NEWS FROM Assembly Health Committee Chair Richard N. Gottfried: Economic Study of NY Universal Healthcare Act Released

March 11, 2015

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NEWS FROM 
Assembly Health Committee Chair  
Richard N. Gottfried
822 Legislative Office Building, Albany, NY 12248 – Tel: 518-455-4941
250 Broadway, #2232, New York, NY 10007 – Tel: 212-312-1492

Contact:                                                     For Immediate Release
Mischa Sogut, (518) 455-4941                                    Tuesday, March 10
SogutM@assembly.state.ny.us

Michael Rabinowitz, (646) 342-3469
*Recording of the conference call releasing the report available on request*

Economic Study of NY Universal Healthcare Act Released

UMass Amherst Econ. Dept. Chair Documents $45B Net Savings to Families, Businesses, Taxpayers from “NY Health” Program

98% of Households Would Pay Less Than They Do Now and 200,000 Jobs Would Be Created

New York would net savings of $45 billion a year by creating a universal health plan, even after counting increased spending to cover the uninsured and eliminate co-payments, deductibles and out-of-network charges, according to an economic analysis released Tuesday, March 10. The Chair of the Economics Department at the University of Massachusetts at Amherst released the comprehensive economic study of the New York Health Act (A.5062, Gottfried/S.3525, Perkins), a proposed universal health care program for New York State.  The full report can be foundhere.

Key findings include:
The Act would save $71 billion in its first year:
    • $26.5 billion by eliminating private health insurance administration and profit;
    • $20.7 billion by reducing healthcare provider administration of health insurance claims;
    • $2 billion by eliminating employer administration of health insurance benefits;
    • $5.4 billion by reducing fraudulent billing;
    • $16.3 billion by capturing savings from overpriced drugs and medical devices.
  • $26 billion would be used to increase coverage, meet demand for increased utilization, pay healthcare providers fairly and retrain displaced workers, leaving $45 billion ($2200 per New Yorker) in net savings;
  • 98% of New Yorkers (families making up to $436,000 a year) would spend less on health care coverage under the Act than they do now;
  • Overall savings to businesses would spur the creation of over 200,000 new jobs;
  • Property taxes could be cut as local governments would save over $13 billion, because New York Health would take over the local share of Medicaid and the cost of public employee benefits would be reduced;
  • 14,000 deaths would be prevented by providing universal access to healthcare
“Based on other studies of universal health insurance programs and the experience in every other industrial country that has one, I expected savings,” saidGerald Friedman, Chair of the Economics Department at the University of Massachusetts at Amherst. “But because New York’s healthcare spending has increased so rapidly compared to income, the savings available in New York are even greater than in other states. Economically, this plan makes total sense. The only thing stopping New York from implementing it is the political power of the insurance industry and its tens of billions of dollars in profit from the current system.”

“This detailed economic study gives us clear proof that a universal health care plan is the right move for New York,” said Assembly Health Committee Chair Richard N. Gottfried. “We’ve always believed New York Health could reduce costs for families, employers, health care providers and taxpayers; create jobs; reduce property taxes and make sure every New Yorker has high-quality health care. Now we have actual numbers, and the benefits are extraordinary. This really changes the debate in New York.”

“Exorbitant insurance company profits and incessant red tape don’t improve health care,” said Senate bill Prime Sponsor Bill Perkins. “This study resoundingly proves that and demonstrates the efficacy of our universal health care plan. It is time to finally put patients before profits for the good of all in New York State.”

Where the Savings Come From

Despite health outcomes that lag other industrialized countries, New Yorkers are paying more for their health care. In 2013, the average premium for an employer-provided family plan in New York State was nearly $17,530 with employees directly paying over $4200, more than twice as much as ten years earlier.[1] For a family plan, the average deductible has doubled from $700 in 2003 to over $1400 in 2013.[2]

The current system includes dozens of separate insurance providers, including large government programs like Medicare and Medicaid and employment-based insurers. The New York Health Act would replace insurance company coverage, premiums, deductibles, co-pays, restricted provider networks and out-of-network charges with broad-based assessments based on ability to pay. It would provide comprehensive health coverage for all New Yorkers with full choices of doctors and other providers.

Eliminating the role of private insurance companies would provide the bulk of the savings. New York health care providers would save 13% ($21 billion) by eliminating the excess costs of dealing with insurance companies. Private insurers spend over 15% of premiums on administration, advertising and profit. Reducing the cost of health coverage administration to that of traditional Medicare would save $26.5 billion in the Act’s first year.

