Why, oh, why, won’t single-payer/public option go away?

Last updated on: August 22, 2016 at 7:32 pm by Jane the Actuary

Why, oh, why, won’t single-payer/public option go away? 2016-08-22T19:32:32-06:00 Jane the Actuary

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So I have to say, I am not a big Costco/Sam’s Club shopper, but many of my neighbors are, and I remember browsing their aisles long before I had a family to shop for, back when you could have a fee-free membership and pay a modest upcharge instead. ‘Bout the only thing I remember buying were extra-giant-sized containers of chocolate chips, back in the day when I could eat all the chocolate I wanted and not gain weight. But the logic was that these warehouse stores could sell their wares cheaply because their packaging costs were reduced with larger sizes. Eventually I concluded that the prices weren’t all that better than sale prices at my local supermarket.

Today Slate had — again — an article promoting the “public option” and — again — lauded its benefits as

a government-offered health care plan that, with lower administrative costs, no profit expectations, and the bargaining power of the federal government, would compete aggressively alongside private plans.

Now, we’re already seen co-ops failing, one after the other, proving that non-profit status and a mission of serving the public aren’t enough to keep a provider in the black.

So what about the other two selling points?

I don’t really see how a “public option” would have lower administrative costs. True, that’s the selling point of a single-payer system — although much of the administrative cost would remain, such as processing claims, paying doctors, reviewing treatments, and general record-keeping, such expenses as marketing costs would be (largely) eliminated. But the “public option” would still have to market, even if it’s labelled differently, such as “public awareness campaigns.” And I’ve often thought that a lot of the claims processing cost could be reduced by allowing insurers and providers to work together on a common claims system via some kind of anti-trust exemption.

And “bargaining power”? Sure, that makes sense if you are buying a product in bulk, where the provider can actually provide its services/product for a lower cost because you’re buying in volume, in a Sam’s Club fashion. But in the case of healthcare, we’re talking about doctors in private practice, doctors affiliated with hospitals, and hospitals and hospital chains which, however much they are growing, are still not the equivalent of your employer or mine having a nationwide contract with a single vendor.

So what we’re really talking about is the government fixing prices.

Now, as it happens, just this past Friday, Megan McArdle had an article about this subject. She wrote,

Now, the public option could, with legal support, perhaps force providers to take those rates [Medicare plus 5 or 10%] — say “If you don’t accept public option patients, you can’t see Medicare patients either.” The problem is that if you try that, all the groups who would be affected: hospitals, doctors, auxiliary service providers, health-care workers’ unions and so forth — will descend upon their legislators with the white-hot fury of a thousand suns. These folks are well organized. They are extremely mediagenic. No lawmaker wants to be seen cutting the salaries of nurses in the neonatal intensive care unit.

That’s been the answer to the single-payer supporters, too: “the only way to get single payer to work is to force cost cuts on medical providers, and if we can’t even implement the ‘Doc Fix’ we have no hope of getting more comprehensive cuts.”

And as it also happens, I read a book that thought it had an answer to this issue. It’s called 5 Easy Theses, by James M. Stone, and, while I didn’t find enough useful in it to merit an entire “from the library” write-up, it has a couple interesting observations, e.g.,

[a weakness in the case for single-payer is] when an opponent asks why Medicare and Medicaid don’t already provide all the benefits attirbuted to a single-payer system. . . . When the private portion of the market sets the standards for frequency of testing, drug usage and cost, and compensation for every variety of medical services, it is extremely hard for any accompanying single-payer programs to be more parsimonious. (p. 168 – 169)

Is he right? Would doctors lose all their leverage in a single-payer world? It certainly is the case that doctors are paid less in those single-payer or single-payer-ish countries, as we saw paying doctors’ bills in Germany. But that’s a lot of savings to be squeezed.

Consider, after all, that, even disregarding the ObamaCare subsidies, that is, in 2010, before those subsidies were implemented, the public healthcare spending (Medicaid, Medicare, and other spending) alone exceeded, in PPP-adjusted dollars, that of nearly every OECD country (Norway, the Netherlands, and Luxembourg were higher), and, for the money, every other country provide (nearly) universal healthcare. (See here for a chart.)

So what’s the answer? Me, I never understood why staff-model HMOs (see the last part of this post) didn’t get us where we need to be.

image: https://commons.wikimedia.org/wiki/File%3ADoctor_examines_patient_(1).jpg; By Unknown photographer [Public domain], via Wikimedia Commons

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