Before We Go 'Single Payer'
In the March 23 New York Review of Books, Paul Krugman makes the case for a health care system that is not only "single payer," meaning that the government handles the finances, but in some respects "single provider," meaning that the government supplies the service directly.
Krugman and his co-author, Robin Wells, correctly diagnose the problem with the Bush administration's pet health care solution of encouraging people (with tax breaks, naturally) to pay for routine care a la carte, instead of through insurance. Like Willie Sutton in reverse, this notion goes where the money isn't. Annual checkups and sore throats aren't what's bankrupting us: It's the gargantuan cost of treating people who are seriously ill. People who can get insurance against that risk would be insane not to, and the government would be insane to encourage them not to.
Most lucky Americans with good insurance are doubly isolated from financial reality: They don't pay for their health care, and they don't even pay for most of their insurance -- their employer or the government pays. Of course, one perversity of the current system is that you can lose your insurance either by losing your job, if you've got one, or by taking a job (and losing Medicaid), if you don't.
Krugman and Wells are persuasive -- it's not a hard sell -- about the nightmarish complexity and administrative costs of the current fragmented system. But they don't do much more than simply assert that a single, government-run insurance program would be more efficient. Even the most competitive industry can seem wasteful and inefficient when described on paper. Dozens of computer companies making hundreds of different, incompatible models, millions spent on advertising: Wouldn't a single, government-run computer agency producing a few standard models be more efficient? No, it wouldn't.
Krugman and Wells duck the issue of rationing -- saving money by simply not providing effective treatments that cost too much. They say, let's try single-payer first. So I say: Let's try some more modest reforms before plunging into single-payer.
Krugman and Wells note repeatedly that 20 percent of the population is responsible for 80 percent of health care costs. But that doesn't explain why health insurance should be different from other kinds. The small fraction of people involved in auto accidents in any year is responsible for almost all of the cost of auto insurance. You insure against the risk of being in that group.
What's different about health insurance is the opposite: Much of it isn't insurance at all but a subsidy. The value of the subsidy is the difference between what the individual pays and what the insurance would cost in the free market. If people were buying health care or insurance with their own money, they might or might not spend too much -- whatever "too much" is -- but no one else would need to care if they did.
A subsidy has to take from someone and give to someone else. Everybody can't subsidize everybody. Or, to put it another way, society cannot give the average citizen better health care than the average citizen would choose to buy on his or her own. And this is what people want. Krugman and Wells believe that the average citizen will be sated by whatever bonus comes out of single-payer efficiencies. In this day of $100,000-a-year pills, I doubt it.
Even though we don't do it, most Americans surely think we ought to guarantee decent health care to everyone. In fact, most would probably be uncomfortable saying it's okay to have anything less than equal health care for everybody. Should a poor child die because her family can't afford a medicine that an insured, middle-class parent can pick up at the drugstore? Current government programs don't protect poor people very well against the cost of becoming sick. They do much better at protecting sick people against the risk of becoming poor. People who can afford insurance ought to protect themselves against a catastrophic health expense. But subsidizing this insurance for them is not only unnecessary, it is futile and unfair. No one is better able to afford health care for people of average means or above than they are themselves.
Krugman and Wells say that private insurance is flawed by "adverse selection": Insurance companies will avoid riskier customers. Only a single payer (that is, an insurance monopoly) can insure everybody, and spread the risk. But anyone is insurable at some price -- a price that reflects the cost he or she is likely to impose on the insurer. Adverse selection is only a problem to the extent that insurance is not really insurance but rather a subsidy.
If you're not as hopeful as Krugman and Wells about being able to avoid rationing, you face this question: Should people be allowed to opt out of rationing if they can afford it? That is, if the system (private or single-payer) won't pay for the $100,000 pill, should you be able to pay for it yourself? Fear that this would not be allowed helped to kill the Clinton health care reform 13 years ago. But explicitly granting some people life and health while denying these things to others is hard, even though this disparity has existed throughout history and is probably unavoidable. In fact, a serious defect of single-payer is that it makes all sorts of unbearable trade-offs explicit government policy, rather than obscuring them in complexities.
There are the makings of a deal here. Better-off or better-insured people could be told, individually or as a group: Give up your health care subsidy and you may opt out of any rationing-type restrictions that the system imposes. And if a few smaller reforms like that don't work, maybe it will be time for single-payer.