Testimony of David U. Himmelstein, M.D.
before the HELP Subcommittee
The following text contains the testimony of
Dr. David Himmelstein at a hearing on "Ways to Reduce the Cost of Health
Insurance for Employers, Employees and their Families" organized by Health,
Employment, Labor and Pensions Subcommittee of the House Committee on
Education and Labor on April 23 in Washington.
April 23, 2009
Mr. Chairman, members of the Committee. My name is David Himmelstein. I am a
primary care doctor in Cambridge, Massachusetts, and associate professor of
medicine at Harvard. I also serve as national spokesperson for Physicians
for a National Health Program. Our 16,000 physician members support
nonprofit, single-payer national health insurance because of overwhelming
evidence that lesser reforms will fail.
reform must address the cost crisis for insured as well as uninsured
Americans. My research group found that illness and medical bills
contributed to about half of all personal bankruptcies in 2001, and even
more than that in 2007. Strikingly, three-quarters of the medically bankrupt
were insured. But their coverage was too skimpy to protect them from
single-payer reform would make care affordable through vast savings on
bureaucracy and profits. As my colleagues and I have shown in research
published in the New England Journal of Medicine, administration consumes 31
percent of health spending in the United States, nearly double what Canada
spends. In other words, if we cut our bureaucratic costs to Canadian levels,
we'd save nearly $400 billion annually - more than enough to cover the
uninsured and to eliminate co-payments and deductibles for all Americans.
simplifying its payment system, Canada has cut insurance overhead to 1
percent of premiums - one-twentieth of Aetna's overhead - and eliminated
mounds of expensive paperwork for doctors and hospitals. In fact, while
cutting insurance overhead could save us $131 billion annually, our insurers
waste much more than that because of the useless paperwork they inflict on
doctors and hospitals.
hospital gets paid like a fire department does in the U.S. It negotiates a
global budget with the single insurance plan in its province, and gets one
check each month that covers virtually all costs. They don't have to bill
for each Band-Aid and aspirin tablet. At my hospital, we know our budget on
January 1, but we collect it piecemeal in fights with hundreds of insurers
over thousands of bills each day. The result is that hundreds of people work
for Mass General's billing department, while Toronto General employs only a
handful - mostly to send bills to Americans who wander across the border.
Altogether, U.S. hospitals could save about $120 billion annually on
bureaucracy under a single payer system.
in the U.S. waste about $95 billion each year fighting with insurance
companies and filling out useless paperwork.
Significantly, these massive potential savings on bureaucracy can only be
achieved through a single payer reform. A health reform plan that includes a
"public plan option" might realize some savings on insurance overhead.
However, as long as multiple private plans coexist with the public plan,
hospitals and doctors would have to maintain their costly billing and
internal cost tracking apparatus. Indeed, my colleagues and I estimate that
even if half of all privately insured Americans switched to a public plan
with overhead at Medicare's level, the administrative savings would amount
to only 9 percent of the savings under single payer.
administrative savings from a reform that includes a Medicare-like public
plan option are modest, at least they're real. In contrast, other widely
touted cost control measures are completely illusory. A raft of studies
shows that prevention saves lives, but usually costs money. The recently
completed Medicare demonstration project found no cost savings from chronic
disease management programs. And the claim that computers will save money is
based on pure conjecture. Indeed, in a study of 3,000 U.S. hospitals that my
colleagues and I have recently completed, the most computerized hospitals
had, if anything, slightly higher costs.
state of Massachusetts recent experience with health reform illustrates the
dangers of believing overly optimistic cost control claims. Before its
passage, the reform's backers made many of the same claims for savings that
we're hearing today in Washington. Prevention, disease management,
computers, and a health insurance exchange were supposed to make reform
affordable. Instead, costs have skyrocketed, rising 23 percent between 2005
and 2007, and the insurance exchange adds 4 percent for its own
administrative costs on top of the already high overhead charged by private
insurers. As a result, 1 in 5 Massachusetts residents went without care last
year because they couldn't afford it. Hundreds of thousands remain
uninsured, and the state has drained money from safety-net hospitals and
clinics to keep the reform afloat.
In sum, a
single-payer reform would make universal, comprehensive coverage affordable
by diverting hundreds of billions of dollars from bureaucracy to patient
care. Lesser reforms - even those that include a public plan option - cannot
realize such savings. While reforms that maintain a major role for private
insurers may seem politically expedient, they are economically and medically