Universal health care would cost $70 Billion for 2009 if enacted using a market-based approach, but this cost will grow rapidly if overall health care inflation is not tamed.
How much would health coverage for all uninsured Americans really cost? Critics maintain that covering all Americans would break the US budget (which is already overstretched), while advocates maintain that covering all Americans can be done affordably. But how much would universal coverage really cost?
The Commonwealth Fund provides a great summary of the costs of proposals under consideration, including Medicare for all, a Building Blocks extension of the current system, and other proposals. Proponents of universal Medicare claim that it will save the US $58 Billion in 2010, since Medicare operates more efficiently than private insurers . Providing universal coverage through incremental changes could cost anywhere between $48B and $120B, according to analyses by the Urban Institute and the Lewin Group, a private health care consultancy. And while Medicare for all would lower total health care spending, it would raise the Federal government’s share of spending by almost $200 Billion per year.
With numbers all over the map, is it possible to come up with a plausible estimate for comparison purposes? Sites like ehealthinsurance.com now make it much easier to get estimates for insurance coverage. Using this data, we can estimate how much basic health insurance coverage would cost for the 45 million uninsured Americans. The experience of Massachusetts, which has implemented universal health care, can also be used to project an estimate for the rest of the country. Since Massachusetts’ health care costs are above US average, this provides a high-side estimate.
Using market insurance quotes, the cost of providing a health insurance with a $1000 deductible and prescription coverage would amount to $2500 per person annually, or roughly $115B per year . This calculation uses different insurance rates for different age groups among the uninsured, based on this demographic breakdown of the uninsured provided by the Kaiser Foundation. In Massachusetts’ experience, covering each uninsured individual costs roughly $3400 per year. Covering all 45 million uninsured Americans at this rate would cost $150 Billion per year.
The midpoint of these estimates is around $130 Billion per year. To get a final estimate, money currently spent on uncompensated care must be subtracted out, since there is no uncompensated care in a universal health care system. Approximately $58 Billion will be spent on uncompensated care in 2009 , and subtracting this figure out leaves roughly $70 Billion in annual expenditure required for universal health care.
While $70 Billion per year sounds like a lot of money, it’s actually less than many estimates. It looks increasingly likely that some kind of health care reform will be passed in 2009, and that money will be found to pay for it for the moment. The bigger question is, how will it be paid for tomorrow? Unless health care cost growth is pulled into line with inflation, no one has that answer.
 Medicare doesn’t have to perform medical underwriting, and it doesn’t have to spend money on advertising, sales, or shareholder dividends, so its overhead should be lower than private competitors, if it can maintain efficiency. Critics counter that Medicare suffers from high fraud rates precisely because it is a government bureaucracy without competition to force it to raise efficiency and tighten controls.
 Here is the rough cost estimate for each demographic group, taken from quotes on ehealthinsurance.com:
0-19: $100/month (20% of all uninsured)
20-29: $150/month (29% of all uninsured)
30-44: $200/month (27% of all uninsured)
45-64: $400/month (24% of all uninsured)
Using these numbers, we calculate a weighted average cost per person of $213 per month, or $2556 per year. That’s $115 Billion for 45 million people.
 In 2004, uncompensated care expense was estimated at $40.7 Billion. Since health care spending (in nominal dollars) has grown at 7.5% per year during this decade, the adjusted number for 2009 is approximately $58 Billion. This assumes that uncompensated care is growing in line with health care costs as a whole.