Blog & Reviews

Is Single-Payer Healthcare a Utopian Fantasy?

Jun 8, 2017 | Blog | 0 comments

Michael Tanner is the author of this opinion piece and is a senior fellow at the Cato Institute. My comments are in parentheses.

The utopian fantasy of a single-payer system is attractive to many voters, but it would destroy the American economy.

(What is fantasy is that the US can continue forward with the status quo in health care.  Business as usual in American health care is killing our economy through enormous cost.)

It is an old joke among health-policy wonks that what the American people really want from health-care reform is unlimited care, from the doctor of their choice, with no wait, free of charge. For Republicans, trying to square this circle has led to panic, paralysis, and half-baked policy proposals such as the Obamacare-replacement bill that passed the House last month. For Democrats, it has led from simple disasters such as Obamacare itself to a position somewhere between fantasy and delusion.

(Some Americans have unlimited care already, leading to inappropriate care, one of the three major reasons for the poor quality of American health care.  Poor quality care leads to excess cost, approximately $700 billion in quality waste every year in the US.  Tanner is correct that there should be efforts made to eliminate inappropriate care.)

The latest effort to fix health care with fairy dust comes from California, whose Senate voted last week to establish a statewide single-payer system. As ambitious as the California legislation is, encompassing everything from routine checkups to dental and nursing-home care, its authors haven’t yet figured out how it will be paid for. The plan includes no copays, premiums, or deductibles.

(copays, premium, and deductibles, and other out-of-pocket costs in American health care have no added value to the health care system.  They are expensive to collect, and are a deterrent to people getting needed care.  One-third of Americans failed to get care in 2016 because of out-of-pocket costs.  Unmet needs for medical care lead to excess costs because people who don’t treat their hypertension or diabetes will inevitably have higher risk for serious illness.)

Perhaps that’s because the legislature’s own estimates suggest it would cost at least $400 billion, more than the state’s entire present-day budget. In fairness, legislators hope to recoup about half that amount from the federal government and the elimination of existing state and local health programs. But even so, the plan would necessitate a $200 billion tax hike. One suggestion being bandied about is a 15 percent state payroll tax. Ouch.

(Tanner fails to take cognizance of the independent studies done on the California proposal which conclude that the cost of single payer care actually brings down the per household cost of health care.  Built into health care costs in the US is the very, very high overhead of the health insurance business model.  Eliminating that excess overhead alone would save $400 billion per year in US health care costs.)

The cost of California’s plan is right in line with that of other recent single-payer proposals. For example, last fall, Colorado voters rejected a proposal to establish a single-payer system in that state that was projected to cost more than $64 billion per year by 2028. Voters apparently took note of the fact that, even after figuring in savings from existing programs, possible federal funding, and a new 10 percent payroll tax, the plan would have still run a $12 billion deficit within ten years. Similarly, last year Vermont was forced to abandon its efforts to set up a single-payer system after it couldn’t find a way to pay for the plan’s nearly $4 trillion price tag. The state had considered a number of financing mechanisms, including an 11.5 percent payroll tax and an income-tax hike (disguised as a premium) to 9.5 percent.

(The Colorado and Vermont plans were not truly single payer.  The authors of those plans, recognizing that a true state based single payer plan required an Act of Congress, attempted to craft a plan without the necessary changes in federal health policy.)

On the national level, who could forget Bernie Sanders’s proposed “Medicare for All” system, which would have cost $13.8 trillion over its first decade of operation? Bernie would have paid for his plan by increasing the top U.S. income-tax rate to an astounding 52 percent, raising everyone else’s income taxes by 2.2 percentage points, and raising payroll taxes by 6.2 points. Of course, it is no surprise that Medicare for All would be so expensive, since our current Medicare program is running $58 trillion in the red going forward. It turns out that “free” health care isn’t really free at all. How, though, could a single-payer system possibly cost so much? Aren’t we constantly told that other countries spend far less than we do on health care?

(I can’t verify what Tanner here alleges are the costs of Sen. Sanders’ proposals.  Remember, Sen. Sanders was also proposing other very expensive social programs, such as making a college education free to any student.  Many nations with better health care than the US have higher tax rates than the US even though their health care costs are far lower because they have adopted social programs far beyond those of the US.  Let’s not confuse ourselves by arguing about the costs of multiple social programs at once.  Single payer health care is much cheaper than business as usual in the US health care system)

Adopting a single-payer system would crush the American economy, lowering wages, destroying jobs, and throwing millions into poverty.

(This statement is simply not true.  It is an egregious example of a straw man argument.  There is no data behind this statement.)

It is true that the U.S. spends nearly a third more on health care than the second-highest-spending developed country (Sweden), both in per capita dollars and as a percentage of GDP.

