Is Single Payer The Answer? (updated)

Most people think of Single Payer as a way to accomplish: a) dependable insurance, b) universal coverage, and c) savings of costs that private insurance companies incur without contributing to health care.

But of all health care issues, the most decisive for us all in the long run is cost.

Universal care can't be sustained if costs continue to rise. Rising costs help tip otherwise viable businesses into failure (GM's biggest handicap pre-bankruptcy), or force shifting the costs onto workers. We are seeing medical costs bankrupt more and more families, as the primary cause -- and most had insurance.

If costs are controlled, the general economy will function better. To thrive, the U.S. economy must compete successfully in world markets. This requires business expenses here in the U.S. are not far higher than our competitors pay, and that workers and technology remain top rate. But the ability of the nation to support education and research depends on available resources. If health care takes more and more of available resources, the national outlook dims.

The cost issue is central.

So the way Single Payer might reduce costs is the most convincing and important aspect of Single Payer (for thoughts on how to make a Public Option less expensive see here). I mean that without cost benefits, Single Payer would not have 2/3rds of its popular support.

The total costs of private health insurance administration, marketing, and profits together add up to roughly 12% of all health care spending in the U.S. (Update: Wendell Potter says here that private insurers are paying out in claims on average at roughly about 80% of revenues, implying the average sum of administration, marketing and profits run closer to 20%.)

That's significant. But even going to Single Payer and saving that 12% (or up to 20%) would not be enough to solve our problems here.

This is because health costs have spiraled much higher than only 12% or 20% upwards over the last decade, becoming far out of line with GDP. We don't get more for all this extra spending. (This NPR piece points out why high cost areas are high cost.)

The challenge is that a one-time reduction in overhead costs would not by itself stop the long-term upward spiral of health care costs due to natural and technological factors described here.

But...without clearly understanding or vocalizing it, many supporters of Single Payer instinctively sense a further outcome.

We correctly sense something more than only saving administrative costs private insurers incur in their work to limit payouts and pad their profits. (Here is a new NYTimes real-life story showing a common situation -- tricky policies).

One unspoken aspect of Single Payer is that if a Single Payer sets the rates, they have near-monopoly power, and most providers would just have to accept the rates they set.

So when the majority (or future majority) of Americans ask for Single Payer, they are really asking that health care costs be controlled, regulated. Set by government.

Then the sharp upward spiral in costs from unregulated fee-for-service health care would become instead a struggle between private providers and the Single Payer over whether to reimburse for ever-expanding treatments.

To which the Single Payer would reasonably respond by specifying more precise treatment paths, and requiring those paths be followed, to control costs. (This is "comparative" or "evidence-based" care, or one way to make a Public Option cost effective.) Or...without such fundamental change it would only a matter of years until we arrive into a new cost crisis (see 2nd comment below) -- leading to more profound reform: into pay-for-outcome (performance) or closely-similar incentive reforms such as those at the Mayo clinic.

All of this would work -- this highly regulated, controlled health care.

It's a feasible outcome.

...

This may be needed, if the key, proposed reform of Pay-for-Performance cannot be enacted.

Pay-for-Performance would naturally control rising costs, in the ways described in the post just before this one.

But if the current efforts for Pay-for-Performance are shot down by the industry lobbies, or weakened into ineffectiveness, so that costs continue to spiral upward, then it is reasonable to expect and anticipate the arrival of Single Payer.

Single Payer is the logical next step -- this is what more and more of the body politic will decide.

Most people will say "if you can't reform 'em, then you have to beat 'em."

This will happen as costs continue to spiral upwards without real reform.

...

Which is best -- Pay-for-Performance or Single Payer?

While Single Payer controls costs, it doesn't by itself encourage rapid innovation.

Pay for Performance encourages innovation, because the reward is proportional to the effectiveness of the treatment, and innovation could increase efficiency and thus the profitability of treatment. Finally, this innovation will also reduce public costs progressively over time for most health conditions since competition in providing new treatments leads to lower costs. First, if current treatments are effective (such as certain chemotherapies, antivirals, artificial joints, etc.), then a new treatment/technology must hit below the current price point to begin with to be of interest to providers under Pay-for-Performance; second, new treatments tend to become more cost-efficient with time, eventually lowering the insurance costs.

But there is nothing intrinsic in Single Payer that would prevent combining these two ideas.

A Single Payer that would only Pay for Performance would be a fearsomely effective health care cost improvement machine.

Either one of these two reforms would be very potent by itself.