Jonathan Cohn pretends to oppose single payer
TPMCafe Book Club
April 12, 2007
And now, I will pretend to oppose single-payer…
By Jonathan Cohn
Matthew’s post (Matthew Holt) seems to be the most controversial, so let jump right in there. He suggests that, contrary to what most of us have been saying, “I am not sure that there’s actually a real difference between a pure single-payer system, and market-based competition within social insurance … once everybody is in some type of social insurance pool with some level of progressive taxation and cross subsidy, then how we actually organize the provision and the reimbursement of care does not much matter.”
I guess I am not so sure about what Matthew says…
As Diane (Archer) has pointed out, “Private health insurers will always be in the business of avoiding risk since their ultimate goal will always be to turn a profit; and, the easiest way for them to make money is to steer clear of providing coverage to people who are sick and need costly services.”
Matt, of course, knows this. (He’s one of the people who taught me how they do it!) And I think he also knows that trying to regulate such practices out of existence is much easier said than done. That’s why (well, part of why) single-payer to me seems like the better option.
But I also think it’s important to be clear-eyed about single-payer. And since we’ve all been talking about the virtues of single-payer, let’s look at some of the more valid objections — even though they are not typically the ones that dominate the debate.
One is about setting prices. In a single-payer system, the government plays a much more direct role in setting prices. This raises fairness issues. If doctors and hospitals think a particular insurer isn’t paying enough, they can demand higher reimbursements and, failing that, simply refuse to see that insurer’s patients. But if they think the government isn’t paying enough, they really have no such option.
There are also efficiency questions: Will the government allocate its dollars — whether through price-setting or some sort of global budgeting — in a way that maximizes the public interest? You don’t have to be a card-carrying libertarian to believe that, as a general rule, the market probably sets prices better than the government will.
Then again, the general rules of economics frequently don’t apply to health care. That’s the whole premise of universal health care. Maggie (Mahar) — whose own book on health care, by the way, has also received rave reviews — makes this point well in her post, noting that the current system fosters all sorts of excessive use of medical care.
Her point, if I understand her, is that government would ultimately do a better job of allocating resources. And I mostly agree, in part because of the evidence abroad, although I’d be dishonest if I said I was 100 percent sure about this.
Another legitimate concern, it seems to me, is choice. I’ve said many times that a single-payer system would promote the kinds of choices American value most: Choice of doctors, hospitals, and treatment. And I stand by that. But a single-payer system, depending on its design, can cut down on a different kind of choice: Choice of financial exposure.
If it’s really one-size fits all, then everybody bears the same level of risk. Yet some people like to take more risks than others. Is it fair to make them subsidize those who disagree?
This is, of course, the reason the right not only opposes universal health insurance, but favors high-deductible insurance that transfers more risk to individuals. Needless to say, I wouldn’t go nearly that far — because, once you do, you’ve transferred the financial burden of illness away from the healthy back onto the sick, which is the opposite of what insurance — or, at least, social insurance — should do. But I’m willing to concede that people ought to have some freedom to choose their levels of exposure.
Fortunately, there’s an easy way to solve this without simply going for high deductibles everywhere. You build a system looks like Medicare or the French system: You have government provide a floor of coverage — preferably a pretty high floor — then let people purchase private supplemental insurance to fill in the cost-sharing gaps as they prefer. (You’d also have government-provided supplemental insurance for those too poor to buy it.)
That wouldn’t eliminate the problem of private insurance gaming the system, but it would mitigate it substantially. At the same time, it would leave some more room for individual preferences about risk.
(Note: I’m very curious to hear about Jason Furman’s new health care proposal — which he unveiled a few days ago but which I haven’t had a chance to examine. Ezra (Klein) will apparently be writing about for the Prospect, soon, so maybe we’ll find out then.)
The other legitimate concern to me is disruption. Health care is one-sixth of our economy. That is a lot of dollars and a lot of jobs to move around — and a lot of insurance arrangements to change. No matter how bad the system seems now, such a massive transformation is bound to cause some difficulty.
Remember, you have an entire infrastructure dedicated to dealing with our private insurance system — from the armies of benefit consultants that companies employ to the minions of billing specialists that work for doctors and hospitals.
This infrastructure is a huge source of waste. But it’s also a source of paychecks. What happens to these people? And how quickly can we build a new one in its place? Again, I don’t think these concerns undermine the case for single-payer. But I do think we should take them seriously and come up with ways of addressing them.
I was going to say more about politics — but I think this post has gone on long enough. So I’ll be back soon with where I differ (somewhat) with single-payer advocates. (Hint: I agree with a lot of what Mark (Schmitt) and Jacob (Hacker) have said.)
http://bookclub.tpmcafe.com/blog/bookclub/2007/apr/12/and_now_i_will_pretend_to_oppose_single_payer
And…
No pretending… I support single payer
By Don McCanne
Before addressing Jonathan’s points, I will not pretend that those reading these posts do not understand the single payer model, as advanced by Physicians for a National Health Program. Simply, single payer national health insurance would automatically include absolutely everyone, would cover all reasonable, beneficial health care services and products, would be financed through an equitably-funded universal risk pool, and would introduce economic mechanisms to slow the rate of cost escalation and improve quality by reducing administrative waste and by realigning incentives to reinforce the primary care infrastructure and reduce detrimental high-tech excesses.
