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.