Association for Public Policy Analysis & Management

The Affordable Care Act has reduced the number of uninsured and established new cost-containment initiatives. However, interest in more comprehensive health care reform such as a single-payer system has persisted. There is no single definition of a single-payer system: it varies, for example, by the type of payer (public or private), eligibility of beneficiaries, jurisdiction of coverage (e.g., state or nation), benefits, cost sharing, nonprofit status of hospitals, and cost controls. It is possible to use microsimulation models to explore effects under a variety of single-payer scenarios while accounting for and making explicit the range of uncertainties underlying the estimates.

We have analyzed two recently proposed single-payer alternatives – we labeled one comprehensive and the other catastrophic. The comprehensive system would be available to all US citizens and legal residents and would have limited cost sharing (1-20 percent). The catastrophic proposal would allow Medicare and Medicaid to continue and would protect all other citizens and legal residents against large financial losses. Coverage would be income-dependent and individuals could supplement the coverage with private insurance. Both single-payer alternatives would be financed by a variety of taxes. We compared health insurance coverage and health care spending relative to what would occur under the ACA. Health insurance coverage was simulated by extending RAND COMPARE, a microsimulation model with a utility maximization framework. The simulated changes in medical expenditures were based on evidence from the RAND Health Insurance Experiment.

Implementation of the comprehensive single-payer system would increase total US health care spending if the coinsurance rate for all services is below 15 percent. A coinsurance rate of one percent would lead to an increase of about $200 billion. With the taxes proposed in the Expanded and Improved Medicare for All Act and the American Health Security Act, federal spending would increase while individual and employer spending would decrease. Total US health spending under the catastrophic system depends on the extent to which individuals supplement the coverage with private insurance.

In the above work, we have not yet accounted for the potential administrative savings or new costs related to implementation of either alternative. We are developing a cost tool designed to inform policymakers of the range of spending effects under single-payer alternatives.