“Single Payer” Health Care Systems

I keep seeing influential groups, particularly here in Connecticut, advocate that we switch to a “single-payer” health care system. There are many variations on single-payer proposals, but they typically have the following characteristics:

The Government takes over the administration of health care plans from insurance companies, private provider-based plans like the Kaiser Permanente plan, and employer-based plans;
The Government would decide on coverage provisions, the reimbursement for physicians and other providers; and
The Government would use its bulk purchasing power to decide on, and acquire, pharmaceuticals, lab tests, and preferred providers.

Single-payer systems are different from single-provider systems like the UK National Health Service because the single-payer system providers would not be Government employees, but would retain their ability to invest in, and own, parts of the health care system.

Single-payer proponents point to the Medicare system as a successful implementation because it provides universal, affordable coverage for the elderly, it has low administrative costs for the Government, and it is very popular among the elderly. Some proponents also point to the Veterans Administration (VA) health care system as a successful single-payer model, and point out that the VA system has a high-quality lifelong system that is supplemented by a comprehensive electronic health record.

Unfortunately, the arguments these proponents make are flawed:

Medicare works to provide broad-based coverage for the elderly, but it is slowly- but surely, destroying the broader health care system. It inadequately reimburses primary care physicians, who are the backbone of any good health care system, and, therefore, is a major contributor to a shortage of primary care providers. Many primary care physicians are either retiring or leaving private practice, or are refusing to take Medicare patients because they cannot make an adequate living.
Because providers are inadequately compensated by Medicare, the excess cost gets baked into what private insurers are charged, and it contributes to inflation in the rest of the system.
Medicare reimburses providers based on a transaction-by-transaction cost model, not based on cost-effectiveness over a whole treatment cycle. This is not a good system for improving quality and reducing cost. In fact, I remember when my Dad was going through rehabilitation for a broken hip, the nurses told me that he needed two rehab sessions a day, but Medicare would only pay for one 50-minute session a day. He never recovered, and spent the rest of his life in a wheelchair. Originally, I thought that I could secure better care for him by offering to pay for additional treatment, but Medicare guidelines prohibit providers from making common-sense decisions to enhance Medicare-mandated treatments. Thus, what has been done over the last two decades is to take the federal government’s reimbursement power and extend it to drive treatments. TheConsumer Healthcare Blog provides a good avenue for us to debate on this topic.
Medicare, or any other single-payer system based on it, would make innovative treatments extremely difficult to implement. For example, at Pitney Bowes, we found that, by reducing or even eliminating the cost of prescription drugs for certain chronic diseases, we could increase adherence and reduce downstream costs. Medicare guidelines would not allow us to do this without going through an elaborate, highly-bureaucratic and highly-politicized process to do something that we have found to reduce costs significantly.
Government administrators tend to be heavily influenced by political considerations. What gets mandated for coverage is often determined by special-interest political advocacy. Once coverage is mandated, it is exceptionally difficult to change that coverage, even when subsequent medical thinking changes. As questioned in the Healthcare Economist blog, “is having government bureaucrats making medical allocation decisions worse than having private sector insurance company bureaucrats making medical allocation decisions?”
Government decision-making tends to be more cautious and rule-bound, whereas good medicine often requires adaptability, flexibility, and the exercise of individual judgment based on unique patient needs.
Medicare’s low administrative costs only refer to the costs the Centers for Medicare and Medicaid Services, the Government administrative arm, incurs. The low administrative cost figures often quoted do not take into account what costs the broader health care system has to incur to comply with Medicare’s complex rules.
If Medicare and the VA constituted the entire U.S. medical system, the revenues obtainable by pharmaceutical companies would drop precipitously. While this would make pharmaceuticals more affordable in the short run, in the long run, it would destroy the pool of funds available for research and development, particularly for acute care and infectious disease conditions. Research would be redirected toward more profitable applications like lifelong chronic disease medications and lifestyle drugs that are acquired outside the single-payer system. Even the chronic disease research would suffer because the lifetime profit potential for all drugs would drop in a single-payer system. If the U.S. stopped being a lucrative market for drugs, the whole world would lose.
Because of year-to-year budget battles, care would inevitably be rationed, as highlighted in Paul Levy’s Running a Hospital blog. The wealthy would not suffer because they would find health care outside the single-payer system, either outside the U.S., or with private, concierge services inside the U.S. The middle class and the poor would see a reduction in health care services, especially with seemingly “discretionary” surgeries like hip replacements, which are generally not available or available with long waiting periods in non-U.S. single-payer systems like Canada.
I also believe that providers learn to “game” the Medicare system to get the results they need, and that there is an incalculable amount of wastage and inefficiency.

For all these reasons, although I think the Government must play a critical role in providing a safety net that guarantees affordable, universal coverage for all, I think the idea of a single-payer system for everyone would be a disaster.