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CBO Analyst Tests Single-Payer Health System Concepts

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What You Need to Know

  • The CBO analyst assumes that any new program would be based on the Medicare fee-for-service program.
  • Were a program already in place, it might cut GDP by 1% to 10% by 2030, according to the analyst.
  • An option that provides long-term care benefits could hurt GDP more but also increase nonhealth consumption more.

The economic effects of moving the United States to a single-payer health care finance system would depend on the details, according to an economist at the Congressional Budget Office.

The CBO economist, Jaeger Nelson, looks at the possible impact of five different government-run health finance system options in a new CBO working paper. A working paper is a scientific paper that has not yet undergone a full peer review.

n CBO is a nonpartisan office that helps members of Congress understand proposals, laws and programs that affect the federal budget.

Nelson assumed when he wrote the paper that any new U.S. single-payer health finance system would be based on the current Medicare fee-for-service program.

He came up with the five different single-payer options by applying the following choices:

  • Whether plan participant premium payments would be high or low.
  • Whether patients who used the system to pay for care would pay a high share of the bills or a low share of the bills.
  • Whether the plan would pay for long-term care.

If the United States had implemented one of the five options in 2021, and it used income taxes or payroll taxes to pay for the new system, the system adopted could have decreased U.S. gross domestic product by 1% to 10% by 2030, Nelson estimates.

But Nelson notes that part of the drop would be due to workers having more time to relax. He believes that the decrease on spending on health care and private health insurance would free some workers to work less.

He estimates that if a single-payer program were already in effect, it could lead to a drop in people’s nonhealth consumption of as much as 7% by 2030, or an increase in nonhealth consumption of up to 3%.

Nelson has included charts showing that the single-payer option that includes long-term care benefits would have the biggest negative effect on gross domestic product, or total national income, but that the option with LTC benefits would also lead to the biggest increase in Americans’ spending on nonhealth consumption.

Nelson also predicts that three of the options studied would cut the average after-tax rate of return on private health by about 0.05 percentage points, when compared with what the CBO thinks the rate of return would be if the current health care finance system stayed in place.

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