healthsignals new york

Cost growth, universal coverage, and single-payer

In It's Only a Matter of When, we set the stage a bit with our discussion of subsystems overwhelming the systems of which they are a part and which support them, especially with financial resources and how that triggers system responses. The example we used was of the loss of coverage. Let's now discuss the implications for universal coverage generally and single-payer, in particular.

The system structures and associated dynamics in It's Only a Matter of When help explain the rising numbers of uninsured, which are themselves much of the political impetus for some form of universal coverage. But, unless we're foolish, the leap to some form of universal coverage also requires that we create the structures in a new system to counterbalance those forces. Otherwise, we will simply transfer the associated problems from one coverage system to another.

Growth in healthcare costs at rates greater than the rest of the economy will continue to cause more people to become uninsured - the gap that universal coverage would fill. But a one-time jump in transfers from the rest of the economy to healthcare that would accompany a political move to universal coverage would not, by itself, change the system structures that create these dynamics. Thus, any move to universal coverage must take those inflationary structures into account and deal with them as part of reform. Certainly no reform should weaken the counterbalances that exist today, much less create new inflationary incentives.

Contrary to the rhetoric of many single-payer advocates, we cannot do this by relying solely on reduced administrative costs. Perhaps politically and rhetorically attractive, that's a dangerous distraction. Instead, we must face up to core healthcare costs and their continual rise and we must find effective means of counterbalancing them.

Let's jump off from part of Tom's comment about this post:

The rejection of the Clinton plan, in part, because of the canard that it would have limited consumer choice, marked the beginning of a consumer revolution that rejected all limits on choice, thus virtually all cost-control mechanisms. So discussions of how we'll reshape the delivery system under a particular universal health care system to control costs probably miss the point, which is that the American public may not allow costs to be controlled under any model. (which is why I think it makes sense to target administration and marketing costs, since those may be the only excess costs truly on the table.)

One of Tom's implicit assumptions is that only by limiting choice can we control costs. I'm not sure that's true. I've certainly seem mechanisms that had the effect of reducing costs without limiting choice. Indeed, I've even seen cost reductions result by giving the patient more choice leverage (through deeper education about their options), but I don't want to dwell on that here.

Rather, momentarily granting Tom's assumption about unfettered choice, let's look at his next point, "the American public may not allow costs to be controlled under any model." Yes, they will. They may hate it. They may resist. They may claw and scratch, but, even under a single-payer system, ultimately they will have no choice but to allow cost controls politically. Why?

Because continual and accumulative healthcare cost growth that exceeds the rate of growth of the economy that pays for it and supports it will sooner or later, but inevitably run into a "Decision/Behavioral Change Threshold" such as we discussed and depicted here. At that point the larger system (the rest of the economy in this case) will push back and say, "no more." (More likely the wording would be a bit more aggressive.) The healthcare sector will have to live and content itself with X percent of the nation's economic resources. Pick your own percentage threshold. Fifteen percent? A bit over where we are today. Twenty? Maybe. Fifty? You must be kidding. The American public which had previously rebelled over "lack of choice" would have long before furiously rebelled over the tax burdens associated with that level of economic commitment. Why would it be otherwise? The point here is not to argue what the trigger level would be. Rather it is to simply say that structurally, such a trigger level will be an intrinsic part of the system and pulling the trigger is a matter of when, not if.

Tom, then using the single-payer advocate argument, goes on to say:

... which is why I think it makes sense to target administration and marketing costs, since those may be the only excess costs truly on the table.

Over the last few years, the administrative costs argument has become the centerpiece of the rationale for single-payer advocates. This is dangerous. Whether large or small, administrative costs are an "add-on" to core healthcare costs. They rise with the increases in core healthcare costs, which the single-payer proposal does nothing explicit to address. All the systems we're discussing, reformed or otherwise have and will have some form of counterbalancing mechanisms. Whether in the present system or embedded in a single-payer system, the same generic system structures will produce the same generic system behaviors. It's best to  think about the nature of these counterbalances  consciously in advance of reform and to discuss them openly.

