Thoughts on Single Payer Health Care

Thoughts on Single Payer Health Care

Timothy Taylor 07/08/2018 8
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The label of "single-payer" health care tends to hide the reality that many choices would still need to be made. For example, a "single payer" plan could involve the government providing a voucher for a standardized health insurance plan, or it could offer choices between insurance plans provided by private firms. It could involve supplementary private health insurance: for example, the single-payer Medicare plan is often supplemented with "Medi-gap" private policies. A "single payer" plan could be funded out of general tax revenues, or by charging insurance premiums that might vary by age or in some other way. A "single payer" plan might have have most health care providers as government employees, or as employees of private firms. A "single-payer" plan could be run at the national level, or at a regional or state-by-state level. It could involve the same price-and-payment structure across the country, or allow for substantial variations across areas.

The eminent health care economist Victor R. Fuchs, who is acutely aware of these distinctions and many others, nonetheless tackles the question in "Is Single Payer the Answer for the US Health Care System?" in a "Viewpoint" essay for the Journal of the American Medical Association (published online December 18, 2017). He focuses on how single payer might affect three outcomes: the number of uninsured, US health outcome, and the cost of health care.

On the issue of covering the uninsured, Fuchs writes (footnotes omitted): 

"Regarding the uninsured, single payer in almost any form could achieve universal health care insurance coverage. But so could many less-comprehensive reforms. Despite the success of the ACA [Affordable Care Act] in increasing the number of individuals in the US who have health insurance, approximately 25 million US residents remain uninsured. Universal coverage requires (1) subsidies for individuals who are too poor or too sick to acquire insurance at actuarial correct premiums, and (2) compulsion (ie, a mandate) for everyone else to participate and implicitly contribute to the subsidies. No country achieves universal coverage without subsidies and compulsion. The United States could achieve universal coverage relatively promptly if it were willing to adopt these 2 principles. Public attitudes toward subsidies and compulsion have been assessed by analyzing answers to a Pew Research Center survey of the US population, which included almost 2000 adults. A modest majority favored subsidies only, and a modest majority favored compulsion only. There was not, however, a majority who favored subsidies and compulsion."

On the issue of whether single-payer would improve health outcomes, Fuchs points out: "Single payer might improve health outcomes by providing more equal access to medical care, but attention to the social determinants of health might be a more effective way to improve health." I've pointed out some of this evidence, as well as evidence on what appears to be a large degree of wastefulness in US healthcare spending, in "US Health Care: The Case for Going Upstream" (March 15, 2017). 

"The strongest case for single payer is its potential to control the cost of care," Fuchs argues, but that outcome would depend on the specific structure of the plan. He writes:

"The high cost of care in the United States (approximately $10 000 per person each year) contributes to several major national problems: stagnant or slow-increasing wages; reductions in state and local expenditures for education, infrastructure, and other valuable programs; and an increase in the national debt. If, over time, the United States could limit health care spending (currently 18% of the gross domestic product [GDP]) to the level of other high-spending countries (currently 12% of the GDP), more than 1 trillion dollars could be available each year to meet other private and public needs. ... 

"Excessive expenditures for administration of the US health care system and monopoly prices for material and personnel inputs to that system account for a substantial portion of the higher cost of health care in the United States.More than half the difference between 18% of GDP and 12% of GDP, however, is attributable to a more expensive mix of services in the United States. The analogy is not perfect, but the biggest difference between health care in the United States and other high-income countries is similar to that between food expenditures at Whole Foods and at Wal-Mart. In the United States, medical care takes the form of greater use of specialists and subspecialists, greater use of technology such as magnetic resonance imaging (MRI) scans and mammograms, and a more expensive mix of drugs (Whole Foods). US medical care does not take the form of more basic care (Wal-Mart), such as visits to physician or days in acute care hospitals, which are frequently greater in peer countries. It is questionable whether this more expensive mix produces better health outcomes. ... 

