36 Chambers – The Legendary Journeys: Execution to the max!

December 29, 2013

Single-Payer Is the Answer

Filed under: Curmudgeonliness — Kevin Feasel @ 6:00 pm

I’ve railed against, mocked, and abused Obamacare for quite some time now.  I consider this to be a worthwhile endeavor—we have to make it clear exactly who caused this failure and how bad the failure is.  Once we understand that, we can start to understand how to fix the long-term problems here.

Tom Blumer says that Obamacare’s failure is part of a strategy to increase the role of the federal government in health care.  He sees the massive ball of failure and thinks that this is according to a plan.  This trojan horse theory might be sound, but I don’t think things unfolded the way that the Obamacare architects wanted.  Let’s suppose for a minute that Obamacare was designed as a trojan horse.  The idea would be that Democrats cram the law through, knowing that there were long-term inconsistencies:  that there would be a couple good years (heavily-subsidized with few penalties) followed by things getting worse and worse.  Democrats could then claim that this is the result of recalcitrant pharmaceutical and insurance companies and Republican malfeasance and the only viable solution would be a complete government takeover—after all, look how great the first 2-3 years of Obamacare were, and that was only a partial government takeover!

Well, if this bill was supposed to be a trojan horse, the floorboards were rotten and all the Greeks tumbled out before the horse got to the gates of Troy.  Obamacare has been such a spectacular failure that it is turning people off from the notion of government-provided health care, and if Democrats try to expand, all Republicans have to do is point out how crappy Obamacare is and ask if we really want Obamacare 2:  Electric Boogaloo.

With that in mind, I want to put down a few ideas for where we should go from here.  My big idea is in the title:  single-payer.  But unlike the leftist single-payer plan, my version of single-payer is as follows:  if you want to receive medical services, you pay for medical services.  Right now, we have a convoluted system in which federal and state governments, as well as employers, tend to be the primary payers for health insurance.  The employer angle came about as a consequence of one of Franklin Roosevelt’s terrible policies:  wage ceilings during World War II.  Instead of paying higher wages to employees, companies offered additional benefits, including providing health insurance.  After World War II, the government codified this practice by making health insurance payment a pre-tax activity, meaning that individuals now had incentives to tie their health insurance to their current employer.  We know exactly why this is bad:  if you get laid off, you lose health insurance (or have to pay a huge amount to go on COBRA).  Furthermore, to paraphrase something Milton Friedman said, we don’t buy food from company stores, so why do we buy insurance from them?

We should also get the government out of paying for health care.  As a result of government health care shenanigans, we have Medicare, Medicaid, and Obamacare.  Medicare is bankrupting the federal government, Medicaid is bankrupting state governments, and Obamacare is an utter disaster.  Somehow, the federal government has found a way to spend way too much on services while still low-balling doctors and providers to the point where a large percentage of them simply will not accept Medicare or (especially) Medicaid clients.

I would also get rid of health insurance companies as they currently exist.  It’s a common trope on the Right that we don’t use our auto insurance to cover oil changes or our homeowner’s/rental insurance to cover a can of paint, and therefore we should not expect to use medical insurance to cover a flu shot or cold.  Decades of regulation and twisted policy have led to a point where orange juice at a hospital can cost $100 and your medical bills are overstated to the point where a hospital may bill $5000 for a service and the insurance company only pays $1500.  That $5000 figure is made up in part because the hospitals know that insurance companies will only cover a fraction of the total cost, so they inflate prices beyond the market clearing price in order to end up somewhere around that clearing price.  Getting rid of insurance companies (except as truly catastrophic insurance providers) would cause individuals to begin comparing prices.  Right now, it’s almost impossible to do price comparisons between providers—most hospitals won’t even tell you that information.  Imagine if grocery stores or restaurants refused to tell you how much items cost, or if you needed to go through a three-month negotiating session to buy a hammer.  Yet this is exactly what happens in health care because of our screwed-up system.

Taking this into consideration, I want to see more competition.  I want to see doctors put their prices online.  I also want to see innovative practice groups, like the one I linked to.  In that case, the same physician ends up charging $5885 in a private setting but $33,505 in a hospital setting.  Note from my last paragraph that the $33K figure is made up and is not a true market clearing price—after all, if the same doctor can profit by charging $5900 for a service, why are we paying $33K?   I doubt we would see quite the same difference across all avenues of health care, but there’s no reason that health care is a special industry in which free enterprise wouldn’t work.

I’d even like to go a step further and break the AMA oligopoly.  As it stands today, if I have a cold and need to see somebody about it, I have a few options:  call my GP (if I have one) and schedule an appointment for a visit and a prescription for what ails me; walk into an urgent care facility and pay a good deal of money; or walk into an emergency room and pay a great deal of money.  For minor issues, all of these are wasteful and expensive options.  A fairly large percentage of health care claims are low-risk scenarios which involve prescribing over-the-counter or non-risky remedies.  Let people open up minute clinics in supermarkets and drug stores like we see for flu shots and reduce the burden of everyday cases from expensive MDs.  Combined with a proper single-payer system, people would decide what level of service they want and price signals would guide people to making the most of available resources.  The current system artificially increases prices by eliminating the lower rungs of health care, meaning that you need to go to expensive primary care facilities, urgent care facilities, or hospitals for basic treatment.  The funniest part is that these facilities are already using non-MD labor as substitutes for MDs.  For example, nurses and nurse practitioners perform a series of basic tests.  In addition, for a number of basic treatments, hospitals will use graduate students rather than MDs.  Yet we as consumers don’t get the benefit of paying less for this decrease in care, due to messed-up incentives.

