Would a Single Payer System Be Good for America?

Brian-KlepperOn Vox, the vivacious new topical news site, staffed in part by former writers at the Washington Post Wonk Blog, Sarah Kliff writes how Donald Berwick, MD, the recent former Administrator of the Centers for Medicare and Medicaid Services and the Founder of the prestigious Institute for Healthcare Improvement, has concluded that a single payer health system would answer many of the US’ health care woes.

Dr. Berwick is running for Governor of Massachusetts and this is an important plank of his platform. Of course, it is easy to show that single payer systems in other developed nations provide comparable or better quality care at about half the cost that we do in the US.

All else being equal, I might be inclined to agree with Dr. Berwick’s assessment. But the US is special in two ways that make a single payer system unlikely to produce anything but even higher health care costs than we already have.

First, it is very clear that the health care industry dominates our regulatory environment, so that nearlyevery law and rule is spun to the special rather than the common interest. In 2009, the year the ACA was formulated, health care organizations deployed 8 lobbyists for every member of Congress, and contributed an unprecedented $1.2 billion in campaign contributions in exchange for influence over the shape of the law.

This is largely why, while it sets out the path to some important goals, the ACA is so flawed.

Understood in terms of its probable returns on a nearly $3 trillion current annual health care spend over, say, 25 years. the lobbying investment was a drop in a very large bucket. The negligible opportunity cost will generate returns for the industry for many years to come.

Second, every health industry sector – brokers, health plans, physicians, health systems, drug and device firms, health IT firms – has demonstrated and continues to demonstrate a willingness to employ institutionalized mechanisms of excess, most of them variants on over-treatment and stratospheric unit pricing, that allow them to extract more money than they are entitled to.

This is why US health care costs double what it does in other developed nations.

It’s not that our people are sicker, but that we now accept distorted care and cost as normal. These practices unnecessarily expose patients to physical peril and cost purchasers double, displacing spending on other critical needs. Unfortunately, ACA does little to disrupt this waste.

Admittedly, employers and unions have so far failed to galvanize and mobilize their aggregated purchasing strength to demand greater health care value. But in a system in which the regulatory environment has been captured by health care, purchasers remain our most promising counterweight to the health care industry’s unrelenting cost growth.

Imagine what might transpire if employers and unions were removed from the equation, except for their contribution through taxes. The purchase of health care coverage would move from groups, who have latent but considerable power, to individuals, who have little to no power against monolithic health care organizations.

In the curious dynamic that has evolved, only non-health care business and labor leaders could work collaboratively, serving as a counterweight to the health care industry’s excesses and holding their health care partners accountable. They could use their considerable purchasing leverage to reward organizations and professionals with good clinical and business practices and, frankly, punish those with bad ones.

But under single payer, we’d all be at the mercy of what occurs in the transactions between our Congressional Representatives and the health industry’s lobbyists. If the past is prologue, there would be little opposition, and the industry would have open field running.

Brian Klepper is a health care analyst and the new CEO of The National Business Coalition on Health.

28 replies »

  1. Yesterday, I saw something that is quite common and at the same time, quite disturbing. It was a fundraising announcement for a 25 year old girl in my community. She was in an accident and suffered catastrophic injuries.
    Her friends and family were trying to raise money to help cover the cost of her medical expenses. She has insurance.
    People who pay premiums month after month, year after year and have to hold fund raisers during the worst time of their lives and may still go bankrupt from medical bills.
    The health insurance industry is a greedy, money eating, evil dinosaur that needs to be shot and buried. Have you read any of the crap the AHIP puts out? These companies operate by a business model created in a moral vacuum. They cannot be fixed. The premiums, co-pays , deductibles, denials, exclusions, restrictions and constant intrusion into our medical care is out of control. They lie, cheat and do major harm to individuals and families in the pursuit of higher profit margins and lavish corporate salaries.
    A mational health plan can and will work. It has to work, because the private model has proven to be a colossal failure that only promises to get worse. We need to take it to surgery and have it removed immediately. A life saving operation for us all.

  2. I think that any solution that is driving at Affordable care is worth while. However, I think to adapt a single payer healthcare system is NOT what the United States needs to help with costs.

    From what I have seen the excess that this sector sees is from a lack of accountability. I would like to think if they were accountable to free market forces they would be better able to adjust costs and operations. With almost 50% of healthcare being funded by Medicare and Medicaid I don’t see how this sector is operating more efficiently in tangent with the not for profit sector. When I look at some of the financials there is nothing that shows the accountability of purchasing these new technologies.

    The simple questions are how are these new innovations saving the purchaser money?

