Any serious effort to control health care spending in the United States — either as a stand-alone measure or as part of a transition to single-payer — will have to contend with provider payment rates.
In an article published in the Journal of the American Medical Association last year, health researchers Dr. Ashish Jha, Irene Papanicolas, PhD., and Liana Woskie compared health care spending in the United States to that of 10 other high-income nations such as Canada, Germany, and the U.K. They found that the U.S.’s higher payments to providers is a major, and underappreciated, driver of the country’s higher health care spending.
While noting that the U.S. performed poorly on a number of key indicators — percentage of adults who are obese, life expectancy, infant mortality — the study’s authors dispelled some commonly held beliefs about drivers of health care spending in the U.S.: The U.S. does not use more health care services; does not have more specialists than other countries; and spends less on inpatient care than other countries. (The U.S. also had the best outcomes for heart attack and stroke victims.)
The study authors found that the U.S. does spend more on both administrative costs (8% of total health care costs versus 1–3% in other countries) and pharmaceuticals. But they also found dramatically higher salaries among doctors in the U.S.: The average salary for general practitioners in the U.S. was $218,173, in comparison to $86,607–$154,126 in the other countries.
“Doctors just get paid a lot less in Canada and the U.K., and nurses get paid a lot less,” says Jha, the Dean for Global Strategy at the Harvard School of Public Health School. “Doctors and nurses make up 20% of the health care spending.”
Knowing all of this, if a single-payer system were to deliver on advocates’ promises of meaningfully reducing overall health spending, it would have to reduce payments to providers. Reducing those payments, however, could transform the U.S. health care system. In the short term, the effects would depend on just how rapidly the shift to single-payer occurs. Blumberg, the Urban Institute researcher, thinks that provider payment rates could likely be gradually reduced from current levels without dramatic effects on quality. But cuts that are too large or that happen too quickly, she cautions, could lead to quality and access issues or even doctors and hospitals to close up shop, particularly in rural areas. “When you start doing this with a much larger population, with much larger cuts, the effects are going to be bigger,” she says.
In the long-term, Jha points to another possible long-term effect of reducing provider payment rates: “If you cut physicians salaries by a third, you will probably get a very different group of people going into medicine than you do today,” he says. If we’re not going to make cuts to payments, doctors, nurses, or hospitals, that’s fine, but then we should be honest that we’re not going to cut health care spending.”
So what’s the drawback of not cutting provider payment rates? Cost. Blumberg identified the cost to the federal government as the biggest con of a single-payer system. And, contrary to the promises of some single-payer advocates, some people — namely wealthy people whose employers offer them good insurance plans — will, in fact, not come out financially ahead in a single-payer system.
“Some will spend considerably less, but some will spend more,” Blumberg says. “You can’t make a blanket statement that you’ll pay less.”