Why I’m ambivalent about single payer

Introduction

I want to set out why, after over twenty five years of thinking and writing about health care reform, and two and a half years as a health care activist, I’ve always been ambivalent about single payer.

That ambivalence is well known to progressive activists in the state. To judge by what they say to each other in emails that friends forward to me, let alone from what they’ve said out in the open, I’ve been public enemy number for single payer advocates in Pennsylvania for a long time.

Partly that’s because I’m the leader of HCAN in Pennsylvania, and we have created the largest issue campaign in Pennsylvania history behind the Obama health care plan, a plan that has a very good chance of being enacted this year and that embodies our principles not those held by advocates of single payer. But that’s by no means the whole story. Passing legislation immediately is, after all, not what the most rabid single payer advocates care about most. If we take them at their word, they care about building for a long term transformation in our health care system. (I have argued, however, that given their lack of political realism, it often looks like they care more about being right and showing everyone that they are right than about making any practical changes). So I most deeply offend them not because our campaign has done what they have dreamed of doing but because I refuse to at least give them the satisfaction of granting that they are on the moral high road. I could support single payer if it were politically viable and were the approach to health care reform that had the best chance of being enacted But single payer is not, in my judgment, the ideal.  I’m not really persuaded that single payer approach is preferable to the Obama / HCAN approach to health care reform.

The Appeal of Single Payer

Now this puts me in a bad light for some progressives because single payer is an idea that has caught on in progressive circles. Indeed, it has become almost a litmus test for all right thinking progressives today. Even politicians who know it is impossible to enact and don’t really support it, like Barack Obama when he was running for President, genuflect to the left by saying such things like, “if it we were designing a health care system from scratch, single payer would make the most sense.”

Single payer has caught on for a few reasons. It is a simple idea and a relatively simple program compared to others. It has an obvious advantage—eliminating a great deal of administrative and marketing costs from the health care system. It has a model that is popular, despite all its problems, Medicare. And defending single payer is defending government and twenty eight years after Reagan was elected and thirteen years after Bill Clinton said the era of big government is over, we progressives need to defend government.

I believe, however, that we can defend government while also defending a health care policy that is more sophisticated than single payer and ultimately more likely to be successful. And, in doing so, we can start to break through ideological blinders that are found on both the left and the right and that stand in the way of attaining the goals for which we progressives have always fought.

Where I’m Coming From: My Philosophical Bearings

Before I became an activist, I was a teacher and writer of political philosophy for twenty five years. And both as a political philosopher and a political activist, I’ve long defended the egalitarian goals of progressives. I believe that we have a long way to go to make our political community as equal as it should be, starting with real equality of opportunity but then moving beyond it. But while I’m a defender of equality—and certainly believe that government must provide many public good and regulate the market–I’m not always a defender of government against markets.

By now I think it is evident that there are virtues and vices of governments and virtues and vices of markets and that¸ while we need to argue against the veneration of the market in American culture and the distrust of government that pervades our political thought, we should not be ideological in our preference for governments over markets. Governments and markets both have advantages and disadvantages as means of producing and distributing goods and services and the trick for progressives is to find the right balance between them. To me, the question of when we should use a regulated market and when we should use government provision to attain our goals is a complicated matter and the right answer depends on particular circumstance.

And that’s why I find the progressive debate between single payer supporters and supporters of a hybrid public / private system so strange. We are not debating about goals at all but rather about pretty technical means to an end we all share: getting everyone quality, affordable health care.

There are some deeper principles that underlie my doubts about single payer. I’m not just an egalitarian progressive, I am what I call a communitarian or participatory democrat. I would ultimately like to see us move from our state and corporate centered political order to one which in which power is radically decentralized and democratized and placed in the hands of small local governments and small worker or consumer controlled business enterprises. And I take that view because, though I know we desperately need to strengthen our government now to provide some democratic control over big business, ultimately I am concerned about and distrustful of the effects of both big government and big business on the civic virtue and commitment to the community on the part of our fellow citizens.