For people who are afraid that going to a supermarket clinic would be dangerous, they could always choose to spend the extra money to go to an AMA-certified doctor.  To soothe their minds, we could make any clinics not headed by AMA-certified doctors post signs which read “NOT AMA Approved.”  I have no real problem with that requirement, as it provides an additional piece of information to consumers at a very low cost.

To summarize (and hit a few points that I didn’t include up above), here’s a quick bullet list of things which would considerably improve health care in the United States:

  • Customer pays, like in pretty much every other scenario.  This is the key.
  • Eliminate tax subsidies for employer-run health insurance.
  • Reform health insurance markets.  Eliminate any insurance policy requirements which effectively ban true catastrophic care.  Allow interstate health insurance markets.
  • Eliminate regulations which would prohibit the introduction of lower-cost clinics outside of hospital settings.
  • Make it easier to open up new hospitals and facilities for MDs to compete against current facilities.  Reduce federal and state regulations wherever they prove anti-competitive.
  • Reduce regulations which prohibit non-MDs from performing certain sets of activities.  Scale down the “MD only” list over time based on highest marginal value.
  • Scale down over time federal and state health care coverage.  Change fee-for-service to lump sum HSA contributions for indigent individuals and provide strict means testing on any remaining coverage.

Putting these into place would result in a more competitive, freer market for health care.  This would lead to better outcomes and lower prices for Americans.

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5 Comments »

  1. Walgreens was, when I still worked there, piloting a clinic of the type you recommend, although I’ve no idea if they’ve been successful or not.

    My one objection to your proposed solution is what we do in the case of emergencies. I’m presuming you will continue to mandate that hospitals treat everyone, regardless of payment, for sufficiently serious cases. If I have a gushing chest wound, I’m not going to fire up Google and comparison shop. That said, medical expenses are by their very nature unexpected. I can’t budget for falling off a ladder and breaking my leg — it just happens. This is the benefit to paying for medical insurance, in my view: if I have the cash on hand or not, I’ll be covered.

    I’m not wild about breaking up the AMA either, as it does serve an important role in standardizing the quality of health care, although I admit your solution is a neat one that would cover my objections.

    Comment by Tony Demchak — December 31, 2013 @ 9:58 am

    • I think I would eliminate the emergency room requirement. Hospitals which wanted to keep emergency room services available for people without means to pay could continue to do so—I’m thinking primarily think of religious hospitals—but hospitals which didn’t would not need to. Given that we’re breaking the supply-side limitations that our current regulatory environment mandates, there would likely be more facilities available offering a larger range of options. Some people may pay more to frequent facilities which offer emergency care services to indigents, but I’d leave that as a choice to the consumer rather than a federal mandate.

      The “do comparison shopping with a gaping hole around your ribs” objection isn’t very strong. It’s one that critics have brought up, but has a fairly easy answer: people shop beforehand. There are a number of possibilities that could arise. First, people could do comparison shopping before they get hurt. There could be services which exist and let you do easy price comparisons early on. People could join medical services groups which help them select the best options: think about insurance companies’ provider networks but where you don’t get penalized for going outside your network…unless you join a voluntary discount club. In a competitive marketplace in which facilities would need to compete on price (as well as other dimensions), institutions develop to assist you. When your car breaks down on the road, you can pre-pay for emergency services through AAA or your insurance company. There’s no reason to believe that the same couldn’t exist in the medical field. Nothing exists today because there are so many regulations and distortions in place that we have nowhere near a free market in health care.

      Automotive problems are typically unexpected as well but we don’t have all-encompassing insurance for everything there. It’s only with medical care that we’ve bound ourselves to Leviathan so tightly. And here’s the important point: in a free market, health insurance would still exist. That health insurance would be primarily for cases where you “accidentally fall on a bullet” rather than when you skin your knee. This is the true nature of insurance, rather than some catch-all wage transfer mechanism like it exists today.

      Comment by Kevin Feasel — January 5, 2014 @ 5:35 pm

      • Ah! From your post, I had gathered that medical insurance would disappear entirely. It would appear I was mistaken.

        Comment by Tony Demchak — January 6, 2014 @ 4:56 pm

  2. […] Simberg is thinking about a free-market alternative to Obamacare.  Simberg and I definitely are on the same page […]

    Pingback by Obamacare Notes | 36 Chambers - The Legendary Journeys: Execution to the max! — January 19, 2014 @ 7:23 pm

  3. Supermarket clinics are a great alternative for those who are less confident in government healthcare options. Thanks for supplying additional information concerning the improvement of the healthcare market.

    Comment by Nicole — February 24, 2014 @ 10:29 am


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