The administrative savings rhetoric is more than a distraction. The rhetoric of many single-payer advocates supports at least implies more dramatic, perhaps radical controls on core healthcare costs:

• It does this in comparisons to other nations' healthcare systems which devote to healthcare much smaller shares of overall economic capacity. If the US spends 14 percent of GDP on healthcare and another system spends 10 percent, we must ask of the single-payer advocate, are you suggesting that the US move toward 10 percent? Are you suggesting that we cap the US system at 14 percent while other nations catch up? If two of the 14 percent is for administration and we can eliminate that, will we then cap healthcare's share at 12 percent? And, especially after dismantling the administrative controls, in any of these cases, how would we do that?
• Most single-payer proposals include or imply some form of price controls. Today that's often aimed at the current villain, pharmaceutical firms. But price controls certainly wouldn't be limited to such firms, they would apply to all forms of healthcare included in the benefit package. A single-payer systems would be a monopsony (single buyer rather than a single seller monopoly). Its leverage over hospitals and physicians and most other services would be near total.
• Service use controls would be of two types, implicit and explicit. Price controls will inevitably have a hidden, implicit effect on service. Priced low enough, no one will sell a service. So patients would have complete freedom of choice to seek services ... that no one sells. In part, this is just an extreme version of the waiting line effect. Explicit service use controls would no doubt emerge as well.

Assume for the moment, that we could have a single-payer solution and universal coverage with zero administrative costs. We would have received a one-time savings. But would we still have a healthcare cost problem? Would healthcare costs continue to rise faster than the rest of the economy? Clearly yes. And therein lies the problem. Because as this new administration-free, single-payer system consumed an increasing share of gross domestic product, eventually the rest of the economy, the taxpayers would limit the resources available to healthcare

As I discussed before, I've never found the administrative cost argument compelling except in the extreme short term. If single-payer advocates were actually able to make the sale to the American public, they would shortly thereafter find themselves accused of a "bait and switch" because the core costs, for healthcare services would continue to grow faster than the rest of the economy and there would be little alternative but to impose administrative controls on service, both raising administrative costs and creating exactly the sort of problems they had promised to avoid. Not a pretty picture.

Any credible reform proposal must include the means by which core healthcare cost growth will be constrained to some fixed percentage of our society's economic capacity or it will necessarily fail.

Even my own discussion of the importance of finding the Mama Bear "just right" levels of healthcare service use does not yet address how. But we must openly and directly address how we would do this

Any universal coverage system must directly face up to how the core costs will be controlled. This can be done bureaucratically or it must leave individuals and families the ability to choose among different systems of care and financing and do so with a financial incentive that creates a counterbalance to healthcare's core inflationary forces. Individuals and families must play an active role in the choices that affect them and their decision making must include personal trade-offs regarding service choice and cost. Even more than in the present system, in a healthcare system with universal coverage, core healthcare costs will be controlled by the rest of the economy. This can be done arbitrarily to patients and physicians and I fear that arbitrary means will be the only ones available in a single-payer system. We must find functional and politically acceptable means of restraining growth in core healthcare costs. At best, tinkering solely with administrative costs avoids finding a solution to the more serious problem, even worse, it's a distraction. Worst of all, it may undermine our ability to confront the greater challenges.

NY Blue Cross conversion case

New York's highest court, the Court of Appeals, today rejected the suit brought by Consumers' Union regarding the conversion of Empire Blue Cross/Blue Shield to for-profit status.

Here's the press release from WellChoice, the Empire parent. Here's a general issues page at Consumers' Union.