I also have some real concerns about the increasing corporatization of medical care in the United States. I know many people share my concern that our medical care is too focused on fixing problems with surgery and drug insstead of preventing problems not just with preventative health care but by changing how we live our lives–what we eat, how much we work, how much we exercise, what we do for recreation and so forth. The most radical thinkers about health care reform have put forward ideas not for funding the current system but for transforming it by introduce more democratic, community control over medical clinics and hospitals. I share those hopes. And like many of my friends who do so, I worry that a single payer system would cement the current system in place. A single system of government payment for health care will be heavily influenced by traditional doctors, hospitals and pharmaceutical companies. And thus a single payer system will be less likely to fund non-traditional forms of health care and non-traditional forms of providing health care. Of course that will be true of any health care system in the United States. But an hybrid public-private system, with multiple insurance  companies in different states and regions, is more likely to provide opportunities for radical experiments in not only providing health care but keeping people well.

That’s the deeper source of my doubts about creating a wholly government run single payer health care system and it is why, if there is no compelling case that single payer is the best way to provide good health care at reasonable costs I’m not eager to embrace it. I’ll say more about these large philosophical doubts in another place. In the rest of this essay I explain why I’m not convinced that single payer is either necessary or sufficient to reform the health care system in the United States

Only Two Countries Have Single Payer

That it is not necessary is pretty evident. While single payer advocates often imply that every liberal democratic country has single payer, that is not true. Every liberal democratic country provides universal health care. But only two countries, Canada and Taiwan, have single payer.

The best health care systems in the world—the ones that provide the best care at the least cost—seem to be France and Germany. And neither of them have single payer. Rather they have many—in Germany about 200—heavily regulated but competing non-profit and for-profit enterprises that provide health insurance. The resources for these enterprises do not come from taxation alone but from individual premiums and employer contributions as well as taxation.

Single Payer by itself Does Not Control Costs

That single payer is not sufficient is true simply because single payer by itself will do little to control the health costs that are taking up an ever growing percentage of our GDP. This is mainly an American phenomenon as we spend almost twice the percentage of the GDP on health care as the country with the next most expensive health care system.

Even if we accept the highest estimates of the savings that would come from eliminating the administrative expenses of private insurance—the number keeps being ratcheted up by advocates and $300 billion is the latest I’ve heard—we would not have enough money to provide good health for all care over the long term. For, even if we could provide care for all in the first year—and $300 billion is probably not enough to do so—health care costs would still continue to go up. Single payer by itself does absolutely nothing about the major sources of high health care costs—our tendency toward unnecessary, wasteful and often harmful health care.

Why Health Care Costs Keep Rising

Health care costs go up in the United States for two sets of reasons.

The first is that we carry out medical procedures and give people medicines that are unnecessary. And with every technological and pharmaceutical advance we waste more and more money doing so. The reasons for this are many and include our capacity to develop new medical technologies and pharmaceuticals;  our cultural penchant for quick technological fixes for what ails us as opposed to longer term changes in lifestyle; our fee for service system that gives doctors and hospitals an incentive do more rather than less; our inability to limit the purchase of expensive technology by every hospital that then must be used to pay off the costs of acquiring it; the crushing debt doctors have when they leave medical school; and our failure to do sufficient research on the effectiveness of medical treatments or to disseminate the research that is done.

The second set of reasons health care costs go up is that we do not provide the kind of care that solves or manages small problems before they become big one. We don’t coordinate care well. We don’t provide good preventative care. And we don’t provide good continuing care for the five chronic diseases—hypertension, cardiac artery disease, chronic pulmonary obstructive disease, asthma and diabetes—that account for 80% of all medical spending

Single Payer and the Two Sources of Rising Health Care Costs

Neither of these two sets of problem will be fixed by single payer. Indeed most of the evidence we have of unnecessary and wasteful medical spending comes from the Dartmouth studies of Medicare, our single payer system. Some attempts to reform Medicare have tried and failed to fix these problems. And many other reform proposals have not been tried.

So even if we could drastically reduce the administrative costs of providing health care by creating a single payer system, at the current rate of growth in medical spending, the savings would by wiped out in a year. And we would be faced with a relentless increase in spending and taxation year after year.

Now one answer to the failure to reform Medicare is that we just need to do better and create a really good single payer system that is a much improved version of Medicare. But there are three problems with this response.

We Don’t Yet Know How Best to Control Costs

The first is that reform is hard because we don’t really know the best route to reform. There are all sorts of proposals to deal with the two problems I’ve described. These include paying doctors salaries instead of paying them for each individual visit or procedure they perform; having doctors work as teams to provide care for individuals; creating medical homes to coordinate care; developing new protocols that outline best medical practices and rewarding doctors.  Some of these ideas have been tested in practice in places like the Cleveland Clinic or Geisinger health system. Other have not.