    Do these organizations understand how they are above or under in their pricings when the CMS comes out with the reimbursement rates?

    These are things that I have not seen any answers for, nor has been explained in any detail that would show comparisons to any other market. If Apple decided to develop a new head set it would be readily apparent how, this would affect their bottom line, in addition analyst would be listening to board calls and explanations.

    Why would changing the system of payment removing the individual further from the payment process result in lower prices?

  3. Bob,

    What you experienced reflects the insanity of our system. I would expect a little more cost for an ER considering higher overhead, more staffing, etc., but a cost of $1400 vs. $125 is outrageous. If your son had had a CT or MRI, you can double or triple that. And that is also the problem with ERs, there is a tendency to want to rule out everything in one visit (likely a function of liability).

  4. Actually, Platon20, the insurance companies would sell supplementary coverage under a single payer plan, just as they have sold Medigap supplements for years.

    And they can make a lot of money doing so. Probably with fewer employees and much smaller reserves, but big deal.

    Note; it does not affect our debate much, but your suggestion that I walk away from the emergency room is idiotic. Even if I could have found out the price – which no ER clerk at midnight could give me — my family and my son would never have forgiven me if he did turn out to have hearing damage
    and I had chosen to save a buck and not treat it. ( he was fine.)

  5. I had a TURP ten years ago at a New York City academic medical center. The total hospital bill was about $5,400 which my insurance paid in full. The surgeon billed $6,000 for a 45 minute procedure and was paid $1,751 by insurance. The anesthesiologist, who was not in network, billed $1,680 and was paid that amount. What a system!

  6. Bob,

    Shortly after World War II, the U.S. had 10 inpatient hospital beds for each 1,000 of population. Now the number is about 3 and the long term trend is down.

    On the outpatient side, I think we will see more and more imaging and labs move out of hospital owned facilities for people who are not inpatients already. When I had my most recent colonoscopy two weeks ago, I noticed that it wasn’t as busy as it was in the past. I asked one of the nurses about it and was told that some of the doctors moved at least some of their patient procedures to ambulatory surgical centers which the docs have a financial interest in. The bottom line though is the work gets done for less money than in a hospital setting.

    Nationwide, we still have about 5,000 acute care hospitals including over 400 that are considered academic medical centers though some of those are really large community hospitals that also do some teaching. The total bed count is about one million. This doesn’t include another 700 or so hospitals in prison, the VA system, psychiatric hospitals and long term acute care hospitals. Altogether, close to 5 million people work in hospitals as these are labor intensive facilities that need to be staffed around the clock.

    To Dr. Palmer’s point about doctors’ income only accounting for 10% of healthcare costs after practice overhead and malpractice insurance costs, he’s right. However, if you look at claims actually paid by Medicare, Medicaid, and private insurers, you will find that they break down largely into three buckets as follows: 40% for hospital bills, both inpatient and outpatient; 40% for physician fees and clinical services including rehab, and 20% for prescription drugs. Total healthcare costs for the system also include skilled nursing home care, dental care, medical research, hospital construction, public health initiatives and administrative costs among other things.

    While we don’t use more drugs per person than most other countries, we pay at least 30% more for many of them though generics are actually cheaper in the U.S. than elsewhere. There is also significant waste and abuse in post-acute care including rehabilitation, home healthcare and nursing home care in the Medicare and Medicaid programs. It’s much harder to determine just how much care is appropriate and necessary in this area and for whom. That’s an area that could well get even worse under a single payer system in my opinion.

  7. Single payer healthcare is a vote to outlaw/ban private insurance companies. Overnight with the stroke of a pen, any kind of single payer plan will wipe out private insurers.

    Considering the fact that they have BILLIONS in their warchest to buy off politicians, who in their right mind thinks that the insurance sector is just going to stand by idly while politicians vote their business out of existence?

    Hell the ONLY way Obamacare passed was because the insurance industry threw their weight behind it — they were guaranteed paying customers for life and they will make out like bandits under the sweetheart deal they got from Obama.

    A vote for single payer is a vote to ban/outlaw private insurance companies. The insurance companies will spend their entire budget to buy out politicians to stop that, if they have to.

    So I guess the real question is, how are you going to raise the BILLIONS of dollars you need to buy off the politicians against the insurance companies? Lobbying against insurance companies aint cheap, folks.

    Good luck.

  8. The same nonsense about rich doctors gets trotted out every year by Klepper, Kliff, Klein, and Yglesias. Every year, without fail.

    Of course, they ignore Uwe Reinhardt’s research, who knows a hell of a lot more about healthcare economics than they do.

    Physician take-home income accounts for 10% of total healthcare spending. It is a fact. Do a google search and see for yourself.