Those participating in this dialogue generally agree that reform should be targeted to achieve most of these goals (universal, comprehensive, equitable funding, efficiency, higher quality, etc.), but there is disagreement on the model of social insurance that we should try to achieve, and on the political feasibility of each approach. We at PNHP believe that reform should be based on optimal policies (those in the single payer model), and that political feasibility should be established by fully informing politicians and the public about the implications of all policy options (admittedly, a monumental task, but not one from which we should shirk merely because it requires a major, concerted effort).
Now my comments will be limited to Jon’s points (policies) with which I differ.
That a single payer system would “set prices” is a problem? The most effective cost containment measure of the managed care revolution was the setting of prices by the private health plans, and we are still living with that. No matter what system of social insurance we end up with, we will have some form of price setting. Do private plans really do that better? In their book, “Medicare Prospective Payment and the Shaping of U.S. Health Care,” Rick Mayes and Robert Berenson make the point that “contrary to conventional wisdom and whole libraries of books and articles that point to managed care as the biggest ‘change agent’ in American medicine in the last twenty years - the private sector neither initiated this battle nor provided the critical innovation that transformed health care in the United States. Instead, it was Medicare’s transition to a prospective payment system (PPS) that triggered and repeatedly intensified the economic restructuring of the U.S. health care system.” And, “Medicare payment reforms have empowered the federal government, making it similar to health care systems in other Western countries.”
And efficiency? Jon asks if the government would allocate its dollars to maximize the public interest. As a financing mechanism, Medicare is certainly much more efficient administratively than private plans. And as far as allocating dollars within the health care system, Mayes and Berensen demonstrate that Medicare is far more efficient in determining where those dollars should be spent. Medicare financing requires continual refinement (e.g., SGR), but that is further evidence that the government can be efficient in health care financing.
And choice? Yes, we agree that single payer would provide greater choice of health care providers than the health plans with their restrictive provider lists. But choice of financial exposure? Jon concedes that allowing the healthy to opt out shifts the financial burden back onto the sick. But that is what you are doing when you allow healthy individuals to choose their level of financial exposure. You are allowing them to opt out of paying their equitable share into the social insurance risk pool.
And establish a floor of coverage? What floor? Basement? The floor just short of the concierge level? Specifically, what level of coverage would a government floor provide? Would it cover an elective hip replacement in an individual who is disabled due to advanced osteoarthritis? Or would it simply cover a walker or wheelchair? Once you decide that elective services of this nature should be covered, you really are supporting a floor that includes all reasonable beneficial services. It is true that a taxpayer supported system really shouldn’t fund vanity cosmetic surgeries or penthouse hospital suites, nor should it fund a two million dollar cancer chemotherapy program that provides an additional three weeks of poor quality life.
And private insurers gaming the system? As long as they control the risk pools, they will game them. A universal risk pool would be the most efficient, though other nations use social insurance mechanisms such as sickness funds or post-experience fund transfers based on favorable or adverse selection. Insurers are now very busy shifting risk to patients, providers and purchasers, trying to limit their function to being primarily vendors of very expensive administrative services. The record shows that they’re profoundly inefficient at that as well.
Though we all share concerns about those whose jobs would disappear, that can hardly be used as a reason to perpetuate this profoundly wasteful, private bureaucracy that actually has a detrimental impact on our health care delivery system. The single payer model includes transitional costs for job placement, retraining and other measures to ease the transition. “Transitional” is vastly superior to “perpetual” when it comes to the spending of taxpayer funds. And the disruption would be limited primarily to the insurance system as the improvements in the health care delivery system would be evolutionary rather than revolutionary.
For now I’ll defer comments on political feasibility, perhaps responding later to Jacob Hacker.
This sounds like we might have significant differences, but actually we agree on almost everything - certainly on the general principle of health care justice. And the goals of Matthew Holt are so close to ours that I won’t have to send my son to beat him up, even if he doesn’t get some of the details right. In fact, maybe Matthew will join my son and me when we attend Jonathan’s book event at Cody’s in Berkeley next Thursday. We won’t beat up on him, but we might have a comment or two.
(To explain the insider joking, our son, Steven, has offices near Matthew Holt’s in San Francisco. Steven is a member of the business community who happens to be very supportive of health care justice. He doesn’t beat up anyone, but he is co-founder of Riverbed, Inc. http://ir.riverbed.com/phoenix.zhtml?c=198235&p=irol-govBio&ID=154072)
http://bookclub.tpmcafe.com/blog/bookclub/2007/apr/12/no_pretending_i_support_single_payer
Comment:
By Don McCanne, MD
This is a part of the continuing dialogue this week on TPMCafe Book Club, led by Jonathan Cohn, timed with the release of his new book, “Sick: The Untold Story of America’s Health Care Crisis—and the People Who Pay the Price.”
To follow or participate in the TPMCafe dialogue:
http://bookclub.tpmcafe.com/ (Click on TPM Book Club)
For “Sick: The Untold Story of America’s Health Care Crisis—and the People Who Pay the Price,” by Jonathan Cohn:
http://www.sickthebook.com/