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Is the U.S. too corrupt for single-payer health care?

You often hear people say that the reason the United States doesn't have a single-payer health-care system is that special interests have a hammerlock on Congress. But in the course of reporting out my article on what liberals miss about single payer, Princeton's Uwe Reinhardt, a single-payer supporter, made an interesting variant of this argument: The reason the United States shouldn't have a single-payer system, he said, is that it's too captured by special interests to manage one well.

"I have not advocated the single payer model here," he said, "because our government is too corrupt. Medicare is a large insurance company whose board of directors (Ways and Means and Senate Finance) accept payments from vendors to the company. In the private market, that would get you into trouble."

Corruption tape. (Andrew Harrer/Bloomber)

The key to a single-payer system is that the government sets prices. Usually, it empowers boards of independent experts who set those prices low. Reinhardt's argument is that in the United States, health industry interests have so much sway over Congress that the prices would end up being set by health-care interests.

"When you go to Taiwan or Canada," Reinhardt said, "the kind of lobbying we have here is illegal there. You can’t pay money to influence the party the same way. Therefore the bureaucrats who run these systems are pretty much insulated from these pressures. Here you have basically a board of directors in the House Ways and Means Committee that gets money from lobbyists both at the regulatory writing stage and during normal operations. And they can call an administrator and demand they stop something from happening."

The question in any argument like this is the counterfactual. Outside of Medicare, Medicaid and some other government-run health systems, prices are set by health-care interests now. But they're much lower in Medicare and Medicaid than they are for private insurers. So it's simultaneously possible for the U.S. government to be much worse at setting prices than, say, France's government, but still be able to negotiate much lower prices than private insurers can manage.

Still, Reinhardt's argument is a reminder that the simple fact that a policy worked in another country does not mean it will work in this country. His point about the importance of independence is particularly crucial.

One of the most interesting pricing experiments in the United States is all-payer rate setting, where public and private insurers band together to negotiate with providers. There was a time when all-payer rate setting was common. Now it's only used in Maryland (see Sarah Kliff's report on Maryland's unique system). Why? Because Maryland based its plan around a genuinely independent board, argues health-care expert Paul Ginsburg:

In the 1970s, a number of northeastern and mid-Atlantic states set hospital rates for private payers and Medicaid, and some received waivers to include Medicare in their systems. When the shift away from regulation took hold in the 1980s and Medicare inpatient prospective payment was thought by many to be adequate to control hospital costs, each of the systems was abandoned except for Maryland, which continues to this day.

I believe that Maryland’s staying power is a direct result of its structure as an independent regulatory agency. The Maryland Health Services Cost Review Commission resembles what some are discussing today as the “Federal Reserve Board” model of governance for health care.  The governor appoints volunteer commissioners to long terms, and commission decisions are not reviewable by the legislature or executive branches.

Obamacare sets up a similar independent board to drive pricing in Medicare. As of a few months ago, that board looked doomed. Republicans were going to filibuster every possible appointee. But now that the filibuster has been eliminated for executive-branch nominations, it seems much likelier that the Obama administration will be able to staff the Independent Payment Advisory Board -- and that the board will actually be close to independent. How that board operates over the next decade or so will be a good test of Reinhardt's theory.



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Lydia DePillis · January 16, 2014

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