent Findings of the Lewin Study

Reduction in Total Health Spending: A unified system with uniform benefits and payment rates, using a single payer and claims administrator, could significantly reduce total health spending below that expected under the Affordable Care Act. Modeling the comprehensive coverage and minimal cost sharing on non-primary care services as specified, Lewin projects nearly a 9% reduction in total health spending in the state of Minnesota in the baseline year of 2014. The unified system reduces spending while increasing coverage and access, as 100% of Minnesotans are covered. (Under the ACA, 262,000 Minnesotans are projected to be uninsured, compared to more than 475,000 today.)

Savings to Employers: There are significant savings for employers that currently offer insurance. Average projected savings amount to $1214 per worker. The impact on individual employers will depend on the number of employees and their average wages. The biggest savings are for state, local and federal employers. Employers not currently offering insurance would see an increase in spending of $2124 per worker on average, varying by industry and size of the workforce.

Savings to families: The average Minnesota family would see a savings of $1238 each year on health care expenses and a $124 increase in annual wages due to lower employer health care spending. Additional out-of-pocket expenses for non-primary care copays would be capped at 3-5% of income with an annual maximum of $1500 per person or $3000 per family. Moving from a premium-based financing system to an income-based financing system eliminates underinsurance, so families would never pay more than 10% of their income on health care. Income-related financing does increase health care spending for families earning more than $150,000 per year, and those earners will also experience some wage suppression as a result of the employer health tax. While the increase will be greatest for the 3% of the households with the highest incomes, these families are unlikely to face the financial barriers to health care that the average family faces today.

Distribution of health care resources: By significantly cutting administrative expenses, reducing fraud and using bulk purchasing, a much greater proportion of health care dollars are spent on providing health care. And by reducing physician time and resources spent on administration, providers will have more time to devote to patient care.

Bending the cost curve: A naturally appreciating method of financing allows for predictable health care expenses for employers, households and governments. A global budget produces strong incentives to eliminate errors, duplication and waste, and to promote care which is effective and efficient. The Minnesota Department of Health projects health care spending to grow faster than projections by the Centers for Medicare and Medicaid. A unified single-payer system slows the rate of spending with increased potential savings each year.

Workforce changes: Moving to a unified system with a significantly reduced administrative burden will lead to a reduction in health sector employment. Even accounting for the increase in health care jobs in the delivery system due to increased utilization with increased insurance coverage, Minnesota could lose 42,000 jobs in health care administration, though a portion of those jobs would have been newly created under the Affordable Care Act. Some studies indicate that employment growth in other sectors may more than make up these losses.

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