Don't hold your breath for single payer

Sepatuads.com   Juni 07, 2017   California, delusions, Employer sponsored health insurance, Nash Equilibrium, Nevada, overconfidence, Single Payer, taxes   Comment  

Today's Managing Health Care Costs Number is $400 Billion

Health Insurer Market Caps as of 6/5/17 Source  

While the Republicans in the Senate are trying to figure out how to pass TrumpCare without being tagged for causing loss of insurance for tens of millions - Democrats are pushing for single payer health care in a way we haven't seen since the 1970s.  

The New York Times headline:

The Single-Payer Party? Democrats Shift Left on Health Care

A Republican writes in the Washington Post:

The momentum for socialized medicine is growing. Where is the GOP’s strategy?

California's Assembly is debating a serious bill to move to single payer health care -- although the bill passed the State Senate without a funding mechanism.   Current estimates suggest that the bill would cost $400 billion a year - more than twice the current state budget.  This problem scuttled efforts to pass single payer health care in Vermont last year.

Nevada's House and Senate passed a bill to allow those with income under 400% of the Federal Poverty Limit to purchase Medicaid rather than an ObamaCare plan - which could be a low cost way to get to a public option.

There are good reasons to support single payer health care -which need not mean a government "takeover" of health care delivery (as is true in the United Kingdom and Cuba).   Most developed countries which have single payer health care pool funds for health care across the entire population, and use intermediaries to actually pay independent providers (hospitals, doctors, pharmacies, etc) for their services.  Mark Bertolini, Aetna's CEO, suggested that the US should have the single payer debate, reminding employees at a private gathering that "Aetna was the first financial intermediary for Medicare. We cut the first check for Medicare in 1965 to Hartford Hospital for $517.57."  Source 

Advantages of a single payer system could include

• Lower administrative costs (for both payers and providers)
• More purchasing power - leading to lower prices
• A unified risk pool - so that there would likely be less effort to shift risk
• More imperative to purchase based on value - which would also decrease price and utilization for lower value services
• Simplification of our finance system in general would lead to fewer intermediaries and less transactional cost

But there are also powerful reasons why single payer is terribly unlikely to prevail in the United States

• Almost a fifth of the economy remains reasonably happy in the current system.   Physicians are largely well paid, and hospitals are the center of wealth for many communities.  All those lower prices look good for purchasers - but if we started paying hospitals the prices paid in other developed countries, there would be massive layoffs.
• The market capitalization for the top four national health insurers alone is almost a third of a trillion dollars.  It won't be easy to pass legislation and regulations to take away their business! Kaiser Permanente, a nonprofit and the largest nongovernmental employer in California, is vehemently opposed to single payer in  its main market.
• Americans deeply distrust government -- and are reluctant to support increased government role
• Any such massive reorganization of so much of our economy will have winners and losers - and the losers will be much more vocal than the winners.

Single payer done state-by-state is also less likely with a conservative Republican administration, which could without Medicare and Medicaid waivers which would mean the states would have to fund a larger portion of the total bill.  

Perhaps most of all, employers pay almost a trillion dollars annually for health care for their employees. Some employers  cherish the ability to arrange high value health care coverage for their employees, and have established the organizational knowledge and infrastructure to do this.  But many others would be happy to focus their attention on their core businesses - and be out of health care altogether.  

But extracting the $1 trillion from employers to fund health care - that would be very difficult. I've been pretty much convinced it can't be done - but circumstances change so it's worth thinking about how this could be accomplished:

	Advantages	Challenges
Payroll tax	Collects money from businesses en lieu of current employer health care costs	Would mean higher cost for high wage employers - which could be addressed through a cap. Might not be able to collect enough from low wage employers- although their employees were often on public assistance before Likely to be opposed by employers - especially those who believed that it would cost more than they currently spend on health care
Per worker fee	Mirrors current cost  structure	Would be difficult to implement for lower wage workers -and could hasten automation to avoid employing low wage workers Likely to be opposed by employers - especially those who believed that it would cost more than they currently spend on health care
Consumption tax (like value added tax - VAT)	Less likely to be opposed by employers Difficult to make progressive as those with low wages spend more of their available resources on necessities	Highly visible -  would raise apparent prices on virtually everything Could be paired with an increase in the earned income tax credit or decreased taxes for those with low wages Could exclude reasonable priced necessities from the tax
Income tax	Perhaps less likely to be opposed by business Would allow progressivity (subsidy from the wealthy to those of moderate income)	Economists believe that in the long run worker income would go up if cost of benefits declined - but in the short run this would lead to dramatic decrease in worker take-home pay Income taxes poll near Ebola in popularity

I'm still not convinced the time is ripe in the US to promote single payer health care.   But most other developed countries have just that, and deliver higher value at lower cost.   We've seen the dramatic changes in federal policies from a single election where the prevailing candidate won substantially less than half the vote and the winning party lost House and Senate seats, so a "wave" election could lead to dramatic changes in what is possible.