Right now there is much we really don’t know. We really don’t know which of these new ideas will work best. We don’t know which of them will work best in all circumstances since, for example, what makes sense in a community hospital might not make sense in a research or teaching hospital. We don’t know which of these ideas will scale from one hospital system to the country as a whole. And, we also don’t really know how to encourage patients to take the kinds of actions—such as modifying their diet or taking their medicines or getting follow up care—that will lead to major costs savings.There is a joke among people who do political campaigns: half the money we spend is wasted but we don’t know which half. The same is true in health care. Just as we don’t know whether direct mail, robo-calls, live calls, or television advertisements are the best ways to drive turnout at elections, we don’t know which of these will drive people to get follow up care for their chronic health problems.

The Political Barriers to the Reform of Medicare

A second problem is that it is not an accident that Medicare is hard to reform. There are powerful interests working against the kinds of reform that will really save money—indeed the whole medical establishment will fight many of the reforms that have been proposed to get health care spending under control. The power of a political movement that creates a single payer system might initially put these reforms into place. But political movements tend to retreat after a big victory as citizens turn their attention to other issues. The interests that fight these movements never go away.

Single Payer Advocates Often Don’t Recognize the Problem

And a third problem is that at least some single payer advocates fail to recognize the seriousness of the problems that lead to rising costs. It is no accident that so many single payer supporters are doctors who are rightly furious at health insurers, both on behalf of their patients and themselves. And their ideal is to eliminate the insurance companies and administrative difficulties they create havoc in  the lives of doctors and patients. I’ve heard prominent single payer advocates say that once we all carry the single payer health care, we will be able to get medical care anywhere in the country “without either doctors or patients having to do any paper work.” A single payer primer prepared by ASMA suggests that single payer would eliminate the administrative costs involve in “handling claims and…billing.”

This is an utterly fanciful picture of what medical care could or should look like. For while no one likes paperwork, most of the reforms that will actually address the two sets of problems I mentioned above require more not less administrative spending. We need to carefully track both what diseases people have and what treatments they get if we want to better coordinate care, provide good chronic care and do research on the effectiveness of various treatments. We need to track what individual doctors do so that we can encourage—and in some cases require—them to follow best practices and avoid bad ones, just as the Cleveland Clinic and Geisinger, two models of good health care, do. While single payer would eliminate the handling of claims and billing, most of the record keeping that is involved in tracking claims and billing would still have to be done to monitor the quantity, quality, and effectiveness of health care.

Some supporters of single payer would like to go back to the good old days when no one looked over the shoulders of doctors. But those were also the days when doctors could not do much to help their patients and consequently medical care was relatively cheap. Now things are different—doctors can do a great deal in offering drugs and procedures that cure or ameliorate illness and medical care is expensive. And while we do have to make sure that doctors and patients can together make the fundamental decisions about medical treatment, we simply are not going to and should not go back to the days when doctors did what they wanted and no one tracked the treatments they prescribed or the outcomes to which those treatments led.

Why a Purely Public Approach is Not the Best Solution

These three problems don’t lead me to the conclusion that that we can’t or shouldn’t make efforts to improve care and restrain health care costs within public programs like Medicare or the new public health insurance option we hope to create in health reform legislation this year.  We have to do this. To the extent we can, we should use the legislative process this year to set in motion reforms in health care payment and delivery systems that will address the two sets of factors driving health care costs.

But while we must begin to work on these problems, I am very dubious about the idea of moving now to institute a new nationwide system of providing health care.

For one thing, we don’t want to discourage the kinds of experiments in the private sector—such as that found at Geisinger or the Cleveland Clinic—that have created the models many of us look to now. There are other possibilities for further experiments such as public or consumer or provider controlled health care cooperatives or accountable care organizations run by doctors or hospitals. Of course I’m not talking about coops like those proposed to replace the public option by Senator Conrad, but rather those that mean to replace corporate run hospital / medical systems that serve their own interest with an alternative that focuses on making whole communities healthy.

In addition, given how little we know, rather than institute a national overhaul of how we deliver health care, it makes much more sense is to allow and encourage a variety of experiments in different settings to see what kinds of approaches will work under what kinds of circumstances.

How Regulation Can Make Insurance Companies Part of the Immediate Solution

We could do these experiments under a single payer system. But I believe that, at least for now, there are advantages to reforming our hybrid public / private system. For, if the new regulations in HR 3962 change the business model of private insurance as radically as I expect they will, the insurance companies will become allies in the search for new models of health care delivery rather than barriers to it.