With a 4-2 vote, the Court dismissed the Consumers Union suit that challenged the transaction as unconstitutional. Empire did its IPO in late 2002, while creating a parent, WellChoice. Under the conversion plan approved by the State 95% of the funds (about $1 billion, was for salary supplements for healthcare workers, with the remaining 5% going to create a healthcare foundation. Arguing that salary increases were not a proper use of funds which had been amassed by virture of Empire's tax-exempt status, Consumers Union won a restraining order barring spending the money until there was a ruling on the conversion's legality. They favored other forms of community health initiatives.

For those concerned about the public policy issues involved in such conversions, this pretty much ends the debate in New York.

For those concerned with NYS finances and the age-old question, where's the money going, this means that the resulting funds the State was counting on for its own purposes are now secure. Hospitals and 1199 will get a substantial portion of the money. It also likely clears the way for the next conversion, that of HIP.

Where's the evidence?

In relation to the single-payer discussion, Tom asks where is the evidence that Medicare overpays for services.

Actually I was coming from a different angle that does not have much to do with benefit design or program operation. It has everything to do with the way the medical system actually works. My experience has been that government agencies assume that uniform policies produce uniform results and they are ill prepared and have no incentive to deal with variation in results, especially when that variation itself is the result of a wide variety of factors that require careful localized analysis, patient targeted interventions and are the result of factors that are not within governmental control.

Or put another way, I was focused on use of medical services. That's where the action is. Single-payer advocates focus on administrative overhead. That's simple and easy to understand. Regulatory types tend to focus on prices. That's simple at first blush and it can work in the short term, but once the regulatory process is captured by those regulated, it's just a lot of politics that produces no financial benefit to anyone but lobbyists and it may produce higher prices. More subtle, more complex, and harder to explain are the bell curves of medical service use. At the high end, they produce nothing but expense and the potential for patient harm. At the low end, they indicate inadequate care. In the equation of total costs ((service use X price) + overhead) = total cost, the longest lever is service use. And no, this does not lead me to having clerks deny care over the phone.

But since you asked Tom, here's a long one and since you asked you have to promise to read it all and think about it and its relationship to what we've been discussing.

Here goes ...

When Medicare and Medicaid were established in 1965, based on what most everyone involved thought they knew about mainstream, privately insured, medicine, they took for granted three key assumptions. These assumptions were so deeply embedded, that they weren't even discussed. This was just the way the world was:

1. That medical care was uniformly provided
2. That when provided, with the possible exception of some oddities, medical care was consistently of good quality. And good quality produced uniformly good results. A related, implicit assumption was more is better.
3. That, where quality was not good, it would be extremely bad and could be weeded out through a regulatory survey process and that aside from that there was not much that could be done.

All three assumptions have turned out to be incorrect with significant implications for for patient care, clinical quality, and spending. What we've learned in the 40 years since is profound, but we still have a very long ways to go in taking advantage of it. This is relevant to the single-payer discussion because while a single-payer system might be centralized, medical care is not. I'll discuss that tie-in further below.

Medical care is not uniformly provided

Where's the evidence?

Read anything by John Wennberg, MD. (If you do a search at the New England Journal alone, you'll find well over 100 citations.) Here's a recent one in the British Medical Journal that focuses on end-of-life care. In the late 1970s, Wennberg began to apply epidemiological methods to medical care. The first study I read was in Scientific American in 1979 as I recall, but that's not online. What Wennberg and his colleagues found was that there is substantial variation in medical care from one community to the next. They have also found what they characterize as a "practice pattern" effect, that physicians in one community develop a rough consensus on the best way to handle particular types of cases, but that their consensus differs from the next community and will produce care patterns that are stunningly different from those in other communities, even within the same state or region.

For a quick introduction, start with the Dartmouth Medical Atlas, published by the Center for Clinical Evaluative Studies, which is one of the offshoots of Wennberg's work.

These variations also exist within similar populations and in some cases very homogeneous populations. For example, a colleague studied variation in hospitalization patterns among Nebraska Blue Cross subscribers for conditions that can be managed on an outpatient basis (diabetes, asthma, CHF, COPD, etc.) As another example, in the late 1980s and early 1990s, my own work focused on variation in hospitalization patterns of Medicaid clients in New York. Here's a quick and dirty update that I did in 2003. The earlier work was much more rigorous and I'll be happy to send a copy to anyone who asks.