    Since 10% of total healthcare spending goes into doctors pockets, that means that a 50% reduction in doctor income only results in 5% decrease in healthcare costs. So where are you going to get the other 45% you need in order to make US healthcare costs similar to Europe? Clearly cutting doctor incomes by 50% doesnt even come close to getting you there.

  9. The present system has to stop. The stratospheric prices will cause it to grind to a halt. Accordingly, I think we are going to see fewer people enter the system and then a watershed collapse.

    [A friend had a TUR, one night in the hospital, total charge minus surgeon $38,000]

    I would like to see free district-wide single payer hospital care paid for by refundable tax credits, local taxes and portions of Medicaid. And leave ambulatory care alone. Hospital would have no billing department and no billing records, only medical records.

    All professionals and administrators on salary.

    Help the poor obtain ambulatory care with refundable tax credits or vouchers.

  10. You state that your son’s care was too expensive and not worth what you paid.

    But you said that AFTER you had been examined. You didnt say that beforehand.

    Why not?

    It is YOUR responsibility to ask about costs up front. If they cant give you an answer, or you dont like the answer, you WALK AWAY.

    After all, you said that the $1400 in the ER wasnt a valuable use of money. If that’s true, take your chances and shop around.

  11. Barry, I am tres skeptical when hospitals say that reimbursement does not cover their costs.

    I suppose the problem is the difference between marginal costs and total, loaded costs.

    When my son was in the ER last year after a fall, the marginal cost of checking out his reflexes over 20 minutes of care was not $1400. Twenty minutes of a doctor’s time and a nurse’s time (and no drugs or diagnostic tests) would cost $125 in a minute clinic. (We went to a minute clinic first, but there was a danger of hearing loss so we had to go to an ER.)

    The $1400 loads in all the costs of building and staffing a hospital.

    Anyways, I think that a great deal of outpatient care could be done outside hospitals altogether. i have no problem with the government setting a low price for many procedures, and those places with too much overhead will have shrink their costs or go broke. Happens in the rest of America all the time.

  12. The current trajectory is not so bad:

    Exchanges work enough -> large group is added to the exchange -> employers give money for employees to shop on exchange -> costs continue to rise -> health plans lobby for higher deductibles and pt. resp. -> patients demand more price visability -> hospital margins are narrowed -> hospitals go bankrupt -> cities and states buyout hospitals

    Is there a system with private insurance, private doctors and public hospitals? Kind of like a reverse Canadian model?

  13. I wonder how well the generalists think they would fare financially if they were paid Medicare rates by or on behalf of all patients with no uncompensated care. At the same time, they would also have to live with Medicare’s documentation requirements, including its RAC’s, and the rest of us would have to tolerate Medicare fraud levels. Every time I’ve asked hospitals in the past whether or not they could sustain their business model if they had to accept Medicare rates from all comers, the answer is always no. They claim that, relative to costs, rates for outpatient care are even lower than inpatient rates and the long term trend is toward more outpatient care and less inpatient care.

    Assuming insurers probably would never go along with negotiating reimbursement rates as a group like they do in Western Europe even if the government gave them an anti-trust exemption to allow that, I think there is plenty they could do to standardize and simplify their offerings. It’s differences in coverage, authorization, and documentation requirements that drive doctors crazy.

    If insurers offered four different coverage offerings aligned by the ACA’s metal tiers, I don’t see why co-pays can’t be uniform across carriers for a specific type of service and why we can’t have more consistency in documentation and pre-authorization requirements. Let the main differences be limited to deductibles and out-of-pocket maximum amounts. Reimbursement rates from a given carrier could be limited to a lower high volume narrow network or HMO level rate and a higher broad network rate for which the member would pay a higher premium to access the broader network.

    There is continuing consolidation within the health insurance industry with more to come. As the industry consolidates into fewer competitors, administrative complexity for doctors should decrease due to consolidation alone. I think there is a lot more that the industry can do to address this issue and they should.

  14. Brian,

    The AMA doesn’t really speak for Primary Care, for sure. And even though I am a member of the Academy of Family Practice, that organization has been so all over the map trying to position itself politically, that I don’t think it knows what it stands for any more.

    I think many primary care docs would just be happy to take care of patients for reasonable reimbursement, if we allowed them to do more patient care than other BS required by the government and insurance companies. If single payer would do that, I wouldn’t be against it. Because of third party involvement through the years, we have fractured the patient-physician relationship, added more administrative tasks to physicians, and falsely elevated medical costs across the board.

    I agree with you Bob, looks like most of the major directors on PNHP are internists, or lower-paying specialties.

