Single-Payer Reform Purported to Save Estimated $504 Billion

February 22, 2017 - A possible repeal of the ACA threatens to eliminate the coverage of 26 million Americans, but the authors of a recent commentary in the Annals of Internal Medicine contend that reforming to a single-payer system would allow for a Medicare expansion sufficient to cover those individuals and provide a total savings of $504 billion.

The latest repeal and replace plan from GOP leaders contains various references to limiting Medicaid spending through set state budgets. But Steffie Woolhandler, MD, MPH, and David U. Himmelstein, MD, do not support the GOP plan, citing significant economic and social impacts whether the ACA is kept or repealed. The pair claims that a single payer healthcare can improve patient outcomes with affordable and fiscally sustainable alternatives.

“The ACA has helped millions. However, our healthcare system remains deeply flawed,” write Woolhandler and Himmelstein.

“Reforms that move forward from the ACA are urgently needed and widely supported,” they continue. “Even two fifths of Republicans (and 53% of those favoring repeal of the ACA) would opt for single-payer reform (10). Yet, the current Washington regime seems intent on moving backward, threatening to replace the ACA with something far worse. Polls show that most Americans – including most people who want the ACA repealed, and even a strong minority of Republicans – want single-payer reform. And doctors are crying out for such reform.”

According to their findings, streamlining a single payer system could produce an estimated savings of $220 billion on insurance overhead. Over $150 billion in hospital administration costs can potentially be saved and $75 billion in paperwork costs could be reduced under a single payer program.

“The economic case for single-payer reform is compelling,” Woolhandler and Himmelstein maintain. “Private insurers' overhead currently averages 12.4% versus 2.2% in traditional Medicare.”

“Reducing overhead to Medicare's level would save approximately $220 billion this year,” the pair adds. “Single-payer reform could also sharply reduce billing and paperwork costs for physicians, hospitals, and other providers. Simplified, uniform billing procedures could reduce the money and time that physicians spend on billing-related documentation.”

The duo found that a single payer reform could reduce the total expenditures for healthcare administration by 46.1 percent. By adopting negotiating strategies for drug pricing from other single-payer countries, Woolhandler and Himmelstein estimate a savings on outpatient prescription drug costs of $113 billion or 31 percent of predicted 2017 spending.

The commentary comes in response to the current debate over the form a likely ACA appeal will take and its impact on current coverage options. According to Woolhandler and Himmelstein, a single payer adoption can meet the healthcare goals of supporting patients more than the economic benefit of the payers.

“The potential health benefits from single-payer reform are more important than the economic ones,” Woolhandler and Himmelstein. “Being uninsured has mortal consequences. Covering the 26 million persons in the US who are currently uninsured would probably save tens of thousands of lives annually. And under insurance now endangers many more by, for example, delaying persons from seeking care for myocardial infarction or causing patients to skimp on cardiac or asthma medication.”

“Single-payer reform would also free patients from the confines of narrow provider networks and lift the financial threat of illness, a frequent contributor to bankruptcy and the most common cause of serious credit problems.”