Right Diagnosis, Wrong Prescription

In a new issue brief, the Center for American Progress (CAP) reports that the United States spends almost $500 billion each year on healthcare administrative costs, twice what is spent in other wealthy countries. This is correct, the complicated healthcare system in the U.S. is inefficient and wasteful.

CAP goes on to write that savings could be achieved through tweaking the current system using global budgets, rate-setting and “simplifying the number of payers.”

These practices have been used in the state of Maryland for decades, so we can use data from the state to determine if they have had an impact on healthcare costs and spending.

Drs. Eric Naumburg and Margaret Flowers, co-chairs of the Maryland chapter of Physicians for a National Health Program found:

Maryland’s all-payer system has been in place for more than 30 years. Compared to other states, the all-payer system has not had a significant impact on health spending, the price of health insurance or health status.

  • In 2014, the most recent year for which data are available, per capita health spending in Maryland was 7% higher than the national average, and spending on hospital care was right at the national average.
  • When states were ranked by the cost of insurance from cheapest to most expensive in 2016, Maryland came in 30th as a state with higher than average insurance costs.
  • In 2017, the percentage of people without health insurance in Maryland was 6%. There were 18 other states with similar or lower percentages of people without health insurance. Maryland has a higher than average percentage of people with employer-sponsored health insurance, which may be due in part to the high percentage of federal employees.
  • Health outcomes and life expectancy are right around average, even though Maryland is the wealthiest state in the nation.

Despite the all-payer system in Maryland, hospitals are prioritizing more profitable care over essential services.

This is because:

1. Setting prices for goods and services will not stop health insurance corporations from continuing to restrict and deny payment for care.

2. All payer systems maintain the current complex bureaucracy of hundreds of health insurance plans with different rules and networks.

3. Health insurance companies will continue to raise premiums each year and shift costs onto patients and providers.

Global budgets, rate-setting and simplifying the payers are effective and can be achieved when they are contained within a single payer healthcare system such as national improved Medicare for All.

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