Yesterday, New York Times health care reporter Margot Sanger-Katz, whose work I very much respect, entered the debate on the costs of Sanders’ single payer plan in a piece I find problematic, headlined “A Single-Payer Plan From Bernie Sanders Would Probably Still Be Expensive.” I should first concede, however, the central argument of her article: it is true that a US single payer system would still be relatively expensive as compared to other single payer systems. We would, that is to say, continue to spend more than the United Kingdom or Canada if we transitioned to single payer. At the same time, there would nonetheless be enormous savings from such a transition, and these savings would allow us to affordably achieve real universal health care. This, in my opinion, would still be an excellent deal.
The background to this debate are two analyses of the Sanders’ single payer proposal—the first by economist Kenneth Thorpe and the second by the Urban Institute—both of which claimed that the actual costs of Sanders’ single payer plan would be significantly higher than what his campaign has predicted. The assumptions of each have been convincingly contested by colleagues David Himmelstein and Steffie Woolhandler: among other points, they argue that both analyses underestimate administrative savings and overestimate the cost of increased health care use resulting from a coverage expansion.
Anyway, without delving into the details, there is something rather puzzling when looking at the analyses of Thorpe and the Urban Institute from a broader perspective. How is it that single payer would massively increase costs in the United States, as these reports contend, even while countries with single payer-type systems—like Canada and the United Kingdom—have much, much lower health care costs than we do?
To answer, a quick side note: our total health spending is, by definition, equal to the quantity of health services delivered multiplied by their price. The US does not consistently use more health services than other high-income nations. Therefore, the fact that we have higher health care costs is mostly explained by higher unit prices for services, as Sanger-Katz and others note. Now us single payer advocates cite lower administrative costs (and lower drug spending) as the major sources of savings under US single payer (effectively lowering the “price” side of the equation). But Sanger-Katz argues that this would be insufficient: prices would have to be slashed across the board, and some services would have to be cut:
Making the American health care system significantly cheaper would mean more than just cutting the insurance companies out of the game and reducing the high administrative costs of the American system. It would also require paying doctors and nurses substantially lower salaries, using fewer new and high-tech treatments, and probably eliminating some of the perks of American hospital stays, like private patient rooms.
Such a transition would, she notes, have some scary sounding downstream consequences: “…making big cuts all at once to doctors and hospitals could cause substantial disruptions in care. Some hospitals would go out of business. Some doctors would default on their mortgages and student loans.” My understanding is that we aren’t really allowed to effectively default on student loans, but admittedly this all sounds rather dicey.
But this frightful health care meltdown isn’t even in the cards. She is correct in a narrow sense: it’s true that immediately lowering US health care expenditures to, say, that of the United Kingdom — i.e. from 16.4% to 8.5% of gross domestic product — would require major, disruptive reductions in spending across the board. However, nobody is contending that we do that. The central claim for US single payer is more modest. Use the enormous administrative savings generated under single payer financing in combination with pharmaceutical savings to cover everybody with comprehensive benefits and no cost-sharing. Overall national health spending would, it is true, remain roughly the same (though we could better control cost growth moving forward). But this scenario of widespread hospital bankruptcies and the end of private (or semiprivate?) hospital rooms is a fantasy: nobody wants it to happen, and it’s not happening.
It’s worth noting that there is also a jarringly inconsistent aspect to single-payer critiques that warn of the threat to health care workers’ income. As Woolhandler and Himmelstein note in an article in the Huffington Post, the Urban Institute simultaneously asserted that the coverage expansion under single payer would lead to an enormous increase in spending on physician services — by $1.6 trillion over a decade!—while simultaneously asserting that physician salaries would be “squeezed.” Whatever one thinks of how much physicians should be paid, it’s hard how these would both happen at the same time.
Transitioning to single payer will not mean reducing our health care expenses to British levels: that is probably not possible, and is certainly not desirable. But that’s not to say that the savings from adopting a single payer financing system wouldn’t be substantial—we’re talking hundreds of billions annually on administrative savings alone, plus more by reducing drug prices to European levels. With that money, we’ll build a much more decent health care system for all to use without having to worry about the cost of being sick, of being pregnant, or simply of obtaining preventive care. No wonder a majority of the country wants it.
What makes any insurance work is that you are spreading the risk over a large amount of people, which greatly reduces the risk to any individual.
That is why when buying your insurance through a large employer (group) it is so much cheaper. The larger the group, the more efficiently it works.
What is the largest group in the US?….
Thanks for reading and dropping a note. Yes — that’s a good point also!
Having been covered by a number of foreign health care plans (including the UK and Canada), I’m always struck by the unreality of the single payer debate here in the USA. Unfortunately, it isn’t possible to send all the critics of single payer to live in Canada or the UK for a year. But I’m sure that more than any argument, it would change a lot of minds, if for no other reason (and there are plenty more) than the feeling of dread it removes from their lives (just ask anybody who has run a company with operations in Canada or the UK and the US; fear of losing health insurance coverage permeates organizations in the US like nowhere else, which undoubtedly has a negative productivity impact).
I also find it very curious that nobody in this debate seems to want to explore the middle ground, where perhaps a winning solution may lie. For example, we could do far worse than copy the Australian system, which includes competing suppliers, price signals to consumers, and, like the UK, basic universal coverage and privately provided top-up options.
In any case, thank you for adding more logic to this debate.
It’s a good point you make about the psychological benefits of a public universal system — never having to worry about losing access to health care. I think it’s a point that doesn’t get enough attention in health care reform debates, where discussion of efficiency, savings, etc. is often center stage.
Regarding more “mixed” systems, though they perform better than the US system, have issues themselves. On Australia, I’d check out this blog post by Don McCanne at PNHP (http://pnhp.org/blog/2015/08/06/what-single-payer-advocates-can-learn-from-australia/) and I touch on the problem of the Dutch system a bit in this article (https://www.jacobinmag.com/2016/02/gaffney-single-payer-sanders-healthcare-obamacare-aca-clinton/).
Thanks for your comment!
And what is so wrong with negotiating the salaries and fees of physicians and other caregivers in order to reduce costs? Though it seems a delicate subject amongst we stakeholders employed in the healthcare system, should professionals be exempt from the same contract negotiations that hypothetically would occur with pharaceutical companies, hospitals, medical device manufacturers, etcetera?
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