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Jeanne Scott looks at Single payer, MSAs and what employees want: I editorialize back

I’m a little late in getting to this because I didn’t get my email over labor day weekend while my site was down.  Enough excuses.  If you haven’t been getting theJeanneScottletter, which I’ve told you to sign up for before, then you are missing out on the best analysis of health care politics in America at a very, very reasonable price (i.e. free). In her pre-labor day issue (PDF is here) Jeanne has three fascinating articles that are revealing a little more editorial comment than usual (and it makes her newsletter all the better for it).

She argues against single-payer Canadian style, which has reared its head as the Democratic primary process approaches, and then convincingly explains why Medical Savings Accounts (MSAs) would destroy conventional health insurance if they were allowed to flourish. And she ends with an amazing piece of analysis about employees’ attitudes to health insurance, from a survey from Stony Brook University’s Health Pulse of America .

I’m gong to editorialize myself a little here. Before I do that let me tell you what I think the likelihood is of single payer passing in the next decade in the USA.

Zero. 

My work for clients is about what’s likely to happen (read: if you’re a health plan who wants help you’ll be getting a rational analyst telling you what’s likely to happen not a foaming-at-the-mouth socialist if you hire me!). However, there are some times when something approaching the truth needs to be told about American health care and this is one of them.

Jeanne opposes single-payer Canadian style because the Canadian system is relatively expensive compared to most other of what she calls multi-payer universal health-care systems, and because Canadians wait relatively long times for access to specialty care and hi-tech machines.  She argues that more competition amongst insurers and hospitals would produce higher administrative costs for Canada but a better outcome for Canadians, in terms of improving that access. But, there are lots of problems with this cursory argument.  For example the British system is very like the Canadian system and spends much much less money (6% of GDP versus 11%). So you can do single payer very cheaply (albeit with even less access).  More importantly in the US context, those multi-payer systems (e.g. Germany and Japan) do not have competing insurers as we’d understand them here–you join the one from your employer or city–and more importantly the providers only deal with one insurance system, which (surprise, surprise) has a fee schedule set by the government.  That looks essentially the same as "single-payer" to me,  Yet those two countries (Germany and Japan) manage to have much greater access to specialist care and hi-technology even than the US.  And of course in none of these countries are there any "uninsured".

Jeanne’s argument about MSA’s underscores why "universal insurance" by definition means "universal compulsory insurance" means "essentially single payer".  If you allow people to withdraw money from an insurance pool it eventually only insures the sick and therefore collapses under its own weight.  That’s more or less what’s happened to the individual insurance system in this country over the last 20 years and is what the Democrats are afraid will happen to Medicare if the "healthy" seniors are allowed to leave. (I’m not sure they are right to be that concerned about that happening given the record of Medicare Risk HMOs, but that’s another discussion.) So lets connect that back to health insurance as we know it in America. As Jeanne says 10% of patients account for 50% of the costs, and 50% account for 10%. So if you allow insurers to choose risks via medical underwriting based on what they know about their potential insurees, they are bound by the laws of economics to try to figure out a way to insure the healthy (the 50%) and reject the sick (the 10%). 

So if you sincerely want sustainable universal coverage you must make insurance coverage mandatory, and put everyone in the same pool (community or nationally rated) or else you will end up with an insurance market that cannot function for the sick.  Oh, and this risk-selection all gets turbo-charged by genetic testing, of course!  Japan Germany, Canada and the UK all do this in their slightly different ways. But the key difference between their systems (and where most of the guff that’s talked about single-payers misses the point) is not about single payer but about single provider.  In Canada and the UK the providers (more or less) all work for one provider organization–the government.  In the Japan and Germany they are  (more or less) independent and private.  The Ladas and Skodas that Jeanne is worried are the result of single payer actually come from nationalized single providers (and anyway those are the worst examples–want to compare and contrast, say, the BBC and Fox News on quality of journalism?). 

No one is seriously suggesting that we make all health care providers in the US work as employees of the government; the true analogy is how the defense industry works.  We have one payer (the DOD) and several private contractors, all of whom bid to build the best tank/bomb/plane. So (suspend disbelief here for a second if you know anything about Defense procurement) the Defense Department gets a better cheaper tank/bomb/plane because of the competition between the contractors than if it made the tank/bomb/plane itself. Well if that’s a good enough system for the US military why wouldn’t it work for the US health care system? No real reason that I can see (and it will get there anyway as Medicare bears the weight of the baby boomers over the next 25 years, but I digress).

And there’s one other point.  If you already had a single payer system, you could use that payer and regulatory leverage to encourage competition amongst providers and even insurers by setting the rules of the game the way you wanted.  This is the theory behind Alain Enthoven’s Managed Competition.  It is no coincidence that the only country where it has come anywhere close to being implemented is in the UK. Although the Brits clearly didn’t get it right (but yet may with their "primary care groups") it’s easier to introduce competition once you’ve set the universal single-payer ground rules, than to get "there" from the American "here" of a mess of insurers and providers competing over the wrong things — like avoiding risk and looking for the best insured patient.

End of editorial . Back to why we won’t get there from here and all of our private sector jobs are safe, or safe from nationalization at any rate. Jeanne points out that when offered the choice in the Stony Brook survey 71% of employees wanted a combination of "health coverage & lower salary" compared to only 24% wanting a "higher salary & no health coverage". On the employer side Kucinich, Gephart, Kerry and others are talking about a payroll tax on employers to fund health care.  Now rationally all employees know that some of their salary is being diverted to pay for health insurance, and employers (or at least the ones who do offer insurance) know that they might end up paying less in tax than they are currently paying for insurance, and at least it might not go up 15% a year

So why the objections? 50% of those asked thought that they couldn’t afford private insurance if they lost their benefits.  In other words they either understand how bad the deals are in the individual health insurance market, or they don’t trust their employers to actually fork over the money that the employer is currently using to buy them insurance (in wonk terms, they prefer defined benefit to defined contribution).  Presumably the average employer is concerned that they’ll end up having to pay more in tax and still top up the health insurance benefits for their employees, and they would rather retain full control of that process.  In any event, Americans are scared of moving away from what they’ve got in health insurance, and as more have got something and less than 20% have got nothing, we’re not going anywhere far from the present system soon.

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