Single-Payer and Group Coverage Empower Government, Not the People

May 13, 2009 · Posted By · Filed Under Covering the Uninsured 

I agree with Professor Chaufan that the “reforms” many states embraced to expand coverage with private insurance have failed, but disagree that it is because of a lack of government power. In fact, such reforms massively increase government power. For example, Massachusetts’ latest reform (passed by Governor Romney in 2006) made health insurance mandatory, and heavily subsidized those who could not afford it.

The results have been instructive: the reform has not cut costs by moving patients from hospitals’ emergency rooms to primary care. According to the Boston Globe and the New York Times, the cost of caring for ER patients has soared 17 percent over two years, despite efforts to direct patients with non-urgent problems to primary care doctors. Costs, including salaries for caregivers, tests such as X-rays and CT scans, and medicines jumped from $826 million to $973 million. Remarkably, the state hospital association claims that hospitals’ profit margins have dropped from 0.7% to 0.3% in the last year. Because of the recession, patients are deferring surgeries, and hospitals are delaying capital investments, despite “universal” health care.

Nevertheless, the Commonwealth asserts savings of $250 million in uncompensated care since reform. Typical of government’s inability to measure cost and benefit, the Commonwealth fails to appreciate that spending $820 million on a “universal” health care plan to save $250 million in uncompensated care is not a good trade-off. The spiraling costs of this taxpayer-crushing reform have caused Governor Patrick to summon the stakeholders to the table once again, to figure out how to get them under control.

However, the alternative, which Professor Chaufan calls “single payer” but is more accurately named “government monopoly” is even less palatable. In discussing “social insurance,” she puts forward (in her comments) Bismarck’s creation of the welfare state in the 1880’s as an example of a program designed to stabilize society from revolutionary forces. Well, I am not enough of a historian to describe the social effects of Bismarckian social insurance on the health of Germany, writ large, but I trust none of us would look to that state’s evolution (at least until 1945) as exemplary!

I also respectfully submit that the term “social insurance” muddles two things: income-transfers to the poor so that they can afford a secure living-standard, and actual insurance. Pooling risk refers to people sharing the risk of an unanticipated future event, not historical events. If we were to adopt “cross-subsidy,” as Professor Chaufan puts it, for car insurance, we would force insurers to sell the same insurance policy to people who have already crashed their cars as those who fear an accident in the future. Looking at it another way, the state subsidizes people who cannot afford rent or groceries, but it does not impose a government-monopoly housing or feeding plan! The insurance principle and the welfare principle are both important in health care, but we must treat them separately.

Mr. Wright’s insistence on expanding group coverage confuses me. The primary reason for fragmentation in American health insurance is the tax code’s bias towards group coverage: losing your job equals losing your health insurance. Although both the federal and state governments have rules designed to allow you to keep coverage, they are poorly designed. If the individual market were the market of first resort, people could buy health insurance that they kept for as long as they wanted, and if they switched insurers after falling ill, they would carry an actuarialy fair amount of money with them to the new insurer. Although difficult to communicate to the people at large, robust scholarly models of such policies have been designed by Professor John Cochrane of the University of Chicago and Professor Mark Pauly of the University of Pennsylvania, and colleagues.

However, there is something else going on between the advocates of universal group coverage and single-payer coverage that I do not understand. In 2007, the Service Employees International Union (SEIU) supported Governor Schwarzenegger’s universal group reform, only to see it killed by Senator Sheila Kuehl, who was supported by the California Nurses Association. Federally, we see the SEIU collaborating with the lobbyists for the health care “industry” to promote a similar reform to Congress and President Obama, while the single-payer extremists are shoved away from the table.

This is an inter-union conflict that is beyond my ken. As, indeed, are all reforms that give more power to the American government, instead of the American people.

Comments

3 Responses to “Single-Payer and Group Coverage Empower Government, Not the People”

  1. Claudia on May 13th, 2009 4:23 pm

    Dear John,

    I am a bit baffled that I did such a poor job in making my point. I never claimed, or at least did not intend to claim, that the many failed reforms were due to “lack of government power”.

    Reforms like Massachusetts, and many others, failed because they failed to apply the two key policy principles I lay out in my first posting. And they did because their goal was not to eliminate financial barriers to health care but to create an “illness market”, and “hope” that this market would meet people’s need.

    But the very talented people behind this and other plans should have known better.

    So in their enthusiasm, they failed, quite catastrophically, to control costs and make the system sustainable, by (among other things) failing to apply the critical policy principle of social insurance, risk pooling, that allows huge market leverage, reduction of administrative overhead, and cross-subsidizing.

    I cannot comment on the rest, but I wanted to clarify this confusion about my argument.

    I am sorry if I misled you or anybody else to think I asserted something that I did not.

  2. John R. Graham on May 20th, 2009 2:17 pm

    I appreciate the clarification, and I trust you appreciate that your essays drew my focus because you are getting all the positive comments and votes!

    Perhaps we are both using vocabulary that is awkward for the other to understand. Terms like “solidarity” and “co-operative compulsion”, sound to me like code-words for government power.

  3. Claudia on May 21st, 2009 1:26 am

    Dear John,

    I would set aside rhetorical issues, or leave them to people like Franz Lutz, whose area of expertise is to figure out which words carry and which words do not, and who does not seem to care a bit about arguments, reasons, or evidence — his latest piece on how to convince ordinary folks to go the way of Republicans in health care, a way which of course he does not bother explain, is the best incarnation of Machiavelli and Bernays (the “father” of spin), I have read in quite a while.

    For better or worse, articulating arguments based on good reasons and evidence is what I have been trained to, and enjoy, doing. And all the reasons and evidence, nationally and internationally, point to social insurance, not to what we do as a nation, a “public-private” insurance mix that basically “cleans up” the health care “marketplace” of “bad customers”, subsidizes the private sector, directly or indirectly, and gives private insurance great deals, while shortchanging patients, current or future.

    At any rate, I have yet to see a plausible counter argument to social insurance, unless, as I have said before, one is a shareholder or CEO of a major insurance company, has no children to worry about, and cares little about one’s friends, all of which are likely to suffer from our current system, sooner or later.

    Indeed, social health insurance would even be good to health insurance employees selling policies over the phone, who make very little money and often lack decent coverage, or any coverage, themselves, and who would have a lot to gain from a system guaranteeing health care, that would allow them to go after the job of their dreams, or at least more wholesome ones.

    Nor have I seen any proposals for reform that have any prospects of working, at least based on evidence. Of course one can “hope” that something radically new, never tested before, will work, but even then, one has to offer plausible arguments (and arguments for why one would reject what demonstrably works). And honestly, I have yet to see any.

    I have little doubt that our country will finally go towards single payer. That is what the majority of Americans, including physicians, want. And it is also the only health care financing reform that works, and the only one that will allow us to get a hold of, and improve, the health care delivery system, because it is the only one that works with the right incentives (again, only from the point of view of patients and doctors, not of private insurers).

    But of course, the question remains, how many people will have to suffer unnecessarily until we do. Winston Churchill was quite right, in my opinion, when he said that “Americans can always be counted on to do the right thing, but only after they’ve exhausted all other alternatives”.

    Regards,

    Claudia

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