Pharmaceuticals and medical devices in the United States are significantly more expensive than in other countries, about 60% on average higher than in Canada or Europe. The Veterans Administration saves about 40% on the cost of drugs through its purchasing power. By using its new purchasing power similarly, New York could save over $16 billion on the cost of prescription drugs and medical devices.

Fraudulent and duplicate billing costs between 3% and 10% of health care spending. Reducing costs by reducing “accidental” duplicate billing and having a single agency with the ability to investigate fraud would save over $5 billion.

Businesses now spend significant sums of money hiring health benefit consultants and choosing plans. Eliminating this wasted spending would save $2 billion, freeing businesses up to do what they do best – create jobs.

Of the total savings of over $71 billion a year, over $26 billion would be used to increase coverage, pay for increased utilization and ensure that providers were adequately reimbursed for services. The remaining $44.7 billion would be available to reduce local taxes and create economic growth.

Financing New York Health

The New York Health Act would be financed by broad-based assessments based on ability to pay. While the Act authorizes the Governor to propose a revenue plan, Professor Friedman’s study looked at potential income brackets and assessment rates that would fully fund the plan. According to the study, New York households making less than $436,000 a year would pay less in New York Health assessments than they currently pay in premiums, co-pays, deductibles and out-of-network charges.

The study recommends exempting the first $25,000 of income from the assessment on payroll income, ensuring that low income New Yorkers and their employers would pay no assessment. The assessment would then rise gradually from 9% to 16% (for income over $200,000), with employers paying 80% (or more, if agreed to by the employer) and employees paying 20%.

Taxable personal income from dividends, interest, and capital gains would be assessed at the same rates.

Most businesses will also pay less than they currently pay. Establishments with fewer than 25 workers in 2012, for example, paid nearly 8% of their payroll for health insurance in addition to bearing the cost of managing their health insurance plan, and with rising costs they and all employers can expect to pay much more in 2019 under the current system. They would see a decrease in their average contribution. Establishments with over 24 workers pay over 10% now and would enjoy substantial savings. Public employers currently pay over 15% of payroll (coming from taxpayers) and will enjoy very large savings.

Job Growth

The study shows that by lowering the cost of health care and reducing the burden borne by employers, the New York Health Act will give New York companies a competitive edge with their out-of-state rivals. It will especially benefit small businesses and start-ups.  By making it less expensive to operate in New York, businesses will have a competitive advantage, allowing them to expand and hire more workers. The study shows that there would be a net growth of 200,000 jobs in New York.

Better health care and saving lives

Deductibles, co-pays, and restrictive provider networks and out-of-network charges are major barriers to health care in New York, and would be ended by the New York Health Act. The study finds that over a third of households with health insurance had to go without health care last year, and in most cases it was for a serious condition. The numbers are even higher for those without insurance. By analyzing data on death rates and financial barriers to care, the study shows14,000 deaths a year would be avoided by the New York Health Act.

About Professor Friedman
Professor Friedman is Chair of the University of Massachusetts at Amherst economics department. He received his BA from Columbia University and his Ph.D. from Harvard University.  He has extensive experience analyzing and drafting healthcare financing plans.

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[1] Premiums are even higher (about 20% higher) in New York City and on Long Island than in the rest of the state; Medical Expenditure Panel Survey at the Department of Health and Human Services at the Department of Health and Human Services,http://meps.ahrq.gov/mepsweb/data_stats/state_tables.jsp?regionid=30&year=2012 .
[2] The share of employees with a deductible rose from 32% in 2003 to 62% in 2013 with the average family deductible increasing from $1048 to $2273. This is from the Medical Expenditure Panel Survey at the Department of Health and Human Services at the Department of Health and Human Services, http://meps.ahrq.gov/mepsweb/data_stats/state_tables.jsp?regionid=30&year=2012 /http://meps.ahrq.gov/mepsweb/data_stats/state_tables.jsp?regionid=30&year=2012 

Comments

One Response to “NEWS FROM Assembly Health Committee Chair Richard N. Gottfried: Economic Study of NY Universal Healthcare Act Released”

  1. bill shaver on March 12th, 2015 2:11 pm

    Bravo well put. I hope it can become law before long as some cannot wait…it truely takes the ball and chain off people. In some cases tied to a job they don’t like but are there just to get a reasonable health care plan… with deductibles and co-pays. This will remove those payments, and its fostered on the revenue collection at a pro rated rate based on income. I hope all can see this is not free. We are all paying for it and we should all use it.

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