Wennberg and his followers also learned that the variation itself varies from one condition to another. For example, appendectomies are always performed in hospitals and there is no known relationship of appendicitis to age, gender, race, socio-economic status. So there is very little variation and, from what I've seen, it's just random. Other conditions, however, are quite different. For just a tiny sample take a look at these:

• Variations in hospitalizations of children in three urban communities, NEJM, May 4, 1989.
• Regional variation in medical care, NEJM, August 31, 1995 where Detsky noted variation in clinical outcomes such as mortality after cardiac surgery. "Once again we have learned that there is substantial variation among regions, hospitals, and even individual physicians."
• Among New York's Medicaid clients the most variable conditions as causes of hospitalization were psychiatric and substance abuse, blood related conditions, and respiratory conditions.

There is much, much more.

This leads to "what difference to these differences make?"

Medical care does not provide uniform results and spending more does not necessarily produce better results

Where's the evidence?

Start in the Annals of Internal Medicine with two papers by Elliott S. Fisher, David E. Wennberg, Thérèse A. Stukel, Daniel J. Gottlieb, F. L. Lucas, and Étoile L. Pinder. The first is "The Implications of Regional Variations in Medicare Spending. Part 1: The Content, Quality, and Accessibility of Care" where they conclude that Medicare patients who live in areas that spend more on Medicare do not necessarily get better care than those who live in regions that spend less. The second, "The Implications of Regional Variations in Medicare Spending. Part 2: Health Outcomes and Satisfaction with Care," where they conclude that Medicare enrollees in higher spending regions receive more care than those in lower-spending regions but do not have better health outcomes or satisfaction with care.

Or even more recently, take a look at Baicker and Chandra who "find that states with higher Medicare spending have lower-quality care. This negative relationship may be driven by the use of intensive, costly care that crowds out the use of more effective care."

Fisher wrote an op-ed for the New York Times, More Medicine is Not Better Medicine (fee required for full article) December 1, 2003. He pointed out that additional service provided in higher spending regions are largely discretionary. He estimated that as much as 30 percent of Medicare's service spending was unnecessary. For you New Yorker's he also pointed to spending in NYC being double a community in the Pacific Northwest with no additional benefit. Here's Fisher's slide show, "Is More Better?" (Quicktime required.)

You can also look at the numerous studies that have come out of RAND on excessive and inadequate care. For example, take a look at Assessing the Appropriateness of Care, How Much is Too Much?.

If care is not of uniformly high quality or does not produce uniformly good results, there's nothing that can be done about it

Where's the evidence?

Start here at the Institute for Healthcare Improvement, founded by Don Berwick. In January of 1989, Berwick wrote "Continuous improvement as an ideal in health care," the seminal paper in the New England Journal of Medicine on the use of industrial quality control methods, statistical process control and other similar methods in medical care. (That paper is not online, but it's worth tracking down if you're interested in the history.) The Institute was founded two years later (with a grant from a health plan by the way) and it has expanded each year. Their annual meetings now get thousands attending.

IHI is just an organizational manifestation of many efforts to measure performance, understand clinical processes, and improve them. You can go into many hospitals today and see graphs of their performance on a wide array of issues hanging near the offices of department chairs and sometimes even in public places. That simply wasn't true 20 years ago. And in many healthcare organizations, it's still not true.

What's necessary to deal with all this variation?

Here's a starter list:

• Data to identify community-by-community, condition-by-condition, and service-by-service where the high and low rates are and, where at all possible, outcome data
• Peer consulting and other knowledge transfer
• Time and support for dealing with it locally
• The organizational infrastructure to support local efforts
• Financial and organizational incentives for local medical organizations and professionals to participate
• Organizational frameworks for evaluating outcomes when, as it increasingly does, care crosses organizational or practice boundaries.
• Patience

Comparative data must be collected centrally or at least in accordance with a standardized design. That would be simpler with a single-payer plan, but certainly feasible in a multi-option universal system.

