There’s yet another take on why the United States should adopt a single-payer system, this time articulated by Igor Derysh at Salon:
The cost of administering health care in the United States costs four times as much as it does in Canada, which has had a single-payer system for nearly 60 years, according to a new study.
The average American pays a whopping $2,497 per year in administrative costs — which fund insurer overhead and salaries of administrative workers as well as executive pay packages and growing profits — compared to $551 per person per year in Canada, according to a study published in the Annals of Internal Medicine last month. The study estimated that cutting administrative costs to Canadian levels could save more than $600 billion per year.
It’s being treated like a new finding but that health care administrative costs are lower in Canada has been well known for years. I recall reading an article in the New England Journal of Medicine more than 15 years ago that found that health care administrative costs in Canada were about 15% of costs while those in the U. S. about 30% of costs. Those costs aren’t just insurance companies. They also include the cost of administration for hospitals, group practices, and individual physicians’ offices. It pays to hire administrators.
For decades, after I’d spent time working in Germany, I supported a single-payer system for the United States. I no longer do. Bill Clinton’s failed attempt at reforming the health care system convinced me that such efforts were in vain. The problems with our system won’t be fixed by changing who pays.
For one thing everything undertaken by our governments costs more than the same things in other developed countries including road-building, education, and national defense. Health care really doesn’t look so different in that respect.
To convince me that a single-payer system is a good idea for the United States you’ll need to convince me of the following:
- Health care really is different from education.
- The scale of our system has nothing to do with its expense. We are almost three times the size of the next largest developed liberal democracy. Bureaucracies tend to increase in cost with scale.
- Costs in our system can be substantially reduced without cutting the wages of people working in the health care sector OR people working in the health care sector will gladly accept a cut in wages.
- Americans will be willing to accept a system that is acknowledged to be tiered.
- There’s no difference in efficiency or public support between a system administered by the national government and one administered by the states. Canada’s system is administered by its provinces.
- The system you propose isn’t any more lavish than those of other liberal democracies.
- We will be willing to bar immigrants from our health care system OR eliminate illegal immigration.
I think that the high costs of our system are due to a combination of scale, lack of social cohesion, pursuit of profits, and politics.
Suppose, just for shits and giggles, that per capital admin costs could be reduced by $1000/yr. compare that to per capita premiums and deductibles. It really solves nothing.
We have a utilization issue, and cost rate for utilization issue. Fundamentally, the notion that it’s not insurance, it’s maintenance, and it’s free, and it’s a right. Because, after all, someone else is paying. It’s free. (Snicker)
This is where I get lectured about how health care is different, you see. It gets tiresome. Costs go up dramatically, people just complain and the usual nostrums are posited. Nothing changes. Costs just go up. No one wants to deal in common sense economics and reality. Just agenda driven academic studies and theories.
1) Dont really see why you would compare with Education, but health care is paid for with insurance for the most part. You incur admin costs with the insurance product, admin costs on the part of the provider dealing with insurance and finally the admin costs for the providers who are actually giving the care. Education doesn’t have either of those first two.
2) Medicare is already bigger that the national health systems for any other country, IIRC. At this scale its admin costs are about 1/4 of the private insurers, maybe less. (Yes, this includes the costs of tax collection, etc.)
3) Regardless of insurance source we need to cut costs. You are indirectly implying here that providers will be all happy and cheery if they earn less because it is private insurance. They won’t. Providers won’t be happy if they earn less with single payer, or any payer. If we are going to let that stop us they lets just stop discussing health care.
4) Our current system is tiered. We accept it. Rich people get private insurance that covers everything and they pay nothing towards it, no co-pays, etc. Lower level workers pay a lot towards their coverage, dont have as much covered and pay extra out of pocket. Lowest tier workers get very minimal coverage and pay a lot towards their coverage. Old people get Medicare which covers almost everything, but they pay 15% towards it. Some poor people get Medicaid. It covers less than Medicare and less than better private plans. Finally, the bottom tier, 10% or so of people have no coverage.
5) Medicaid admin costs are generally thought to be about 7%, about 2-3 times those of Medicare.
https://khn.org/news/medicaid-true-or-false/
6) You are correct that if we go with something bizarre like Bernie’s proposal costs go up. If you just take current Medicare and expand they you save trillions.
7) Maybe we decide to cover all of North America too. I dont see it so I would assume we just expand to citizens.
Again, I will make my standard plea here that we are only talking about, for the most part, admin costs that leave out what it costs for providers to have to deal with Medicare vs private insurers. This has been studied several times and it costs providers a lot more to deal with the privates. Admin savings are likely higher than you think. Remember this article from Matt Welch. Many French doctors dont even need to have billers working in their office!
https://reason.com/2009/12/07/why-prefer-french-health-care/
Steve
“Suppose, just for shits and giggles, that per capital admin costs could be reduced by $1000/yr.”
Probably closer to $2000, plus a lot less time spent by providers working on billing. Imagine if had just one set of rules we had to work with instead of 4 or 5 different insurers. But you are right, we do need to address other costs.
At present, our alternative is private insurance. AS I am sure you are aware, costs for private insurance have increased at the same rate of faster than Medicare. They cost more than Medicare to begin with. If we take that as the alternative we are looking at big increases in spending.
Steve
1. The similarities between health care and education are broad and deep. Just to list a few:
A. The majority of spending derives from tax dollars
B. Labor intensive
C. Decreasing marginal utility
D. Skyrocketing administrative costs.
E. Being asserted as positive right.
2. The systems are designed to make Medicare and Medicaid administrative expenses look low so, of course, they do. Your claim that Medicaid’s lower administrative costs prove economies of scale is specious. It doesn’t prove that at all.
