Universal Health Insurance: What's Wrong with Single-Payer Health Care?

Most people seem to agree that we need some kind of "reform" to our health care system, and that furthermore "universal health insurance" in some form is a good thing. The larger debate is over how best to achieve this goal. One popular idea among the general public is a "single-payer" health insurance plan. This is however quite unpopular politically. Is this because of the heavy lobbying by the insurance, pharmaceutical, and health provider industries because they fear their profits will be hurt or even eliminated? Regardless of the source of the criticism, we need to consider the perceived problems with this idea, so I ask: What's wrong with single-payer anyway?

One criticism I hear a lot is that a single-payer plan would be socialism-a "government takeover of the health care industry." Well that seems to be quite a bit of an exaggeration, since single-payer only means the government pays the health care providers, not that the government provides the actual services. In a true socialized medicine system-- like they actually have in Great Britain-the doctors and other health providers are actually government employees and the hospitals are owned by the government. A single-payer system only replaces the insurance companies with a government run system for paying the providers, not the providers themselves. If even that seems too socialistic for you, then consider this: we already do that now for citizens age 65 and older: it's called Medicare. And it seems to work pretty well (although it is underfunded and thus running out of money, but that is another story). So, universal single-payer health care can be thought of as "Medicare for all." So what's wrong with that?

Well, one argument goes that we need the free-market competition of private business to keep costs down. Well let's see: the business we're talking about replacing here is the health insurance business. As private companies, their goal is to make profits for their shareholders. They do this by collecting money from their customers (both individuals and businesses who pay for their employees' insurance) and then paying some of those customer's health care costs. The profit they make is the difference between what they collect and what they pay out. So they try very hard to keep payouts down and premiums up. The result is complicated policies that are difficult for consumers to evaluate and compare, and surprises when the consumers need care and discover that the insurance doesn't pay what they expected.

Case in point: have you ever read your health insurance policy to find out what it covers? They usually say they will pay (after meeting your annual deductible) some percentage of a mysterious number called the "UCR" cost. UCR stands for "Usual, customary, and reasonable." Sounds fair does it? But where are the actual values - not in your policy. The insurance company decides what they are, and they can change them whenever they like. Most consumers only find out what the UCR is for a given procedure when they have that procedure and find out only then what their insurance would pay. So even when the policy says it covers "100% of UCR" for something, you may still be out of pocket a lot of money. This is an example of the obfuscation that allows them to charge higher premiums and of one way they can keep down the amount they pay out.

A more serious example of how insurance companies maximize their profits at the expense of their customers is how the actively try to find reasons to avoid paying a given claim at all, or even to retroactively cancel the policies of customers who end up needing expensive care. Such insidious practices are a direct result of the profit motive. In fact, insurance companies incentivize their staff to find ways to avoid paying claims.

So where is the benefit of private companies engaged in free market competition? My conclusion is that it does not apply to the health care business. Some would say that the solution to these problems is to give the consumer more control and choices, and that an informed consumer will foster competition and improvement in insurance company products and practices. One attempt to do this is use of high-deductible policies tied to "health care savings accounts." The idea is that consumers will have a motive to minimize their health care cost because they will be able to keep more of their savings. Well this works quite well in other markets, but I contend it does not apply to health care. Consider a typical scenario. A patient has some symptoms that could be due to a minor ailment that will go away without treatment, but could also be due to a serious illness for which early treatment is critical or premature death is likely. The test required to diagnose whether he has the more serious condition is fairly expensive, but there is only a one in ten chance of having this illness. I for one do not want to have to decide whether to pay for a test that might help diagnose a condition early enough to save my life, or have enough savings to take a nice vacation that year. I want my doctor to make that decision, uninfluenced by financial motivations. I did not go to medical school - why should the burden of such decisions be on me? It is one thing for me to make an "informed decision" in choosing what stereo or car to purchase, but quite a different matter when it comes to my life. So let's keep free market competition in those industries where my life is not at stake, but let's have sensible, non-profit-motivated policies governing health care payments. This means a non-profit system, such as Medicare is.

Another advantage of eliminating the insurance companies is that all those profits they now make can instead go to reducing the cost to the taxpayer. And speaking of the cost-- that is another criticism of a government-funded single-payer system: that it will increase our taxes by huge amounts. That need not be the case, since elimination of insurance companies and relieving businesses of the burden of paying for employee health care should in theory go a long ways toward paying these costs. It would only be a matter of shifting the costs, not adding new costs. And consider this: the total amount of money spent on health care in the US is much greater (both on a per-person basis and as a percent of GDP) than other countries which have single-payer or even socialized medical systems, and yet those countries have much better health than we do. This tells me that if we shift the costs we are now paying to a single-payer system, with its inherent improvement in efficiency, we should be able to achieve better health outcomes at a lower cost! Why wouldn't we want that?

One reason many fear a single-payer government run system is that they hear bad things about health care in countries that have it. This seems paradoxical, when the statistics show that those countries have better overall health than we do. The "bad" stories we hear often involve long waiting times for certain procedures or other examples of what is called "rationing" of health care. But remember, those other countries spend a much lower portion of their national income on health care than we do. So I think that if we just shift our current health care expenditures into a single-payer system, we would not have this rationing to the extent these other countries do. Perhaps that is what Barack Obama means by a "uniquely American solution."