Beyond that, it seems to me that most of the advantages are with alternatives to a single centralized system. There's economic incentive and local involvement on scales that don't exist for Medicare, much less the entire US population.

And what does this have to do with single-payer?

The most politically compelling rationale for single-payer is that it would instantly provide a large savings in administrative expense. It quite likely would. But where would we go from there? Nothing I have personally seen or read gives me confidence that a large centralized system would be capable of effectively dealing with variations in care. In my experience with New York's Medicaid program and with the exception of some legislators and local officials, there has been nothing but resistance from government officials. Perhaps that's biased my view of the potential, but let's remember that New York is one of the states that is most intrusive into medical care and certainly, given the cost of its Medicaid program, it would seem that there should be an adequate incentive. For government agencies this requires too much subtlety and long-term commitment.

What's required is a system that includes a significant incentive such as economic competition for example. And it requires lots of people working on it in different organizations with different perspectives. That's where innovation comes from. Innovation slows when you have to ask for governmental permission.

It may also require the ability to be selective in ways that government agencies just can't be. I'm reminded of the multi-decade stalemate over Medicaid physician fees in New York. The state had stopped updating the fees in the same manner that it updated institutional rates. So here's what happened. First, physicians dropped out of the Medicaid program at increasingly rapid rates until there only a few left and many of them were practicing in the so-called Medicaid mills. Second, the patients recognizing reality rather than what the law said about what Medicaid covered moved to emergency rooms and hospital outpatient departments for care because there was no alternative. Third, the hospitals paid political attention to the regulators and the physicians largely did not.  When the state finally recognized the imbalance it had created, it was unable to fix it because to raise physician fees would have been to reward the Medicaid "mills." The log jam was only broken with the large scale use of Medicaid managed care which brought physicians back into contact with Medicaid clients by way of intermediary health plans. As a result primary care access has significantly improved for Medicaid clients. Docs may hate the health plans, but at least there's a working relationship. That was long past for Medicaid.

You need an ongoing, permanent economic incentive, local working relationships (which admittedly some of the national health plans may be fairly weak on) and the ability to work with medical professionals targeting local patterns everywhere. I just don't see the Federal government doing that. Certainly if it attempted to, much of the administrative savings would be lost.

If, as Fisher argues, 30 percent of Medicare expenditures for service today produce no medical benefit, then it is likely to become worse as medicine becomes more complex and involves more with each patient. Ignoring that for the cheap win of killing off the health insurers would leave us with no where to go and relying on the Federal government to find a new direction.

 

 

State based universal coverage?

Neil asks: "couldn't US single-payer be a state-based model, like Canada?"

Assuming that, like the Canadian system, there were a minimum Federal standard, it's certainly possible. Here are some of the issues that we'd likely have to deal with:

• What would be the states' financial obligations and to what degree would that lead to poorer or less healthy states' offfering much more restrictive benefit packages.
• How would we handle interstate movement? Would we have to dis-enroll and re-enroll? How would we handle families with multi-state legal residences? If we were using some form of voucher program, this would likely be even worse because different states might authorize different health plans.
• How tolerant would we be of the extra complexity? In contrast to our 50 states and a few other jurisdictions, Canada has 13 provinces and territories.
• Are the risk pools in smaller states smaller than we'd like? Canada seems to do OK, but I don't know how they deal with this or if they equalize the load in any fashion.

And Neil's question raises more questions to which I don't have the answer (yet). They include:

• How does Canada handle its territories, especially those with very small populations? The Yukon barely has 30,000 people. Nunavut has less than that.
• How do they handle interstate movement?
• What are the provincial financial obligations?