Remember that HR 3962 will by and large keep insurance companies from making money the way they do now, that is by denying people who might actually get sick health insurance or, if they have health insurance, health care. The usual practices of the insurance companies will become illegal. And these regulations, coupled with the competition provided by a public health insurance plan, will drive down health insurance profits. And remember that even if we lost the pubic option nationally, at least California will have one.

So how, then can insurance companies make money under these new regulations? First, by expanding their business and insuring more people rather than less, both to spread administrative and insurance risk over a larger pool of people and to make up in volume what they lose in their margins. And second, by keeping the people they insure healthy by, for example, figuring out ways to keep chronic diseases under control.

Economists sometimes say that because insurance companies have no guarantee that the insured will stay with them for long, they can’t benefit from programs that keep people healthy

But it’s not clear this has ever been true. People don’t change insurance plans all that frequently by choice. And someone who has a heart attack and has uncontrolled cholesterol and high blood pressure is much more likely to have a second heart attack and need bypass surgery or a stent relatively soon. So there is an incentive for insurance companies to take steps to get people good care so that are less likely to need follow up care.

Moreover, so long as insurance companies have an incentive to expand their pool—which means to keep people they insure with them—then they are likely to find that, for example, outreach programs that encourage people to take their medicine on a regular basis not only reduce long term health care needs but are also a way of increasing customer satisfaction and re-enrollment.

And these kinds of programs exist now. For all its nasty and rapacious political side, my insurer, Independence Blue Cross is already offering people who have coronary artery disease a variety of counseling and other  services in order to keep them healthier longer.

Similarly, if private insurance companies have to compete with a non-profit public option that can drive a hard bargain with hospitals and doctors, private insurers will have an incentive to do the same  and to figure out innovative ways to pay doctors for better providing better health care for their insured.

In other words, a plurality of insurance companies competing with one another is just what we need now in order to carry out the variety of experiments we will need to figure out how to reform health care delivery and payments systems over the next ten years.

Why We Might Want to Keep Private Insurance Long Term

And beyond that, once we have that figured out, will it make sense then to move to single payer? Or will we then be glad if, as some suspect, the public option has grown to encompass much of the insurance market?

Perhaps. I definitely won’t rule that out. But there still might be a way in which private insurance—under the proper regulations—will still be useful. After all medical practice is likely to continue to change and we may need constant innovation in new health and delivery systems.

In addition, the further we get from the moment of reform, the fewer challenges there will be to the power of health care providers. And that means they will be able to use their influence to bend Medicare and the public health insurance option to suit themselves rather than the public. At that point, the independence of private insurers, and their profit driven incentive to keep health care costs low, might actually, by means of competition, help guarantee that the goals of the public health insurance programs aren’t perverted by the political influence of health care providers.

Administrative Waste, Public and Private Insurance

But what of the administrative waste that comes with private insurance?

There is no question that a system that includes private insurance will spend money on some administrative expenses—such as profits and marketing—that do not directly add to the health of the American people. (Of course, if I’m right to think that competition is likely to improve health care delivery and payment systems, then profits might indirectly contribute to the health of the American people.)

But having said that, it seems to me that the argument that only single payer will save billions in health insurance costs is very much over stated by the proponents of that approach.

How Much Administrative Waste Is There?

Calculations about the administrative savings that come from single payer are based on the much lower administrative cost of Medicare (about 3%) compared to that of private insurance (which ranges from 8% for large companies providing insurance to big businesses to over 30% for smaller companies providing insurance to small businesses and individuals.)

This is a plausible way to begin. But it is not the whole story.

For one thing, the extremely low administrative costs of Medicare have been called into question. If we measure administrative costs as a the percentage of total costs that goes for administrative expenses instead of health care, then we get something like results presented in the last paragraph. (The numbers vary from one report to another, but the numbers I give above are roughly what most progressives believe.) However, one reason administrative costs for Medicare might be lower by this measure is that people insured by Medicare are much older and sicker than people insured by private insurers. Thus the administrative costs for dealing with any one patient are spread out over much large number of medical treatments and procedures. (Of course there is an additional administrative cost for each additional medical treatment or procedure but when someone has a lot of procedures at one time, the administrative costs should be lower for each of them.). If you measure administrative costs per patient instead of as a percentage of total expenditures, it turns out the Medicare has administrative costs roughly the same as private insurance.