(This is a major concession by Mr. Tanner.  American health care costs are way high.  It’s even worse than Mr. Tanner allows.  Compared to the mean health care costs in the rest of the first world, US costs are double what they should be.  And the rate of rise of proportion of GDP devoted to health care is much faster here than elsewhere.  American health care business as usual is a speeding car heading for a concrete wall.  Mike Leavitt, former Secretary of Health and Human Serivces, recently said that there is no place on the economic leaderboard for a nation that spends one-fourth of GDP on health care.  The US is already spending essentially one-fifth of GDP on health care and rising fast.  This can not go on.)

But that reduction in spending can come with a price of its own: The most effective way to hold down health-care costs is to limit the availability of care. Some other developed countries ration care directly.

(The US rations health care by not giving care to those without the means to buy care.  Truly an irrational rationing.)

Some spend less on facilities, technology, or physician incomes, leading to long waits for care. Such trade-offs are not inherently bad, and not all health care is of equal value, though that would seem to be a determination most appropriately made by patients rather than the government. But the fact remains that no health care system anywhere in the world provides everyone with unlimited care.

(If patients could best make the decision about what care is medically necessary, then we would not have the problem of inappropriate care, a problem which Mr. Tanner himself concedes we have.  Market based medicine, such as is the case in the US profit motivated system, would rather make a sale of health care, even if inappropriate, than actually take care of the patient.)

Moreover, foreign health-care systems rely heavily on the U.S. system to drive medical innovation and technology. There’s a reason why more than half of all new drugs are patented in the United States, and why 80 percent of non-pharmaceutical medical breakthroughs, from transplants to MRIs, were introduced first here. If the U.S. were to reduce its investment in such innovation in order to bring costs into line with international norms, would other countries pick up the slack, or would the next revolutionary cancer drug simply never be developed?

(On a per capita basis, other countries in the first world have just as many truly breakthrough clinical science papers published in the peer-reviewed medical literature as do US clinical scientists.  We have more patents for drugs and medical devices because we allow more useless ‘innovations’ to come to market, again, because our system is more interested in sales than care.) 

In the end, there is still no free lunch. American single-payer advocates simply ignore these trade-offs.

(Single payer advocates know that there is no free lunch.  We know it better than do the faux market advocates like Tanner, whose wishful thinking about market forces keeps us in a system that throws away $1 trillion each year on inefficiency and quality waste in health care systems.) 

They know that their fellow citizens instinctively resist rationing imposed from outside, so they promise “unlimited” care for all, which is about as realistic as promising personal unicorns for all.

(I know of no single payer advocate who plays this game.  Inappropriate care, such as back surgery that has no chance of clinically improving the patient’s condition, is one of the targets of quality improvement possible in single payer health systems.  Single payer systems promise to pay for the cheapest available intervention that is medically effective and necessary.  Eyeglasses instead of Lasik surgery, for instance.  There will definitely be limits on the care paid for publically in a single payer system, no one promises otherwise.  But at least every single citizen will have the financing needed to pay for medically necessary care, rather than watch how many tens of thousands die of disease and injury amenable to medical intervention.) 

In the process, they also ignore the fact that many of the systems they admire are neither single-payer nor free to patients. Above and beyond the exorbitant taxes

(Americans pay the exorbitant health care taxes, not other citizens in the first world.  We have a health system that costs upwards of $3 trillion per year, with about $2 trillion coming from public expenditures–the taxpayer.  No other nation approaches that level of taxation for health care.)

that must almost always be levied to fund their single-payer schemes, many of these countries impose other costs on patients. There are frequently co-payments, deductibles, and other cost-sharing requirements. In fact, in countries such as Australia, Germany, Japan, the Netherlands, and Switzerland, consumers cover a greater portion of health-care spending out-of-pocket than do Americans.

(This is not true.  Americans have the highest per capita out-of-pocket costs, including the costs born by private employers.)

But American single-payer proposals eliminate most or all such cost-sharing. Adopting a single-payer system would crush the American economy, lowering wages, destroying jobs, and throwing millions into poverty.

(Just not true.  Pure fabrication.)

The Tax Foundation, for instance, estimated that Sanders’s plan would have reduced the U.S. GDP by 9.5 percent and after-tax income for all Americans by an average of 12.8 percent in the long run. (And why should anyone believe the Tax Foundation, whatever that is.  What assumptions went into this ghastly analysis? Where is this data?) That is, simply put, not going to happen. So Americans are likely to end up with a lot less health care and than they have been promised. Santa Claus will always be more popular than the Grinch. But the health-care debate needs a bit more Grinch and a lot less Santa Claus. Americans cannot have unlimited care, from the doctor of their choice, with no wait, for free. The politician that tells them as much will not be popular. But he or she may save them from something that will much more likely resemble a nightmare than a utopian dream.

(It is true that politicians of whatever political party need to develop backbones and tell the American people what needs to be said about health care.  Instead, both major political parties get their talking points on health care from the boardrooms of American Corporate For-Profit Big Business.  Americans need to stop voting for politicians according to their political party.  We need to throw all of the ACA and AHCA supporters out of Congress and start over.  Let’s make 2018 the year that single payer politicians get elected to office, who cares what party they affiliate with.)