As noted earlier, this assumes there were a minimum Federal standard. If there weren't, you'd run into all kinds of extra problems, especially serving as a magnet for high cost patients. Over the past few years, there have been several states that have considered some form of state-only single-payer system. Vermont and California are considering them now. It strikes me as asking for trouble, but perhaps, if it relieved employers of the financial burden of paying for health benefits it would also be a form of economic development. Hmmm. That's actually worth analyzing.

OK, now that I've done the analytical thing ...

I listed some arguments against a single-payer form of universal health coverage. Now let let's get a bit more pointed.

For the life of me I can't understand the disconnect when my liberal/progressive friends support single-payer without so much as a discussion, describe it as Medicare for everyone and then turn around and aggressively attack Republicans and a handful of Democrats for the Medicare pharmaceutical benefit.

With a single-payer plan, this is going to be their full time occupation, because it's all going to be controlled in Washington.

Don't these folks understand that Bill Frist and Tom Delay and their successors will control all of our health care? Are they out of their minds?

That's at the policy level. Operationally, when I have a problem I'm going to call one of thousands of Federal employees or contractors and they are going to have no flexibility and I'm going to have no option.

I just don't get it.

Even more web chatter on universal coverage

Hmmm. There seems to be a recurring theme here. Perhaps folks think GW Bush will pull a Richard Nixon and support universal health insurance. That's why so many are talking about this issue now. Sure. Right.

The buzz started in April. And then there was more last month. And now for another round ...

Kevin Drum of Washington Monthly summarizes Ezekiel Emanuel and Victor R. Fuchs proposal for a universal health care voucher. You'll find the full proposal here in Solved!.

Emanuel then does a series at the Monthly:

• Why Keep Insurance Companies?
• Why Single Payer Won't Work
• Why Single Payer Won't Work, Part 2
• Bashing Health Plans
• Why Universal Healthcare Vouchers?
• Answers to Some of the Questions in the Comments

And then back to Drum in what he calls the Healthcare Cage Match followed by Emanuel's response in Insurance Companies. And back again to Drum in Healthcare and Big Business. And Emanuel responds Big Business and Healthcare.

For those who haven't watched this struggle until recently, Emanuel offers a very brief history of national proposals for universal coverage and what happened to them.

In the midst of the Drum/Emanuel discussion, Phil Glastris points to the Veteran's Administration healthcare program here and Emanuel responds here on whether the VA is a compelling model. Speaking of analogies, Emanuel then points out that his and Fuchs plan is more like the plan enjoyed by members of Congress.

Care in the VA system is much improved and we've talked about the VA comparison before. In my judgment, the apparent quality today is not an adequate argument for single-payer. Here's why.

Five years ago while running for President, Bill Bradley made health care and health care coverage a centerpiece of his campaign. The plan he proposed was based on the Federal Employee Health Benefit Plan and his argument was "if it's good enough for your Congressman, it should be good enough for you. Clearly Gore ran a better political campaign, but the gist of his argument against Bradley was that someone with coverage might lose some benefits or the program was too expensive or both. Hardly the populist argument that we might expect from him today.

Gore also seemed to have over-learned the lesson from the Clinton Health Plan, not so much that it was too complex, but that it was too ambitious. He bought into the "incremental improvement" position. There was just one teensy-weensy problem with the Clinton-Gore incremental improvements: At the end of the Clinton Administration there were many more uninsured than at the beginning. Evidently, they thought rhetoric was enough.

Here's Jonathan Cohn on why he prefers a single-payer plan and specifically referring to Krugman's column yesterday.

And here's Matthew Yglesias arguing that a universal voucher plan is no more politically feasible than single payer. And then Brad Plummer follows up on Yglesias.

The argument against single-payer

We do not need a single-payer system to gain universal health coverage.

Here, I made the argument for universal health coverage. For many, the solution is a single, national, government sponsored, financed and administered program. I emphatically believe that this "single-payer" approach is not the solution, either programmatically or politically. Think of this notion as Medicare for all, or as Canada's system imported to the US (or at least Canada before last week's Court decision).

