Posturing over US health care system offers little practical purpose

The University of Miami-Jackson Memorial Medical Center in Miami. There is a basic problem moving Americans to single payer system. Carlos Barria/Reuters

The conventional wisdom these days is that the major Democratic presidential candidates for 2020 will end up endorsing some version of single-payer health care. The senator Bernie Sanders is expected to introduce his Medicare for All bill this week, with a considerable number of co-sponsors.

This political posturing, however, is far from a practical proposal.

There is an obvious problem with moving Americans to a single-payer system: most people with private health insurance are pretty happy with their current arrangements. They are not looking to trade in that coverage for a new government programme of uncertain quality, along with unknown higher taxes. When the US president Barack Obama was selling the Affordable Care Act, he promised Americans that they could keep their health insurance if they wanted to. When this did not turn out to be true for everyone, there was a significant backlash.

Progressive analysts thus have turned to how a single-payer system might come about more gradually. But longer transition times do not solve the core problem.

Let us say the federal government sets up a “public option”, as it sometimes is called. Individuals would have the opportunity to buy into government insurance at some price. The new government programme would be competing with private insurance, but just how good will the new benefits be? If you are healthy and have other coverage, you probably will not switch - if you did, that would be a sign that the new government programme was of very high quality and probably too expensive for the nation as a whole. Boosting the health care of the best-covered Americans is not the policy priority right now.

Instead, the public option might be set up to attract those who do not already have good coverage. But those are the same people who do not have the money to pay a fair market price for health insurance now. In essence, the programme would come to resemble a Medicaid expansion, whether or not it would fall under the formal rubric of Medicaid.

That is a plausible option for a marginal change; many states, of course, have already done a Medicaid expansion. The question remains whether such a programme can evolve into single-payer health insurance. The answer is probably not. To become a single-payer system, as coverage climbs up the income ladder, the new reform would have to lure Americans out of private health insurance. It either has to make the private alternative worse, say by penalties like a stiff “Cadillac tax” on policies that exceed a certain level, or it has to make the public alternative especially appealing. We are then back to the change either being unpopular or spending too much money on people who already have decent coverage.

You can make a good case for continuing the forthcoming Cadillac tax on private insurance, as is embedded in Obamacare. But the point of that change was to get people to move to less health insurance coverage and to use fewer healthcare resources, not to bounce them into a system with yet lower marginal cost for a doctor’s visit or extra medical procedures.

It is worth thinking through why some single-payer systems, such as those on the European continent or in Hong Kong and Taiwan, seem to work. Typically those systems were instituted while healthcare costs were still fairly low, and then kept down by government fiat. The US is not in that position, and it is hard to see doctors and hospitals - powerful lobbies - going along with significant cuts to their payments.

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Single-payer systems can work for yet another reason: if a citizenry consumes much less health care, and it does not damage patient outcomes so much. Patient queuing is not a disaster if people who really need treatment get priority, as is the case in the better-run single-payer systems. In other words, single payer has to be sold as a way of getting us all to cut back on the consumption of medical resources. Unfortunately, the Medicare for All movement is more about easing everyone’s access and boosting the usage of healthcare resources, a typically American approach.

When it comes to access, the major problem in the US is distributional: some of the poor have insufficient access and, arguably, some of the well-off receive health care at too low a user price. Given Americans’ love for consumption, it is probably too late to fix the latter problem. There can be, to some extent, improvement for lower-income access by Medicaid expansions.

The political war along the way to a full single-payer system is unlikely to be rewarding. According to one poll, single payer is supported by only 43 per cent of Americans, hardly enough to overcome political gridlock.

Progress will come in bits and pieces. The notion of a universal cure-all is a myth, whether it comes to improving your health or improving America’s healthcare system.

Tyler Cowen is a professor of economics at George Mason University in Virginia and writes for the blog Marginal Revolution and Bloomberg. His books include The Complacent Class: The Self-Defeating Quest for the American Dream.