Single-payer boosts the GDP---allows for increase accumulation of new capital---studies prove.

The decomposition of the five channels is similar in each of the five single-payer systems. In this section, we focus on Option 2, which has lower payment rates to providers, more cost sharing, and no LTSS benefit. To get a clearer picture of what is driving two aggregates, GDP and nonhealth consumption, we also look at the five channels’ contributions to the changes in 23 economywide productivity, the labor supply, the capital stock, and the after-tax wage rate in 2030.

In 2030, under Option 2, GDP is 1.4 percent higher than projected under current law. The effect can be decomposed into five channels (see Figure 11):

■ The redistribution of workers’ compensation to taxable wages boosts real GDP by 1.2 percent because it increases both the labor supply, by increasing the after-tax wage rate, and the capital stock, because households save a share of the increase in their disposable income and accumulate new capital.

■ The reduction in premiums and OOP expenses reduces GDP relative to current law by 3.0 percent. That reduction is driven by the positive wealth effect, which results in households’ choosing to work fewer hours over the course of their career. Moreover, as households’ OOP expenses late in life are lower under a single-payer system, they choose to reduce their saving, and the capital stock declines.

■ The reduction in administrative costs increases GDP by 2.4 percent in 2030. The percentage increase in GDP is larger than the percentage increase in economywide productivity because the boost to after-tax wages increases households’ disposable income and, ultimately, their saving and the capital stock.

■ The reduction in payment rates to providers increases GDP by 0.9 percent in 2030. The effect of reduced payment rates on GDP is smaller from 2021 to 2025 because the payment rates are phased in over time. The increase in productivity that occurs when providers find ways to provide care with fewer resources is offset initially by reductions in labor costs throughout the supply chain in the health care sector. In the long run, the effect on wages diminishes as labor markets adjust.

■ Lastly, improvements in people’s health outcomes increase GDP in 2030 by 0.5 percent relative to current law, as the population and labor force grow and workers’ average labor productivity increases.

The 11.3 percent increase in nonhealth consumption relative to current law is driven primarily by the first two channels. The redistribution of workers’ labor compensation to taxable wages boosts their disposable income—even after accounting for the decline in hours worked and higher average marginal tax rates—which accounts for approximately 5.2 percentage points of the rise in consumption. The reduction in premiums and OOP spending directly reduces households’ financial obligations, and OOP health care expenditures can now transition into nonhealth consumption (accounting for 4.0 percentage points of the rise in nonhealth consumption). The final three channels—reduced administrative expenses, reduced payment rates to providers, and improvements in health outcomes—account for 1.9 percentage points, 0.2 percentage points, and ˗0.1 percentage points of the change in consumption, respectively (see Figure 12).