My guest today is Gerald Friedman, professor of economics at University of Massachusetts, Amherst. Welcome to OpEdNews, Jerry.
JB: You've inadvertently found yourself in the spotlight of late. How did this come about?
JF: I've always had an interest in health policy because I have believed that everyone should have a right to healthcare as part of our inalienable right to "life, liberty, and the pursuit of happiness". In 1978, I went to Washington as part of a group, "Democratic Action," organized by the late Michael Harrington to lobby for Senator Ted Kennedy's single-payer bill. Through the next 30 years, I wrote a few short pieces about health policy and that attracted some attention so that a group promoting a single-payer plan for Massachusetts asked me to draft a report on the economic consequences of a single-payer program there.
That report attracted more attention and I was asked to write reports for other states: Maryland and then Pennsylvania and Colorado. And in 2013, Physicians for a National Health Plan asked me to write a report for the financing and economic impact of a national single payer plan, HR 676. When Senator Sanders began his presidential campaign, he included single payer in his program and reporters began to contact me because my report is the only economic study of the financing and impact of a single payer plan. The Wall Street Journal in particular used some numbers from my study, out of context I might add, in their attack on Senator Sanders. Since the WSJ article, a steady flow of reporters and others have contacted me to discuss economics of single payer.
I am delighted that single payer is getting this attention and I am able to contribute to the campaign to bring better and less-expensive health care to the American people. But this is a bit of a mixed blessing! I have other responsibilities (to students and the University), and other research interests. And, I have a dog to walk.
JB: Let's not forget that dog! So, your visibility is both good and bad: good in that single payer is getting well-deserved attention but the numbers in your study have been taken out of context. How did the WSJ mishandle them, Jerry?
JF: The WSJ reported the cost without the benefits. They acted like economists in a bad joke: "Economists know the price of everything but the value of nothing!" So they gave an estimate of how much people would be spending on a single payer plan without acknowledging how much individuals and businesses would save by not having to pay for private health insurance and for copays and deductibles. Furthermore, savings will increase over time because every country that has a national healthcare system has lower inflation rates in health care than the US!
Single payer systems save money because they (1) have lower administrative costs because it is more efficient to process bills in one pipeline -- Medicare has overhead of less than 2% while private health insurance companies have overhead rates of over 12%. This would save us $200 billion in the first year of a single payer program. (2) they have lower administrative for providers because they send the bills to only one company. Many American hospitals have more people doing Billing and Insurance Related (BIR) activities than they have beds or doctors! American physicians spend hours every week and over $90,000 per physician on these activities. Most of the BIR costs in provider offices disappear in a single payer program. This saves another $200 billion. (3) Drug prices are nearly twice as high in the US as in other countries because pharmaceutical companies can exploit their monopolistic power against fragmented insurance companies and individuals. In the US, only the VA is able to bargain with drug companies effectively and they pay prices barely half what the rest of us pay! A single payer program could save over $100 billion through negotiated drug prices, just like they do in Canada, France, Italy . . .
(I could tell you a story about when we were in Florence, Italy, and our younger daughter got sick!*)
Altogether, a single payer plan would save Americans $600 billion in the first year, with savings rising over time because the plan would control the growth in monopolistic pricing and administrative expense. This is what has happened for Medicare in the US, for Medicare in Canada (what they call their single payer system -- they call it that to make fun of us!) For 45 years (since 1971) health care prices in the two Medicares have risen at 1.1% a year less than in the private health care system in the US. Had the rest of the US health care system controlled prices that effectively, we would be saving $1.5 trillion this year!
Had the WSJ talked about the savings, they would have written a very different story: spend a little more in public taxes and save a lot in the "private taxes" that we are required to pay to private health insurers (because we are required to buy health insurance!).