3. Lower reimbursement rates has been a major sticking point for health care reform for decades. Are you really arguing that this time is different?
You haven ‘t convinced me so far because you insist on dodging the issues.
Old News: Obamacare allows an insurer a 20% “loss-ratio.” What that means is that for every $100 you pay in premiums will give you only $80 of health care.
Looked at another way, the $20 the insurer gets is already 25% of the value of your $80 health care. You have to be an Amerikan fool to put up with that. You are a double fool for being a man, since women utilize far more health care than men. You are a triple fool for any subsidies for health care for the breeders’ kids. Under socialized medicine, you will be a quadruple fool for subsidizing healthcare for any, like kids, who don’t contribute to the premium pool, as they at least do indirectly under Obamacare by way of their parents’ higher premiums, co-pays and limits. To escape this socialist circus, one needs to learn to practice Medical Tourism.
2) As I said above even when you account for all of the things critics say make the costs lower, it really is lower. Those costs have been accounted for in several studies. I didnt say Medicaid proves anything is specious. I simply put out that the program has higher admin costs than does Medicare. I see no reason to believe Medicaid would be administered more cheaply by the states as half of them would be doing their best to sabotage the program, unlike in Canada where that is not the case.
https://theincidentaleconomist.com/wordpress/a-few-remarks-on-medicares-administrative-cost-ctd/
3) I am saying that his is no more a sticking point than it is for any other reform you choose. You are making the case that we cant ever cut reimbursements. In that case, why do you even bother writing about health care? ( I really dont get what you are driving at here to the point that I think this is kind of bizarre.)
1) The differences are also major. As I point out above health care is paid for much differently, via insurance. Everyone gets educated, relatively few receive very much health care. The technology in health care changes constantly. Not so much for education. The big expenditures for health care are those for chronic care, which last a lifetime or in brief bursts, typically much less than a year. Education mostly for 12 years or 16 years. Education is mostly for the young. Health care mostly for the old. Control of spending in education is at the local level. State and national level, mostly, for health care. (As an aside education has lot of local control but that doesn’t control costs. Why should it do that for health care?)
Steve
I am casting bread upon the water. That is actually a fairly common theme here. Lots of the policies I support are hard sells.
You do know that reimbursements have been cut, and pretty drastically, in the past for lots of different groups of providers? Ophthalmologists, CT surgeons are the ones I am most familiar with. The world didnt end. We still had plenty of CT surgeons and eye doctors.
Steve
Which is why I’ve been promoting the idea of stopping or at least slowing the increases in Medicare reimbursement rates as a way of slowing the increase in overall health care costs.
Without transparency in pricing and billing, without portability of insurance across state lines and an end to the 50-state cartelization of insurance, without true cost accounting of Medicare and other government insurance programs (just to name a few problems), it’s shuffling of deck chairs on the Titanic.
The results of transparency in pricing have been disappointing. I’m not even sure what “transparency in billing” means. There is no real predictable, consistent relationship between costs and prices even in conditions of a perfectly competitive marketplace (which health care is not). Price is always determined by supply and demand, what the market will bear, not by cost. I think that “cartelization of insurance” is more of a talking point than a real issue. And I’m pretty sure that steve will tell us that we already have a “true accounting” of Medicare (the most important program). What do you mean by it?
Then why do you keep making the case that we cannot cut reimbursements under Medicare? We have done it many times in the past and docs didnt stop taking Medicare patients.
Steve
Are you misinterpreting what I am writing? Perhaps I’m not expressing it clearly enough. I think we can but it is politically difficult. The blocking factor in health care reform has always been physicians. They were a blocking factor when Medicare was originally enacted until they were bought off and they successfully blocked Clinton’s attempted reforms. Repeated squeals of anguish prevented SGR from having any teeth. The Democrats savvily bought them off early in the process of negotiating PPACA but that also resulted in kicking the can down the road.
My interpretation of this discussion is that you’re claiming that providers will just need to like it or lump it, dammit, while I’m claiming that they are much more likely to organize to oppose reimbursement cuts as they have in the past.
“Imagine if had just one set of rules we had to work with instead of 4 or 5 different insurers. But you are right, we do need to address other costs.”
There is more than one way to crack that nut, such as mandating a common standard. As I understand it, the high administrative costs are the result of a balkanized FFS system, not some inherent characteristic of private insurance.
But administrative costs are still relatively minor in the overall scheme of things. Even if we zeroed out admin costs, in a few years we’d be right back where we started thanks to medical costs increasing 2-3 times the regular inflation rate. That’s the real problem that needs to be addressed and I see it as more of a political problem than an economic one.
Health care administrative costs vary dramatically from country to country. In Germany they’re about 5% of the total; in Japan under 2% of the total. In the UK they’re 10% of the total. In the Netherlands they’re 20%.
“There is more than one way to crack that nut, such as mandating a common standard. ”
That’s socialism. Wish I was kidding but I am not.
“My interpretation of this discussion is that you’re claiming that providers will just need to like it or lump it, dammit,”
The context is the discussion of single payer. I am saying they won’t like it, but they won’t like it either if we chose market based reforms (and they actually worked). We cant let that stop us.
“They were a blocking factor when Medicare was originally enacted until they were bought off and they successfully blocked Clinton’s attempted reforms.”
I think that the insurance companies and big pharma were just as important. Its a life and death issue for the insurance companies. Docs just see a pay cut.
Steve
“That’s socialism. Wish I was kidding but I am not.”
That’s like saying the FCC is socialism because of the common regulation of the airwaves and the standards implemented to use and share spectrum. It ain’t socialism.
I don’t recall the exact figures, but IIRC a majority of admin expenditures relate to billing. It’s certainly doable to reform that and create a simplified system while keeping FFS and everything else intact. That ain’t socialism either.