"The fragmented financing system is one of the principal explanations for the high cost of medical care in the United States. A careful consolidation of financing into some form of single-payer system is probably the only feasible solution. But single payer is easier said than done."

For example, a "single-payer" system which is run on a state-by-state basis, while offering choices between insurance plans offered by private sector firms and the possibility for buying private supplementary insurance, while purchasing from dispersed private-sector providers of health care, would be less likely to offer cost savings. 

What about Canada? In a companion "Viewpoint" essay published the same day, C. David Naylor argues that Canada's example has limited applicability for the United States in "Canada as Single-Payer Exemplar for Universal Health Care in the United States: A Borderline Option." As he points out, the "Canadian" system is actually 13 different systems run by provinces or territories. It was enacted in 1957 at a time when every hospital in Canada was either a non-profit or government-run. Canada is governed by a parliamentary system, which means that a government in power can enact pretty much what it wants, and worry less about having wavering legislators hold up the process and negotiate for special loopholes as they come under pressure from lobbyists. Naylor writes:

"More importantly, given the near-chaotic pluralism of US health care, obsessive reference to Canada as exemplar conflates ends and means. Universal coverage has been achieved for different baskets of services in OECD countries with or without the use of multiple insurance carriers or intermediary administrative entities. Arguably, no country actually has a single-payer health care system for all services. Instead, there are varying mixes of public and private funding for specific services. Canada’s public share (70%) is on the low end of the spectrum owing to the narrow scope of Canadian Medicare. Federal cost-sharing constrains provinces only to cover all necessary medical services and hospitalizations. Various other services are covered at provincial discretion, but the core coverage under US Medicaid is more generous than that available in any of Canada’s 13 health care systems. ...

"The well-known 2014 and 2017 rankings by the Commonwealth Fund, for example, placed Canada 10th and then 9th out of 11 peer nations, slightly north of the United States, which has consistently come last. Those rankings reflect structural weaknesses in organization and finance that bedevil all the subnational Canadian plans, as reviewed extensively in a recent federal report. Policy analysts have repeatedly cited limited integration as the key flaw in systems that have a payment architecture largely mired in the 1970s. However, integration is limited by the absence of intermediaries, such as US integrated delivery systems or accountable care organizations. Medical associations, in particular, have representation rights to bargain directly with provincial governments, and, despite arguments that alignment of incentives would be in mutual interest, resist consolidation of medical budgets with other health care services. So difficult has it been to modernize Canadian Medicare that a 2013 scholarly monograph focused solely on the causes of the “Paradigm Freeze” in health care policy."

None of this is to say that the US health care system doesn't have some lessons to learn from the Canadian system, as well as the German, Swiss, Dutch, and other systems. But just saying "single payer" doesn't address the wide differences in what Americans want from  health insurance and health care, or the wide differences in the quantity and cost of health care provided across states, regions, and urban/rural areas. If the US health care system is crossword puzzle, "single payer" is one word in the puzzle -- with the remainder still needing to be filled in. 

A version of this article first appeared on Conversable Economist.

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  • Harry Thompson

    Wonderful thoughts, one of your best articles.

  • Joe Portelli

    Only solution that may please the US government is to not get sick I guess.

  • Sam Jones

    Healthcare is a profitable business in the US. They are not interested in protecting inhabitants. Profit comes first. It's a shame.

  • Luke Brown

    Thank God for the NHS so grateful for it!!

  • Tom Lennon

    Health care is a right not a privilege.

  • Zoe Landeg

    Healthcare costs are so high because there's not enough competition. The free market is not allowed to work properly with all the government and insurance company intervention, but there's also not enough of it to make public healthcare work either.

  • Paul Gobble

    Excellent article. It’s simple don’t get hurt.

  • Becky Dixon

    Meanwhile in Canada.......

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Timothy Taylor

Global Economy Guru

Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.

   

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