And that leads to a second point, if we look at total administrative costs–not just administrative costs at insurance companies but at health care providers as well–the best estimates suggest that single payer will save substantial amounts of money but not nearly enough to cover all the costs of insuring the uninsured. From this perspective, the best estimate of overall administrative costs in the US is 31.5% and 16.7% in Canada. If single payer would cut our administrative costs to Canadian levels (and there is reason to believe that this is not quite possible)  the savings would only be $124 billion because private insurers only pay for a third of US health care costs now. That’s not nearly enough to cover all the uninsured with decent health care.

Overall, it seems to me to be entirely reasonable to assume that the administrative costs for single payer would be lower on average than for private insurance. After all, a single payer system does not have to make profits, will not pay its executives enormous salaries, and has no marketing costs. And it dramatically reduces the administrative burden on health care providers.  Our crazy-quilt non-system of private insurance generates enormous administrative costs for doctors and hospitals and businesses as as well, which have to deal with the individual forms of tens of companies that have tens of thousands of different insurance policies with their own rules about how much and what is covered. (The smallest Blue in Pennsylvania, Capitol Blue Cross offers 43,000 separate insurance policies with each small business getting it’s own policy and premium rates.)

Single Payer is not the Only Way to Reduce Administrative Waste

But the question then is whether we can reduce these administrative costs substantially without adopting a single payer system. And the answer is yes. Under HR 3962, individuals and small businesses will purchase insurance from the Exchange which will create a large insurance pool that that, because it spreads administrative costs around will enable them to purchase insurance at the same low rates that big businesses receive. In addition, the Exchange will radically reduce the number of policies offered to these people and businesses from thousands to three and will therefore reduce the administrative burdens on the companies involved and the doctors and hospitals that care for them.

The Exchange, along with the computerization of medical records and the requirement under HR 3962 that private insurance companies standardize their forms, should substantially reduce the administrative costs in the parts of the insurance market—the individual and small business market—where those costs are highest.

And while this might not lead to as great a reduction of administrative costs that might be obtained under single payer, we will still see a major reduction in those costs.

Conclusion

So I conclude first, that the major benefit of single payer can be obtained, if not to the same degree, under HR 3962 and, second, that there are advantages in the short term, and perhaps in the long term, too, of using competition between public and private insurers as a means to encourage not only reduction in the growth of health care costs but better health care.

When I add to this conclusion my strong preference for solutions to our immediate problems that leave us more open to long term transformations in our political community that empower local communities to find ways of providing for themselves without relying on either large corporations and governments, my preference is not to rush to single payer but to reinvigorate and reform our hybrid public / private health care system.

The case for this approach to health care reform is not, I would be the first to admit, open and shut. There is much to be said for single payer. But, if the arguments of this essay are at all correct, then the case for single payer is not nearly as strong as its proponents assert either.

And, since single payer is, at the moment politically impossible to attain, I find that reassuring. The reform proposals before Congress have a good chance of being implemented and making a huge difference in the lives of millions of Americans. And by restoring confidence in government and building a large public health insurance plan, they will create the conditions under which a movement towards single payer becomes politically feasible, if that does turn out to be the best way to provide quality, affordable health care for all.

Postscript- A Model for Reform

Perhaps the best model for us to use when thinking about the respective roles of government and private enterprise in the provision of health care is the American higher education system. Despite recent cutbacks in public spend that, for example, have very much undermined some of our greatest public universities including many in California, our system of higher education is widely thought to be the best in the world. It is the most varied, with all sorts of public and private institutions that appeal to the diverse needs of college students. It is the most open to a wide range of students from many different economic backgrounds. And it has the best institutions, at which the most advanced teaching and research takes place.

Our system of higher education is an hybrid system, a public / private system, like the kind of health care system I support. And its virtues–diversity, openness and accessibility , and high quality–are in large part the product of a system that has multiple sources of funding and that encourages competition between institutions.

I would not be surprised to find out that our administrative costs per student (or class hour) are higher in America than elsewhere in the world. They are, no doubt, higher in private than public universities. But are we willing to give up our thousand small colleges and the divesity of our community colleges so that we could save administrative costs by having all college age students go to massive universities that teach 60,000 students or more? Of course not. No one who cares deeply about maintaining the diversity of our colleges and univerities, nor the quality of the best ones, would endorse such a view.

The hybrid public / private solution to problems is a uniquely American idea, one that we find in our sytem of higher education and in the way we produce and distribute electricity as well as in many other fields. It is a good model for us when it comes to health insurance as well.