Tuesday, March 10, 2015

Economic Analysis of the New York Health Act

Economic Analysis of the New York Health Act
March 6, 2015
By Gerald Friedman, PhD

This report analyzes the economic effects of the New York Health Act
(the "Act"), which would establish a comprehensive, universal health
insurance program for all New Yorkers. The Act would replace the
current multi-payer system of employer-based insurance, individually
acquired insurance, and federally sponsored programs (e.g., Medicare and
Medicaid) with a single billing pipeline funded by broad-based
progressively graduated assessments collected by the State and based on
income and ability to pay, thereby reducing administrative bloat and
monopolistic pricing and dramatically reducing the cost of health care
to New Yorkers even while extending and improving the provision of care.

The New York Health Act would finance medical care with substantial
savings compared with the existing multi-payer system of public and
private insurers. By reducing administrative and other waste and
eliminating health insurance company profits and excessive prices for
drugs and medical devices, the New York Health Act would increase real
disposable income for the vast majority of residents. It would
simultaneously increase employment by reducing the burden of health
insurance on business. Some of these savings would be used to extend
coverage to the 7% of New York residents still without insurance under
the Affordable Care Act; other savings would be reinvested in the
health-care system to improve coverage for the growing number with
inadequate coverage. In addition to improving New Yorkers' health by
reducing barriers to access to health care, the Plan would eliminate the
financial penalty associated with health problems. It would also reduce
economic inequality by replacing the current regressive system of health
insurance finance with contributions proportional to income and ability
to pay.

Conclusion: Better Health Care, Found Money, and Fairness

The New York Health Act would produce substantial health and economic
gains for New York. The new system would create such large economies in
the administration of health care that all of those currently uninsured
could be given access to health care with money left over. Furthermore,
by financing health care with assessments based on ability to pay, the
New York Health Act would produce large savings for the great majority
of New York residents. Finally, by reducing business costs, it would
also lead to expansion in employment.

(Professor Friedman is Chair of the University of Massachusetts at
Amherst Economics Department.)

Economic Analysis - Gerald Friedman, PhD

Bill A5062-2015,Gottfried/S5062-2015,Perkins - Provides for
establishment of the New York Health plan
Sponsor - Richard Gottfried, Assembly/Bill Perkins, Senate

Press Release – Economic Study Shows Benefits of Universal Healthcare
Bill - 3/10/15


Comment by Don McCanne

The New York Health Act, introduced by New York Assembly Health Chair
Richard Gottfried and in the Senate by Sen. Bill Perkins, and supported
by the economic analysis of Prof. Gerald Friedman, is important because
it demonstrates how much health care reform can be accomplished on a
state level, especially when we have a Congress that is dominated by

Is this a single payer bill? The study refers to a "single billing
pipeline." Rather than being limited by labels, states wishing to go
ahead with reform now and not wait for a receptive Congress should
support any and all beneficial policy measures possible, including
whatever can be accomplished with existing waivers and through
negotiations with the U.S. Department of Health and Human Services.

In this analysis, Prof. Friedman estimates that through this
legislation, New York can achieve the goals of universality,
comprehensiveness, equity, free choice of providers, and removal of
cost-sharing barriers to care, while achieving a net savings of $45
billion in the first year alone - funds that could be used for much
better purposes than administrative waste.

For any given state, the economic advantage would depend on the
specifics of the state legislation and might vary based on the economic
assumptions used in the analysis. The important point is not the
specific details of this particular analysis but rather that introducing
as many single payer policies as possible does result in major
improvements of the functioning of the financing infrastructure while
significantly reducing the profound waste inherent in our current
dysfunctional system.

Our primary goal remains to bring health care justice to everyone in the
nation by enactment of a federal single payer system - an improved
Medicare for all. In our state efforts we cannot set aside this goal
since it is our prime goal. But Richard Gottfried and his colleagues
have demonstrated the types of policies that we can apply on a state
level as a transition until we can enact reform for the entire nation.

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