On Kenneth Thorpe's Analysis of Senator Sanders' Single-Payer Reform Plan

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Professor Kenneth Thorpe recently issued an analysis of Senator Bernie Sanders' single-payer national health insurance proposal. Thorpe, an Emory University professor who served in the Clinton administration, claims the single-payer plan would break the bank. Thorpe's analysis rests on several incorrect assumptions, and is at odds with analyses of the costs of single-payer programs that he produced in the past - which projected large savings from such reform.

1. He incorrectly assumes administrative savings of only 4.7% of expenditures; but this is based on projections under Vermont's proposed reform - not a single-payer system.

The correct way to estimate administrative savings is to use actual data from real world experience with single-payer systems such as that in Canada or Scotland, rather than using projections of costs in Vermont's non-single-payer plan. Administrative costs of insurers and providers accounted for 16.7% of total health care expenditures in Canada, versus. 31.0% in the U.S. - a difference of 14.3%. In subsequent studies, we have found that U.S. hospital administrative costs have continued to rise, while Canada's have not. Moreover, hospital administrative costs in Scotland's single-payer system were virtually identical those in Canada.

In sum, Thorpe's assumptions understate the administrative savings of single-payer by 9.6% of total health spending. Hence he overestimates the program's cost by $327 billion in 2016, and $3.742 trillion between 2016 and 2024. Notably, Thorpe's earlier analyses projected much larger administrative savings from single-payer reform -- closely in line with our estimates.

2. Thorpe assumes huge increases in the utilization of care, increases far beyond those that were seen when national health insurance was implemented in Canada, and much larger than is possible given the supply of doctors and hospital beds.

Instead of a huge surge in utilization, more realistic projections would assume that doctors and hospitals would reduce the amount of unnecessary care they're now delivering in order to deliver needed care to those who are currently not getting what they need. That's what happened in Canada.

4. Thorpe's analysis also ignores the large savings that would accrue to state and local governments -- and hence taxpayers -- because they would be relieved of the costs of private coverage for public employees.

State and local government spent $177 billion last year on employee health benefits - about $120 billion more than state and local government would pay under the 6.2% payroll tax that Senator Sanders has proposed.

5. Thorpe's analysis also apparently ignores the huge tax subsidies that currently support private insurance, which are listed as "Tax Expenditures" in the federal government's official budget documents.

These subsidies totaled $326.2 billion last year, and are expected to increase to $538.9 billion in 2024. Thorpe's analysis makes no mention of these current subsidies.

6. Thorpe assumes zero cost savings under single-payer on prescription drugs and devices.

Nations with single-payer systems have in every case used their clout as a huge purchaser to lower drug prices by about 50 percent. In fact, the U.S. Defense Department and VA system have also been able to realize such savings.

In the past, Thorpe himself estimated that single-payer reform would lower health spending while covering all of the uninsured and upgrading coverage for the tens of millions who are currently underinsured. The facts on which those conclusions were based have not changed.

At: http://www.huffingtonpost.com/david-himmelstein/kenneth-thorpe-bernie-sanders-single-payer_b_9113192.html?1454092127