Research & Commentary: Can New York Afford Single-Payer Health Care?

Published June 20, 2017

New York legislators are considering a single-payer health care plan that would upturn the state’s entire health care financing infrastructure and replace all public and private insurance with a single government-run health care plan financed by taxpayers. Eligibility would be universal for all residents of the state, with no age or immigration-status restrictions, a generous-sounding offer. However, single-payer systems face major obstacles that will make implementation difficult, if not impossible. The New York Health Plan’s creators have greatly underestimated the costs of implementing and maintaining a single-payer health insurance system and the effects it would have on individual patients and the entirety of the health care marketplace.

The proposed single-payer plan would offer comprehensive coverage without copayments, coinsurance, or deductibles, and patients would be able to see any doctor or use any hospital they choose. In order to implement the new system, the state would need to obtain waivers from the federal government to integrate the state’s Medicaid, Medicare, and Affordable Care Act programs into the new health care plan. Under the single-payer health care system, private health insurance would essentially end in New York.

Single-payer proposals have not fared well in other states. In Vermont, a single-payer program failed when Gov. Peter Shumlin (D) discovered its high costs. In a University of Massachusetts study commissioned by Vermont’s state legislature, the researchers estimated Vermont would need to raise $1.6 billion in new revenues each year to support Green Mountain Care. In fiscal year 2012, Vermont collected only $2.7 billion in total tax revenues. Vermont’s plan would have required large-scale increases to the state’s payroll or income taxes to survive. In Colorado, 80 percent of voters rejected a single-payer proposal that would have imposed a 10 percent payroll tax and nearly doubled the state’s $27 billion budget.

Due to the lack of any premiums under the proposed model, either from individuals or employers, New York would have to finance coverage with a combination of revenue from existing government programs, such as Medicare and Medicaid, and taxes. The Reason Foundation estimates the single-payer plan would require substantial increases in tax revenues to cover the new costs. In 2016, New York collected around $71 billion in tax revenue. Reason estimates that in 2019, when the single-payer plan would be enacted, the state would need to generate an additional $91 billion annually, and this prediction may be optimistic; some critics believe the costs could be even higher.

One proponent of single-payer health care, Gerald Friedman, an economist at the University of Massachusetts-Amherst, admitted in a 2015 cost estimate of the New York Health Act the single-payer system would cost more than every other function of state government. To pay for the plan, Friedman suggested a new tax on dividends, interest, and capital gains that would impose a levy of between 9 percent to 16 percent, depending on investment income and a new payroll tax ranging from 9 percent to 16 percent, depending on an individual’s income. Both taxes would place a heavy burden on families and their investments, undermining the very people single-payer proponents aim to help.

Avik Roy, president of the Foundation for Research on Equal Opportunity, argues the cost of New York’s proposed single-payer system may be higher than anyone realizes. In his analysis on the proposal, Roy wrote, “Finally, because the Friedman report overstates cost savings by $71 billion per year, underestimates spending increases by $61 billion per year, and understates revenue losses by at least $9 billion per year, the plan would need to raise an additional $134 billion in annual tax revenue, above and beyond the $91 billion proposed by Friedman, in order to avoid larger state deficits.”

The program’s free coverage for undocumented immigrants would likely create an incentive for people to come to the state for the free care. This will create a burden on the system that funding may not be able to cover. It is not clear how long a person would need to reside in New York to receive coverage for a full year.

Bill Hammond of the New York-based Empire Center correctly argued, “The reality is that no conceivable health-care system will give New Yorkers something for nothing, and Albany lawmakers should stop pretending otherwise.” New York should resist moving to a single-payer model and should instead pursue policies that emphasize consumer-driven health care.

The following documents offer additional information about single-payer health care systems.

New York’s Single-Payer Health Care Plan Would Be More Expensive than New York’s Entire State Government
Eric Boehm of the Reason Foundation examines the proposed single-payer health care system in New York and argues the state may not be able to afford it. “The bill might get a vote in the state Senate this year … but the real hurdle for New York’s single-payer health care plan, like similar efforts in other states, is a fiscal one. New York collected about $71 billion in tax revenue last year. In 2019, when the single-payer plan would be enacted, the state expects to vacuum up about $82 billion. To pay for health care for all New Yorkers, though, the state would need to find another $91 billion annually,” wrote Boehm.

How State-Based Single-Payer Initiatives Crush Economic Opportunity
Avik Roy, president of the Foundation for Research on Equal Opportunity analyzes the New York Health Act and estimates the bill would “require approximately $226 billion in new tax revenue per year, nearly quadrupling the state’s tax burden and leading, at minimum, to the loss of 175,000 jobs, as high-wage, high-value industries move to neighboring states.”

The Case Against AlbanyCare
In this paper, Bill Hammond of the Empire Center for Public Policy argues against a single-payer system in New York. “Beyond affordability questions, a single-payer system would impose government price control on all health-care services, eliminating any vestige of market competition in a major sector of the state economy. It would also channel billions more dollars through New York’s notoriously dysfunctional state capital, multiplying opportunities for favoritism and corruption,” wrote Hammond.

California’s Single-Payer Health Care Plan Would Cost More Than the State’s Whole Budget
Eric Boehm of the Reason Foundation examines the proposed single-payer system in California and the high cost of maintain such a program. “This year’s state budget in California, by the way, is about $180 billion. That means that implementing a single-payer health care system would require doubling (at least) the state’s current tax burden. The analysis of the health care proposal presented to lawmakers on Monday suggests a 15 percent increase to the state’s payroll tax to provide the necessary revenue,” wrote Boehm.

Ten Principles of Health Care Policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems.

Twenty Myths About Single-Payer Health Insurance: International Evidence of the Effects of National Health Insurance in Countries Around the World
Health care experts John C. Goodman and Devon M. Herrick identify 20 myths about single-payer health care and provide evidence single-payer is inferior to our admittedly flawed current system.

Issue Brief: Healthcare & Single Payer
The Ethan Allen Institute examines recent developments in health care reform in Vermont, including the state’s single-payer proposal. The author describes the single-payer program and concludes it may not work the way its supporters claim.

Single-Payer Health Care Is Not Right for Colorado or Any State
In this article published by The Daily Sentinel (Grand Junction, CO), Heartland Senior Policy Analyst Matthew Glans argues against single-payer health care in any state. “Single-payer systems across the world have failed to provide needed care and have caused rationing and a deterioration of medical innovation. When government sets prices on health care products and services—limiting the profit incentive of providers—efficiency, quality, and innovation will always suffer. Instead of imposing a monolithic single-payer system on Coloradans, the government should pursue policies emphasizing consumer-driven health care, such as health savings accounts, which empower individuals by giving them more control over their hard-earned dollars,” Glans wrote.

Ten Hard Questions about Single Payer Health Care
The Ethan Allen Institute identifies ten important problems with Vermont’s single-payer health care plan, in the form of ten questions about the program’s structure, funding, and prospects for long-term success.

Vermont Single-Payer Plan Full of Holes
Joshua Archambault of the Pioneer Institute argues Vermont’s single-payer plan has many serious, fundamental problems that should not be lost in the excitement that seems to arrive whenever a state tries something big. “Many of the issues that a single-payer system is attempting to address can be dealt with by greater consumer engagement, a federal tax policy change to delink insurance from employment status, and greater transparency in the health system,” he wrote.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database. 

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