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A Publicly Funded, Universal Health Care System Would Be a Boon to U.S. Businesses, Public Citizen Report Says

April 8, 2014

A Publicly Funded, Universal Health Care System Would Be a Boon to U.S. Businesses, Public Citizen Report Says

New System Would Boost Economy, Reduce Costs and Eliminate Unfair Burdens on Companies That Provide Health Insurance Benefits

WASHINGTON, D.C. – A publicly funded, universal health care system would aid businesses by engendering a more dynamic economy, taming costs and freeing businesses that provide health insurance of the costs of administering benefits and subsidizing the nation’s health care, a Public Citizen report released today concludes.

“Small businesses have rated the cost of health insurance as their top concern for a quarter century, and large businesses struggle with health care obligations that their international competitors do not have to worry about,” said Taylor Lincoln, research director of Public Citizen’s Congress Watch division and author of the report. “If it weren’t for entrenched partisan alliances, business leaders would have demanded that Congress relieve them of health care burdens long ago.”

Publicly funded universal health care systems – such as the Canadian “single-payer” system, in which the government pays for all covered services – exist in nearly every developed country in the world. In the United States, universal care systems could be implemented either at the federal or state levels. The Affordable Care Act of 2010 includes language permitting states to apply for waivers that would enable them to institute universal care systems beginning in 2017. Vermont has passed legislation declaring an intention to do just that.

Public Citizen’s report, “Severing the Tie That Binds,” outlines three ways a universal health care system would benefit businesses.

First, it would end “job lock” and other economic distortions stemming from our health care financing system that hinder the freedom of individuals to pursue new ventures. Despite common perceptions that the United States is an entrepreneurial bastion, we have among the lowest rates of self-employment and small businesses among industrialized countries, researchers at the Center for Economic and Policy Research reported in 2009.

The researchers hypothesized that the dismal numbers in the United States were due to the high costs that individuals and small businesses here must pay for health care, which those in countries with universal access to health care do not face. By facilitating more entrepreneurship, a universal health care system here would likely boost economic growth, leaving businesses with a larger pool of potential customers.

Second, a universal care system would significantly dampen future increases to health care costs – and perhaps reduce costs – even as it greatly increased access to care. Numerous studies have concluded that the United States spends much more on administrative functions, such as billing and interactions with insurance companies, than other wealthy countries. Meanwhile, pharmaceuticals and procedures in the United States cost much more here than elsewhere.

A universal care system would reduce administrative costs by expanding economies of scale, streamlining processes and cutting insurance companies’ marketing costs and profits from our national health care bill. At the same time, costs for drugs and procedures would be kept in check by increased transparency, as well as increased governmental bargaining power and rate-setting authority.

Third, although a publicly funded, universal care system would likely rely on significant revenue from businesses (such as through a payroll tax), there is reason to believe that total health care-related costs for businesses now providing benefits would decline, in part because a new system would spread costs more fairly.

Businesses that provide health care benefits would no longer have to essentially subsidize those that do not by covering the unreimbursed cost for care provided to the uninsured. Businesses also would be spared the costs of administering health care benefit programs. Meanwhile, funding formulas for universal care may reduce the overall share of national health care costs borne by the business sector by garnering revenue from a broader array of sources.

Elements of the solutions laid out in Public Citizen’s report already exist at the state level or are under consideration. For 35 years, Maryland has set across-the-board rates for hospital care, including care funded by Medicare and Medicaid. This program has saved tens of billions of dollars. In 2014, the scope of Maryland’s program was broadened by establishing overall caps on hospital budgets to counter the economic incentive to provide a greater volume of care. Establishing rate-setting authority and capping overall hospital budgets are hallmarks of the cost-savings mechanisms in universal care systems.

Vermont in 2011 passed legislation that called for it to create a “universal and unified healthsystem” that would take advantage of provisions in the Patient Protection and Affordable Care Act that permit states to apply for waivers to craft their own health care systems beginning in 2017.

“The states might be flying below the radar, but they have a chance to implement solutions that should have widespread appeal,” said Lisa Gilbert, director of the Congress Watch division of Public Citizen. “If businesses leaders allow common sense to guide them, we think they will join the campaign for universal care.”