Provider Instability in a Single-Payer System

By Health Ideas Staff
Sep. 6, 2019

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The Effects of a Single-Payer System

To many people, a single-payer healthcare system seems like an easy way to increase healthcare access and control costs. Like an iceberg, there are hidden dangers that lurk below the surface of this seemingly simple solution. A single-payer healthcare system would have a devastating effect on the provider community within the United States that would ripple throughout the system affecting provider viability, access to care and innovation.

Short-term Impact: Lower reimbursement rates would affect provider financial stability

Today, reimbursement from government programs –like Medicare and Medicaid – do not typically even cover the costs providers actually incur to provide services. A recent MedPAC Committee report (March 2019) to Congress estimates that Medicare payments result in an average margin of -9.9% for U.S. hospitals. A Stanford University study published in JAMA projected a 15.9% loss of revenue if the Medicare fee schedule was applied to all patients.[i]  Margins for Medicaid payments are even lower.

Under a single-payer proposal, the government becomes the sole payer and reimbursement rates are certainly not expected to increase.  In fact, CMS Administrator, Seema Verma, said in a recent speech, “The secret of the public option is that it’s only cheaper because it uses the force of government to strong-arm doctors and hospitals into accepting below-market payment rates.”

Although in reference to public options versus single-payer, it’s clear the outcomes would be the same in either model – low reimbursement rates that don’t reflect costs. Hospitals and other providers will need to look at other ways to make up the difference or go out of business.

So what are the options? Eliminate staff? Forgo promising quality improvement measures? Limit or ration the services offered? Unnecessarily increase the delivery of complex and high paying services to close the reimbursement gap? All of these “solutions” to inadequate reimbursement rates neglect the needs of patients, increase costs, reduce quality and exacerbate provider burn out; all major concerns for providers.

Long-term Impact: Provider Shortages and Limited Innovation

Given that seventy percent of healthcare costs are labor related, reduced reimbursements directly impact provider livelihoods. It begs the question as to how attractive the profession/field will actually be under a single-payer model? Our educated guess – not very.

High wages draw top talent in all industries. Low wages will deter the best and brightest from pursuing careers in medicine and healthcare, stunting the quality and diversity of providers.  Potential medical students will have to weigh the heavy burden of student loan debt against earning potential.

The U.S is already facing a provider shortage in our current system. A report from the Association of American Medical Colleges (AAMC) shows that the nation will potentially see a shortage of physicians between 42,600 and 121,300 as soon as 2030. That shortage will be hastened by fewer entrants to the field and further complicated, by increased patient/consumer demand expected from a single-payer program.

Put it all together and single-payer systems are a significant threat to medical/healthcare professionals and to all patients who want continued access to high quality innovative care.


For a further look at additional single-payer implications, read other entries in this blog series exploring the single-payer model.

Blog 1: “Exploring the Single-Payer Model”

Blog 2: “The Patient Consequences of a Single-Payer System” 

Blog 3: “Provider Instability in a Single-Payer System”

 

[1] (The Implications of “Medicare for All” for US Hospitals, Schulman K, Milstein A, JAMA. 2019;321(17):1661-1662. doi:10.1001/jama.2019.3134).

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