Author: Gerald Friedman, Professor of Economics, University of Massachusetts at Amherst.
gfriedma@econs.umass.edu
Legislation Analyzed: An Act Establishing Medicare for All in Massachusetts, 193rd session (Bills S.744 & H.1239)
Updated: April 26, 2023
Latest Legislative Testimony: 10/26/2021
2023 Summary
The Act would lower health care spending by $48.4 billion in the first year alone, while saving lives, expanding care, reducing physician and nurse burnout, and ensuring the solvency of community hospitals.
The proposed Act would bring down total health care costs from $125.47 billion currently to $87.11 billion. Savings would come from reduced burdensome billing expenses, administrative waste in the insurance industry, monopolistic pricing of drugs and medical devices and in hospitals, and fraud. Some savings would be used to finance system improvements - expanding coverage to the uninsured, removing barriers to access, and correcting the underpayment of Medicaid services ($11.06 billion). Overall the Act would lower health care spending by $48.42 billion in the first year alone.
Current “System”: $125,470,000,000
Improvements: $11,063,000,000
Single Payer Savings: -$48,422,000,000
Single Payer System: $87,111,000,000
In Massachusetts, the current actuarial value of private health insurance plans is only 80%; including Medicaid and Medicare raises the statewide actuarial value to 87%. Raising the Medical Loss Ratio to the level of traditional Medicare, 98%, would save Massachusetts $13 billion.
Providers would save an additional $10.5 billion on administrative costs. Savings from provider administration will be captured by the Health Care Trust through lower reimbursement rates leaving physician incomes secure. Physicians will benefit from higher Medicaid reimbursements as well as higher utilization, especially from those now uninsured or under-insured.
Lowering hospital prices to Medicare rates with an increase in these rates of 10% would save nearly $11 billion dollars in 2021. Massachusetts hospitals are currently stashing away $1.6 billion in reserves in the Cayman Islands and other tax havens. Eliminating monopoly profits in this way would reduce hospitals ability to accumulate reserves, to reimburse investors in the case of for-profit hospitals, and would compel them to lower their often-inflated managerial salaries and ambitious investment plans. We anticipate saving another seven percent ($2.2 billion) from eliminating monopoly pricing among some elite physicians
Bulk purchasing pharmaceutical drugs would provide another area of savings. A single agency negotiating prices for seven million residents, just like the Veterans Administration, should negotiate dramatically lower prices. Bringing prices down by 45%, less than the savings achieved by the Veterans Administration, would save over $8 billion; similar bargaining over the price of medical equipment would save nearly another billion dollars.
While the largest savings would go to working households earning less than $75,000, over 98% of Massachusetts households would spend less on health care under the Act than they do now.
The Massachusetts Health Care Trust would be financed with existing Federal and State revenue ($66.34 billion) and payroll assessments based on ability to pay and assessments on non-payroll taxable income (e.g., capital gains, dividends, and interest), approximately $23.09 billion. Total raised would equal $89.42 billion, more than enough to cover the cost of a single-payer health care system.
Existing Revenue: $66,335,000,000
New Revenue: $23,086,000,000
Total: $89,421,000,000
We can fund universal health care in Massachusetts while reducing the burden on the sick, the poor, and the middle class.