We should have universal coverage. We will never be able to eliminate many of the inefficiencies much less the inequities in today's system unless we do. Recognizing that we might also eliminate some administrative inefficiencies with a single-payer approach, I think they're worth the cost. Most important, the differences in access to care between those with coverage and those without are so large, so significant, and so tied to racial, ethnic and income disparities, that it raises ethical issues that should disturb us all.

A purely market-based approach won't get us near universal coverage, and an active role for government is essential. However, a single, government operated program won't work either. Too many needlessly take for granted that universal coverage requires a single payer system. But single payer can be separated from universal coverage by distinguishing between the financing and operations of a universal coverage program, and between gathering the necessary revenues and spending them. These functions need not all be located in one governmental organization. For example, we can and do use public money to buy private insurance.

What's wrong with the single payer proposal? I made the following arguments in the late 1990s, but haven't seen anything since that would lead me to a different perspective.

Who chooses? What choices?

Single payer systems rest on the premise that there is a uniform best health benefit plan for every individual, that public officials and organized political interests always can know what this best arrangement is, and that they uniformly will choose it. The weakness of this foundation should be argument enough against single payer.

The health care system will be even more politicized than it is today.

If the revenue of health care institutions and professionals, as well as the rules controlling the institutions and the care providers, are determined by government policies, lobbying by vested interests will be even more fierce than it is today. Key choices will be made by government, political elites and vested interests. This same political process also would determine which medical services are available, to whom and under what circumstances. In today's political environment it doesn't take much to imagine what that might be like.

Single payer systems minimize the involvement and responsibility of individuals and families

The corollary to increasing government decision making and politicization is a diminished role and voice for individuals. In a single payer system, there is no role for the average person except to consume service. Individuals have no place in choosing systems of care and financing, little leverage over institutions that directly and significantly affect their lives, and only a faint voice when dissatisfied.

Once we establish a single payer plan, we cannot easily undo it

Some reform plans can be undone. A single payer system cannot. If we choose a single payer system, we will dismantle organizations and processes such as health insurers and plans. We will not easily or quickly rebuild them if the new system fails to satisfy us.
And single payer offers no guarantees on cost and quality. Some countries that have single payer systems have had lower cost-growth than the United States. However, in order to restrain cost, single payer systems require centralized government control of health care prices and use of services--and the intrusiveness that goes with it. But our experience with heavy regulation on the state level raises questions about whether central controls really are effective.

Organizational vitality and innovation

The structure of single payer systems discourages diversity and thus discourages the robustness and resilience that typically characterize diverse systems. Organizations continually must revitalize themselves lest they become moribund and bureaucratic. Diverse systems usually are better able to adapt, innovate and survive. This is particularly so for innovations in the organization of care across provider's organizational boundaries. Moreover, because it will take Federal permission to do so, only those organizations with enough size and political clout will have a chance to innovate.

Organizational clumsiness

No single payer plan can centrally manage the formal or informal systems of care serving millions of people. No large centralized system can adequately tie together all of the diverse elements of a health care system on behalf of an individual. To do this we need organizations with motivation and means, and that operate at the local level. We can have a uniform system or we can have a system that is responsive to the needs of individuals, but we can't have both simultaneously.

Locking the systems status quo into place

A single payer system would cement into place the worst and most inefficient characteristics of our health care delivery system. It is based on a fee-for-service payment model and it relies on isolated individual institutions, agencies and professionals.

The ugly (political) facts of life

The politics of universal coverage are tough enough. Why we in the United States have never adopted a system of universal coverage is worth a separate post, but it is clear that the individualist preferences embedded in the American psyche, and our ambivalence about the appropriate role of government, play a substantial role. With this as backdrop, getting agreement that everyone should be covered is tough enough. Seeking the consensus necessary to force everyone into a centralized system will leave the problem unrelieved for decades. Even if a single payer system were ideal, we should sacrifice it in order to get even minimal coverage for those who have none.

