The real costs of single payer

$24 billion for single payer health care in Maryland sounds like a lot — until you consider how much we spend now

Our view:

You can feel the glee radiating from Gov. Larry Hogan’s re-election campaign at The Sun’s report Tuesday on a Department of Legislative Services estimate of what it would cost to implement a Maryland single-payer health care plan like the one Democrat Ben Jealous is proposing in this year’s election. The grand total — about $24 billion in newstate spending, which is more than half of the entire existing state budget — sounds like an enormous amount of money, and it fits right in with the Hogan campaign’s efforts to paint Mr. Jealous as a wild-eyed tax-and-spend liberal, if not outright socialist.

But even if we assume $24 billion is an accurate estimate — and we should note that the analysts who produced it included a long list of caveats about their assumptions — it sounds a lot different whenyouconsider that, according to the Centers for Medicare and Medicaid Services, Marylanders spent more than $51 billion on health care in 2014. Based on the historical average rate of growth, that’s something like $65 billion today.

Now, that includes some big categories of health care spending that state analysts intentionally left out of their estimate — Medicare, Medicaid, Veterans Administration, Tricare and state employee health insurance. Their goal was to figure out howmuch new spending the state would have to take on, so they left out costs for people who already get their health coverage from the government. The $24 billion represents the additional costs the state would have to incur to cover people who now pay for their own health insurance or get it through an employer, plus the expense of providing coverage to people who are now uninsured. The DLS analysis includes no estimate of how much businesses are paying for their employee health plans now, and CMS data don’t give an answer that fits precisely into the methods the state used to model costs. But in the aggregate, Marylanders spent $17.3 billion on private health insurance in 2014, which, based on the historical rate of growth, would be about $21 billion today.

In other words, what we’re spending now on private health insurance may not be so far off from $24 billion, and the efficiencies and bargaining power of a single-payer system might narrow — if not eliminate or exceed — the gap.

That said, there are plenty of reasons beyond the sticker price to be skeptical about whether Maryland could or should pull off a state-level single-payer system. The first and most obvious is that the state’s new Medicare waiver agreement with the federal government specifically says the arrangement is voided if Maryland adopts a single-payer system. That would mean a $2 billion annual loss for the state’s health care system.

But there are other pitfalls as well. Federal law governing employer sponsored benefits prevents state governments from interfering in those relationships, meaning Maryland lawmakers couldn’t force businesses to participate in a state-sponsored system rather than continue with their existing, self-sponsored coverage. And on the financing front, it’s unclear whether the federal government would continue to provide the same level of subsidies it now does under the Affordable Care Act to a state that went single-payer, or whether it would fund Medicaid to the same extent. Other states that have considered single-payer have grappled with start-up costs and with questions about how they would continue to fund the system during an economic downturn since states, unlike the federal government, can’t borrow money to cover budget shortfalls.

Doing single-payer on a national level would erase, or at least ease, many of these legal and logistical difficulties. Given the current political climate, it’s a fair question as to whether Congress would ever move forward with such a system if some states didn’t find a way to try it first. But is Maryland the right place to start? There is a case to be made that our state’s experiment in cost containment at hospitals begun under the O’Malley administration and extended recently to other sectors of health care by the Hogan administration makes us better positioned than other states to adopt single-payer. But it also may make the case for seeking to build from the status quo, as many of the state’s universal health care advocates contend.