Nobody likes health insurers, but the Democratic candidates’ fixation on them as an all-purpose bogeyman for any problem with health care, as demonstrated at this week’s debates, is a demonstration of why single payer in the U.S. wouldn’t work like its supporters see it working abroad and would like it to work here.
One of the key arguments for a single payer system is that it’s cheaper than a system with private payers. That has generally been true around the world, but it’s not a law of nature. Single payer is cheaper because governments use their leverage as the sole buyer of health care to push prices down. They pay doctors and hospitals less, because they can. The savings don’t come from the single-payer system itself; they come from the choice to pay less.
So, what will happen if the U.S. adopts a single payer system? Providers like doctors and hospitals will make the same arguments Senator Michael Bennet did at Thursday’s debate: That they depend on the higher rates from private insurers to offset the lower rates they get from Medicare and Medicaid. If every patient’s insurer paid like Medicare, they’d close.
In a lot of cases, the hospitals aren’t bluffing: Hospitals need to charge patients more than in other countries to make their finances work, because they pay their doctors more than in other countries. Achieving costs like in countries that have single payer would require cramming through unit cost savings so our costs align with those countries. And that path runs straight through doctors and hospitals, which are a lot more profitable than insurers.
Senator Kamala Harris noted – correctly – that American emergency room costs are outrageous, leading patients to hesitate before they seek care they might need. But while Harris framed this as a problem with health insurance, it’s hospital systems that set those high prices; insurers increasingly pass those costs through to patients, but if they didn’t, premiums would be even higher than they are now.
Former Vice President Biden, bizarrely, threatened to put health insurance executives in jail “for their misleading – their misleading advertising, what they’re doing on opioids – what they’re doing paying doctors to prescribe.” That’s not chiefly an insurance issue, either – it’s an issue with pharmaceutical companies.
And at Wednesday’s debate, Senator Elizabeth Warren objected that health insurers had made $23 billion in profits last year. $23 billion is a lot of money, but total U.S. health expenditure – public and private – was $3.5 trillion as of 2017, the most recent year with available data. Since we spend about twice what our peer countries in the OECD tend to spend for approximately the same outcomes, our excess health spending is about $1.8 trillion. Abolishing health insurer profits would take us roughly 1 percent of the way to getting in line with our peers on costs.
I understand the impulse not to name the key villain, the key element in our health care system that’s making it unaffordable, which is providers and the payments they require. People feel positively about doctors and hospitals; they do not feel positively about insurers. But when you try to implement a single payer system, you will have two options: Fight the providers, or pay them whatever they want, in which case the shift to single payer won’t save much money and will require enormous tax increases.
I would also note that, while cost saving through monopsony buying power is not an ironclad consequence of adopting single payer, it is also possible to achieve that end without adopting single payer at all. The government can control payment rates to providers without actually making all the payments if it regulates prices. That is, it is possible to take on the providers first, which would save money for the government, employers, and individuals – making money available for all sorts of things, including expansions of health coverage.
While this approach would also require fighting the powerful provider lobby, it would make available allies you would not have with you for a fight to expand government spending and implement single payer. You could tell employers their cost for employee health benefits would go down, without offsetting new taxes. You could tell individuals they’ll get to pay lower premiums. You could even tell insurers their costs will become more predictable.
This would still be a very difficult political fight – doctors and hospitals save lives, and so it’s understandable people feel good about them and trust them when they object to policies. But this approach wouldn’t involve fighting everyone at once.