In sum

There are other, better ways of covering everyone than to force us all into a uniform centralized system. Universal coverage does not demand a "one size fits all" solution, and single payer is not the answer.

Krugman on single-payer

Because of the New York Times new pricing policy, requiring a $50/year subscription to view columnist online, I'm going to stop linking to them. But as a parting gesture, I'll give you one last link, this one to Paul Krugman's One Nation, Uninsured. (If the link dies, blame the Times.)
 

In the column, he endorses a single-payer health plan.

Let's ignore those who believe that private medical accounts - basically tax shelters for the healthy and wealthy - can solve our health care problems through the magic of the marketplace. The intellectually serious debate is between those who believe that the government should simply provide basic health insurance for everyone and those proposing a more complex, indirect approach that preserves a central role for private health insurance companies.

He's right on that point. But we diverge on his next point:

The great advantage of universal, government-provided health insurance is lower costs.

To be more precise, what's lower is administrative costs. But that ignores where we (through insurers, Medicare, and Medicaid) spend the bulk of the money, on medical care. And it assumes that all of that care is just fine or not very expensive, or that even if it isn't the case, governmental action would take care of the problem. That's where I see things differently. We've talked here extensively about unnecessary care and I just don't have a lot of confidence in a single centralized system's ability to find the Mama Bear solution, not too much, not too little, but just right.

Krugman goes on:

Some people, not all of them right-wingers, fear that a single-payer system would hurt innovation. But the main reason these proposals give private insurers a big role is the belief that the insurers must be appeased...

But I think that's the wrong lesson. The Clinton plan actually preserved a big role for private insurers; the industry attacked it all the same. And the plan's complexity, which was largely a result of attempts to placate interest groups, made it hard to sell to the public. So I would argue that good economics is also good politics: reformers will do best with a straightforward single-payer plan, which offers maximum savings and, unlike the Clinton plan, can easily be explained.

Actually much of the Clinton plan's complexity was based on the the need to guarantee that the cost of the program would be within certain budget constraints (boy, those were the good old days, weren't they?).

No question about it, we need to demand more of health insurers. Alternative plans would afford us the means to box them in and we should do just that.

I agree with Krugman with much and particularly that " We need to do this one right. If reform fails again, we'll be on the way to a radically unequal society, in which all but the most affluent Americans face the constant risk of financial ruin and even premature death because they can't pay their medical bills." But I think we can do a better job both programmatically and politically and do so without rolling the dice on a one-size fits all, single-payer solution.

Risk segregation

A couple of years ago in an effort to lure more health insurers back into its market, New Hampshire allowed its insurers to establish premium levels based on subscriber risk, i.e., age, health status, etc.

Here's the Concord Monitor on what happened and why New Hampshire has just reversed direction:

Before SB 110 took effect, the state operated on a "community rating"system that forbade insurers from rejecting an applicant for health reasons or from basing rates on health status or geography. Once community rating ended, insurers began returning to New Hampshire, just as supporters of the change predicted. They came, however, to cherry-pick, signing up the healthy while using exorbitant quotes to drive away those most likely to need care.

Prices dropped considerably for a small group of employers, primarily those with young and healthy workforces that lived in an area where health-care costs were relatively low. But, according to the state's insurance department, 80 percent of the state's small businesses saw increases, and the rates for nearly half rose by 30 percent or more in one year. Some saw rates rise by 80 percent.

Is there any reason to believe that health savings accounts won't have the same effects?

 

Private long term care insurance failing?

So it seems that private long term care insurance is running into trouble.

"Insurers have not hit on the right business model yet in order to help people deal" with long term care needs.

And they're not going to. And, they're certainly not going to solve a Medicaid problem.

If I've told you once, I've told you a thousand times, forget about it. It's a niche product at best and it's certainly not going to fulfill any legislator's fantasy that it will make a dent in Medicaid expenditures.