1. Will Single Payer cost my company more? Will there be a tax increase associated with Single Payer?

Under Single Payer, employers will pay less because they will no longer provide commercial health insurance for their employees. Insurance costs will be replaced by a payroll deduction, similar to Social Security and Medicare. The payroll taxes will be significantly lower than what employers are paying now to insure their employees.

Here’s the math: The average wage for an American worker is $49,000. The average cost for employer-based commercial insurance is $19,000 per year for family coverage and $6,500 per year for single coverage. Therefore, the average cost of a health benefit is in excess of 15% of employee compensation. Further, insurance premiums do not include what employees additionally pay out-of-pocket for care. Those costs include rising deductibles and co-pays. The insurance premiums that employers pay also do not include the HR expense to administer health plans or the rising cost of other insurances that have a health care component, such as Workman’s comp; the state, local and school taxes that have a high cost of health care; or the overall drag health care has on disposable income that deteriorates demand for our products.

For many employers, the cost of a health care benefit is over 20% of payroll.

2. Why will Single Payer financed health care cost less — particularly when it is coupled with the concept of universal coverage for all Americans, which will add cost?

The U.S. healthcare system is grossly inefficient. Much of this inefficiency comes from the way the system is financed, particularly from the unnecessary complexity associated with commercial health insurance.

For every dollar employers pay to insurance companies in premiums, fewer than 80 cents go to doctors, hospitals and other providers of care. The remaining cents on the dollar go to the financing side of health care, costing hospitals and physicians to interface with the complex insurance industry. The collective waste adds up to 30% of insurance premium dollars, or $300 billion-400 billion annually.

Traditional Medicare, on the other hand, is much more efficient. For every dollar collected, via payroll taxes, over 95 cents goes to providers with less hassle and administrative cost. In addition, Medicare does a better job in general of negotiating reimbursement rates from providers for equivalent care. Medicare’s Advantage Plans, those Medicare supplements administered by commercial insurance companies, are less efficient. They add more than double the administrative cost of traditional Medicare.

Economists estimate that the cost of providing health coverage to the currently uninsured will be $77 billion annually. This is significantly less than the monies we will save from reducing inefficiency through Single Payer.

Countries throughout the industrialized world have recognized this phenomenon and have adopted Single Payer, with some variation, as a “best practice” in health care system structure. Simply put, Single Payer is publically financed, privately delivered health care. It can be delivered efficiently for all Americans, and we can save billions in cost.

3. Why are drug costs in the U.S. so high? How do we continue to stimulate innovation in life-saving medications when prices become lower?

Americans pay twice as much for medications than the rest of the industrialized world. The typical American family of four spends $4,200 a year on average for drugs. Why do Americans pay more? Because our government allows monopoly pricing through the patent system, there is no regulation or negotiation, we do not mass our purchasing power and bargain effectively, and we allow TV advertising and massive sales and marketing activity by the pharmaceutical industry.

The solution is not complicated. We need to empanel the nation’s most renown doctors and biomedical scientists to establish an evidence-based formulary of drugs at the national level. Pricing would be negotiated by Medicare for its programs, and those prices will become the standard for the rest of the country. Similar to the rest of the industrialized world, the Veterans Administration negotiates price effectively. The projected system-wide savings of this plan is $150 billion a year.

Lowering the price in the U.S. to international levels will not deter innovation. There is little correlation between current U.S. price levels and innovation. The great majority of cost for basic biomedical research is paid by the U.S. taxpayer through grants from the National Institutes of Health and from philanthropy and academia. The pharmaceutical industry spends 50% more on sales and marketing expenses than it does on R&D. Most of its R&D is devoted to non-innovative, competing (“me too”) drugs and for expensive FDA trials after a particularly innovative drug is discovered.

4. Why has the business community been silent? Why should the business community organize to reform the U.S. healthcare system?

Health care is our nation’s biggest expense. It takes 28% of the annual federal budget, a sum significantly higher than national defense (16%). Health care is a volatile expense for state and local government and schools. It is the single factor that keeps economists awake at night as annual increases in health care costs dramatically surpass general inflation.

The healthcare sector in the U.S. is well-organized and well-financed. It uses its size — almost one-fifth of the economy — and its substantial profitability to advance its commercial interests. It lobbies Congress and state legislatures and spreads its influence and financial support throughout American society. The sector leads all other industry sectors, by far, in lobbying expense and activity, and it also uses popularly recognized business voices, like the U.S. Chamber of Commerce and the Business Roundtable, to carry its water to the detriment of the overall business community. It supports candidates, public institutions and academia in ways that advance its overall power and influence. Even state- and local-level business groups formed to negotiate insurance plans that are supposed to operate at arms-length in negotiating health plans for the business community receive financial support from the industry. There must be a counterbalance to the healthcare sector’s power and influence.

Left alone, the healthcare sector literally eats the rest of the U.S. economy alive. A 2010 RAND study found that in the decade leading up to 2009, 79% of household income growth was absorbed by health care, leaving only 21% available for other purposes. The inefficiency of the health care sector is seen as a significant drag of U.S. productivity and competitiveness. Why locate a car assembly plant in the U.S. when you can save $5 an hour on health costs for auto workers in Canada and more than that in Mexico? Restructuring the way health care is financed in the U.S. following the “best practice” of other modern industrialized societies can level that playing field.

The business sector, separate from its health care component, has immense potential power in Washington. Why doesn’t it assert that power to reform the health care system? Our national organization, Business Leaders Transforming Healthcare, with state affiliates can be an effective voice in Washington and elsewhere when it gains substantial business leader membership and support.


Adapted from materials prepared by Business Leaders Transforming Healthcare.