CBO: Single-Payer System to Impact Provider Pay, Physician Shortage

May 02, 2019 - In a new report, the Congressional Budget Office (CBO) says establishing a single-payer healthcare system would involve substantial changes to coverage, provider payment rates, and financing methods, which could overburden provider organizations and lead to a physician shortage.

The long-awaited report states that establishing a single-payer system would substantially increase government spending on healthcare. But the report did not specify by how much.

Industry stakeholders on both sides of the single-payer debate have been waiting on the CBO to provide an official cost estimate for implementing a single-payer healthcare system, like Medicare for All. A cost estimate will impact how much tax revenue the government will need to establish and support a single-payer healthcare system.

Highly-cited cost estimates for a single-payer or Medicare-for-All system range from $13.8 trillion to $36 trillion depending on who is doing the estimating, according to the Committee for a Responsible Federal Budget.

Pinning down an accurate cost estimate is difficult. An accurate cost estimate depends on policy details, such as how the system would alter the sources and extent of coverage, provider payment rates, and methods of financing.

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“The amount of those additional resources would depend on the system’s design and on the choice of whether or not to increase budget deficits,” the CBO states in reference to the potential cost of implementation. “Total national healthcare spending under a single-payer system might be higher or lower than under the current system depending on the key features of the new system, such as the services covered, the provider payment rates, and patient cost-sharing requirements.”

While the report did not meet cost estimate expectations, the CBO did express other concerns in the report.

Specifically, the CBO raised concerns that a single-payer healthcare system could exacerbate the existing physician shortage problem if provider payments do not adequately cover increases in demand.

“An expansion of insurance coverage under a single-payer system would increase the demand for care and put pressure on the available supply of care. People who are currently uninsured would receive coverage, and some people who are currently insured could receive additional benefits under the single-payer system, depending on its design,” the report states.

“Whether the supply of providers would be adequate to meet the greater demand would depend on various components of the system, such as provider payment rates. If the number of providers was not sufficient to meet demand, patients might face increased wait times and reduced access to care. In the longer run, the government could implement policies to increase the supply of providers.”

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The healthcare industry is currently facing a serious physician shortage problem.

Earlier this week, the Association of American Medical Colleges (AAMC) provided an update on the issue. The association projects a shortfall of up to 121,900 doctors by 2032 based on the growing aging population and the high number of doctors approaching retirement age.

The CBO expresses familiar anxieties about how a single-payer healthcare system would impact provider organizations.

For example, the American Hospital Association (AHA) has opposed single-payer system proposals, arguing that hospitals would take a significant financial hit. The hospital group found that a Medicare-for-All system would cut reimbursement by $774 billion over a ten-year period.

The reimbursement cuts would be “catastrophic,” the group said in a statement on the “Medicare for All Act of 2019.” The cuts would not only fail to cover costs of care and lead to financial instability for hospitals, but they would also hinder innovation and delivery system reform.

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“We also are deeply concerned that a single-payer model would seriously distract from the important delivery system reform work underway,” the hospital group said. “Hospitals and health systems have invested billions of dollars in technology and delivery system reforms to improve care, enhance quality and reduce costs. Moving to a single-payer model could stymie these efforts by, at best, diverting attention and, at worst, being deemed irrelevant if the government can simply ratchet down provider rates to achieve spending objectives.”

In response to the CBO’s report, the Federation of American Hospitals (FAH) also expressed apprehensions.

“Today's CBO report on single-payer health care raises sobering questions,” said Chip Kahn, FAH president and CEO. “But what needs to be asked, is it worth the risk of upending healthcare for every American when the law on the books already contains a roadmap to universal coverage? Instead of such a high stakes gamble, lawmakers should build upon the current foundation so we can continue to improve quality and affordability for families across the country.”

Establishing a single-payer healthcare system will certainly impact provider payments and healthcare demand, CBO and others agree. But to what extent a single-payer system would influence provider payment rates heavily depends on which proposal policymakers would implement.