Single payer health care: a quack cure

The American left, which now dominates the Democratic Party, thinks it has a sure-fire winner in its advocacy of a single-payer system for America. Under single-payer, government becomes the sole source of reimbursement for health care services. Federal bureaucrats with the advice of “experts” would set reimbursement rates for health care services, as well as establish “appropriate” procedures for access to treatments, especially those that are expensive.

The Canadian model

The model for the leftists’ vision for American health care is the Canadian single-payer system known as Medicare, which covers all Canadian citizens. For covered services purchase of private insurance is prohibited, as are co-payments. Canadian Medicare does not cover prescription drugs, vision care, dentistry, rehabilitative service, and home health care.

Some policy analysts argue that the quality of Canadian health care is superior based on certain aggregate measures of health status such as life expectancy and infant mortality. Cross-country health status comparisons, however, are useless as a measure of the relative effectiveness of various health care systems. Accurate apples-to-apples comparisons are not just difficult, but impossible. They do not take into account procedures that significantly affect quality-of-life but have negligible impact on gross heath status statistics, e.g., joint replacements, various procedures for improving vision and hearing , or advanced but expensive procedures for heart and brain problems. Also, it is not possible to make reliable adjustments for factors that have a huge impact on a population’s health — behavior, diet, culture — but are minimally influenced by the quality of a nation’s health care. In Canada, for example, the Inuit people have a life expectancy 15 years shorter than non-indigenous Canadians.

Would Americans want to live under a single-payer system such as Canada’s? If they understood its inevitable long-term impact, clearly not. Treatment delays can result in avoidable death and disability, as well as lost wages. At the very least they prolong suffering. Even to Canadians waiting times for care have become unacceptably long. In Canada rationing, which is unavoidable in any system, is done by time rather than cost. A few statistics tell the tale. In 2017:

    • Over a million (out of a population of 36 million) patients were forced to wait for necessary medical treatments;
    • According to the Fraser Institute, the queue for various procedures was:

— Ophthalmology: 173,000 patients
— General surgery: 91,000 patients
— Urology: 40,000.

In the United States, there already is a single payer system, namely the Veterans Administration. Ask a veteran or a member of his family how well that is working for them.

Inherent Defects of a Single Payer System

All single payer systems have inherent, unfixable structural defects that doom them to a downward spiral of degradation of quality per dollar spent and less availability of good care on a timely basis:
• Power is centralized in the hands of government workers who have no incentive to help patients get the best possible quality of care at a reasonable cost.
• All single payer systems increase demand for health services and reduce supply. This guarantees shortages and dissatisfaction.
• Since doctors and hospitals are paid by government, they will become increasingly less focused on patients and families. Whose bread you eat, his song you sing.
• Under single payer, there is a strong incentive to get patients out of the office as soon as possible.
• Huge amounts of time are wasted in “box checking” to keep the compliance bureaucrats and accounting clerks happy. Neither contributes to good health care.
• The extent of control by government bureaucrats necessarily must always grow. If they control reimbursement rates, utilization of services will rise. Therefore, they have to control utilization. To control utilization, government needs to how much and what kind of care doctors can provide without having to get advance permission. Patients and doctors would now have another party to deal with who has no knowledge or incentive to do anything but apply stringent control procedures.
• Incentives to innovate under single payer always wilt.
• The wealthy and well connected will, as usual, find ways to circumvent the system to get what they need, while everyone else will just have to get in line.

A Better Way

To understand the likely impact of a public policy, it is necessary to answer two questions: ‘
1. Who gets to control the flow of money?
2. What are the incentives of the main actors?

The leftists with their single payer dream would have the money controlled by Congress (presumably good progressive senators and congressmen), government workers, and various health policy “experts”. Note that none of these entities has personal “skin in the game”, i.e. they suffer nothing if they make a mess. They therefore have minimal incentive to focus on what actually works. Elected officials and bureaucrats are masters of scapegoating and evading personal responsibility.

In order for a health care delivery system to provide the best possible outcomes in a pleasing, caring manner at reasonable costs:
1. The flow of money should be controlled by patients and their families, but they should be incented to be conscious of cost as well as quality.
2. Health care providers (doctors, hospitals, nurses, technicians, etc.) should be focused exclusively on doing the best they can for patients and there should be strong incentives to innovate because ultimately, the only way to get improved care for everyone is through continuous innovation .
3. Every American regardless of ability to pay should have access to decent care, if not “presidential level” care. The latter is unaffordable, even for the United States.

No system is perfect, and all require trade-offs, but there is one program that meets these tests better than what Canada offers or what we have in the United States today. The technical term for it is a negative income-related refundable tax credit. In broad outline, it would work as follows:

• Every American paying income tax would get a tax credit applicable against any state-licensed insurance plan or one offered by an employer that itself provided insurance for medical and surgical expenses. The size of the credit would be inversely related to income; higher income people would get a smaller credit.
• Low income people would be eligible to receive from government a voucher entitling them to buy a state-licensed health insurance plan. That, too, would be income related.
• Besides vigorously policing for fraud, government’s role would be limited to making sure eligible low-income people got what they needed to buy a health care plan in the form of either a tax credit or a government- provided payment.

This program puts power where it belongs: namely, in the hands of patients and their families. It induces competition to create a wide diversity of health plans that cater to the wide variety of people’s needs, and it stimulates competition to provide superior value for the dollar.

Certain technical issues must be addressed. The most important pertain to risk adjustments to accommodate people with pre-existing conditions, and to scope of plan coverage. Practical solutions to these issues, based on common sense trade-offs, are readily available.

A negative refundable tax credit plan for health care coverage could be applied initially to those who can’t afford to purchase health care coverage on their own. Since the plan is compatible with what most Americans are familiar with — employment-based group insurance — immediate, wholesale changes in how health care is paid for and delivered would not be necessary.

Why isn’t the refundable tax credit idea better known and more popular?

Politicians in general and the loudest voices in academe, the media, the Democratic Party, and the entertainment industry don’t like the idea. By returning power back to the people, it would diminish their power and prestige. God forbid that the American people would come to rely more on free markets than the government-enforced dictates of their “betters”.

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