The Corner

Health Care

If You Assume Single-Payer Saves Money, It Does

The RAND Corporation advertises a new study of New York’s proposed single-payer plan as showing that the policy “Could Expand Coverage Without More Spending.” This refers to total spending, not just government spending, of course, and “could” does a lot of work: What the study actually shows is that single-payer could do just about anything, depending on what assumptions you start with — echoing the lessons of the Mercatus Center study I discussed yesterday.

The study’s “base case” estimate is that single payer would reduce total health-care spending in the state by 1 percent by 2022 and 3 percent by 2031. Some key assumptions, however, are that (a) administrative costs will eat up only 6 percent of the money for health-care services; (b) provider payment rates will “grow at a rate equal to that in Medicare and Medicaid” (which is lower than the rate at which private payments are growing); (c) drug prices will be 10 percent lower than status-quo Medicare prices; and, most troublingly, (d) “increased patient demand for services would not be fully met because of ‘congestion’ — nonfinancial factors limiting the supply of services.”

But the study also shows some alternative scenarios. In one, provider payments increase at the private rate, the administrative rate is 12 percent, and drug prices are higher. In that case, health spending goes up 7 percent by 2022 and 12 percent by 2031. And if you yank the assumptions in the opposite direction, costs go down quite dramatically, 12 percent by 2022 and 15 percent by 2031.

It kind of sounds like we actually have no idea how much total spending would increase or decrease under single-payer, much less what would happen to the quality of care, though we do know it would transfer an immense amount of money and power to the government.

I’m a fan of federalism and left New York years ago, so part of me hopes they’ll try it so we can all see how it works, but make no mistake: It’s a major gamble.

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