  15. According to one of the great recent articles by Elizabeth Rosenthal in the NYT, a German dermatologist is paid about $30 for treatments that are billed at $1,000 or more in the USA.

    A financially solvent single payer system would have to adopt a German style fee schedule and enforce it rigorously.

    The greatest enemy of single payer (besides the fast food and retail industry, which will resist payroll taxes) might turn out to be the richer doctors.

    Given that fact, I wonder if the well-meaning single payer advocates at PNHP are all generalists, not specialists.

  16. Given the way the current “reform” has been handled so far, I have serious reservations about the Federal Government administering a single payer system. This is a huge undertaking with everything from payment schedules to manpower to EHR to be coordinated. Britain wasted almost 12 billion pounds on their EHR system.
    I think you’re right that so many players in the health care industry with different “needs and wants” putting lobbyists in play will hinder anything meaninful being done.
    I will say that there may be some high paid specialty physicians with their hands in the pie here, but Primary Care is just struggling to survive. Now the buzz is that Nurse Practitioners can provide as good primary care as a physician, so why bother going to med school unless you’re going into a specialty?

  17. Interesting article… It may not be in our lifetimes but I don’t believe it’s a question of “If” but rather “When” and “How”.

  18. I’m very aware of that. Most of us who have actually worked on meaningful change know that the current paradigm ends in a black hole. As Barry Carol pointed out, there are many approaches that can reduce unnecessary health care clinical and financial risk. Still, that doesn’t mean that, under our system, single payer is a workable or desirable solution.

  19. “…successful decision-making.”

    Define “successful”. Course changes involve “consequences’, so does staying waste deep in the big muddy as Pete Seeger sang.

  20. “Maybe this strikes you as simple-minded and obvious, but in the world I live in, carefully thinking through realistic consequences of major course changes is a critical part of successful decision-making.”

    Great line! It is time to reevaluate alot with healthcare, quality measures, meaningless use measures, hospital ownership of physicians etc. All of which have failed to demonstrate any value.

    However the quote from upton sinclair says it best: you cant win an argument with someone whos salary is dependent upon you losing it.

  21. Peter1, I’m not sure what you mean by old news. Do you mean that of course we all know that the system’s corrupt? Or that, because the system’s so corrupt, we would likely get a different result than we anticipate under single payer?

    Maybe this strikes you as simple-minded and obvious, but in the world I live in, carefully thinking through realistic consequences of major course changes is a critical part of successful decision-making.

  22. Brian, you ask if single-pay would be good for America but only provide an argument that this political system is so corrupt with special interests that it would not be possible.

    Old news.

  23. Barry,

    There is a new crop of “anti-health care health care companies” that are mission-driven, with business models that exploit the market vacuums created by legacy health care organizations in every sector. That said, the legacy firms have a strong grip on the market, which is why only collaboratives of employer and union purchasers, making purchasing decisions that reward good and punish bad practices, have a shot at bringing health care back to rights and saving the country.

  24. Based on what I remember from Joseph White’s classic Competing Solutions,
    (which described health care systems in all advanced nations), the countries which had single payer systems had civil service bureaucrats who were not captured by the health care industry. In fact, in the case of France and Germany it seemed like the bureaucrats looked down on doctors and had no hesitation about controlling prices.

    They also had legislators who did not depend as much on campaign contributions.

    At the risk of probably being a little romantic, I got the impression that French and German and Canadian legislators were filled with Bernie Sanders and Dennis Kucinich types, plus labor union leaders.

    Whereas we in America had ‘The Senator from Aetna” (Joe Lieberman), and Billy Tauzin and Tom Scully going to lobbyist jobs the minute they left government.

  25. The Vermont legislature passed single payer legislation for Vermont and the governor signed the bill. So far, though, a financing mechanism has not been developed. Since Vermont is one of our smallest states based on population, I think we should let the process play out there and see what happens before the concept is considered anywhere else.

    Liberal expert, Ezekiel Emanuel, opposes a single payer system for a number of reasons including the potential for an adverse impact on medical innovation including innovation around care delivery. Widespread fraud is also a huge risk given our experience with both Medicare and Medicaid.

    I think there is enormous potential for squeezing a lot more value out of the system we already have. Strategies include price and quality transparency tools for both patients and referring doctors, tort reform, bundled pricing for surgical procedures, reference pricing, more aggressive use of fraud mitigation analytics and a more sensible approach to end of life care among others. Integrated delivery systems like Kaiser that put insurers and providers on the same team may also play a greater role going forward.

    I remain a staunch opponent of the single payer approach and I think Dr. Berwick is on the wrong track.