David Brooks is worried, too, but his worries are about the path from our present health care system to a single-payer system. From his most recent New York Times column:
It sounds good. But the trick is in the transition.
First, patients would have to transition. Right now, roughly 181 million Americans receive health insurance through employers. About 70 percent of these people say they are happy with their coverage. Proponents of Medicare for all are saying: We’re going to take away the insurance you have and are happy with, and we’re going to replace it with a new system you haven’t experienced yet because, trust us, we’re the federal government!
The insurance companies would have to transition. Lots of people work for and serve this industry. All-inclusive public health care would destroy this industry beyond recognition, and those people would have to find other work.
Hospitals would have to transition. In many small cities the local health care system is the biggest employer. As Reihan Salam points out in The Atlantic, the United States has far more fully stocked hospitals relative to its population and much lower bed occupancy than comparable European nations have.
If you live in a place where the health system is a big employer, think what happens when that sector takes a sudden, huge pay cut. The ripple effects would be immediate — like a small deindustrialization.
Doctors would have to transition. Salary losses would differ by specialty, but imagine you came out of med school saddled with debt and learn that your payments are going to be down by, say 30 percent. Similar shocks would ripple to other health care workers.
The American people would have to transition. Americans are more decentralized, diverse and individualistic than people in the nations with single-payer systems. They are more suspicious of centralized government and tend to dislike higher taxes.
My worries are a bit different. The fiscal rationale of the entire scheme assumes that we will hold the line on reimbursement rates and that’s something I see no will to do. If the Congress had been willing to hold the line on Medicare reimbursement rates 50 years ago or even 20 years ago, we wouldn’t be in the fix we’re in now, spending significantly more than any other country in the world. If the consequence of “Medicare for All” is to raise all reimbursement rates to those of private insurance and continue to increase the reimbursement rates at a multiple of the growth of non-GDP annually, no foreseeable system of financing will render it affordable.
And keep in mind that once we’ve torn down the private insurance system, if the new system fails, there’s no way to get back. It’s like a parachute jump. If you miss the target, you can’t jump back up into the plane and try it again.
I think the public needs to be educated as well, something advocates have little interest in – and actually, the advocates often don’t have a clue either.
But you’ve pointed out, once more, the central problem single payer – the political will to actually reduce costs does not exist.
“The fiscal rationale of the entire scheme assumes that we will hold the line on reimbursement rates”
You need private insurers to hold down costs just as much or more. Anyway, if our whole system used Medicare prices we would spend 20$-30% less or maybe more IIRC. Trend line will still be bad, but at least we could put off having to do anything for a bit longer. (And Brooks is sort of right in that transition might be difficult. Doing nothing is worse.)
Steve
Maybe I didn’t express that clearly. Under the proposed plan there would be no private insurers. It would not be like Germany’s plan. Some bill text I’ve seen would go so far as to limit care that could be provided outside the plan.
There are implications for all of that. The effect at outset would be to increase rates for care presently provided under Medicaid and reduce the rates for care presently provided under private insurance or out of pocket so that all care is provided under Medicare rates.
That would result in substantially less income for providers since, as you’ve pointed out, Medicare rates are lower than those paid by private insurance (but higher than Medicaid). Somehow I don’t think that providers will be happy about that. Presumably, they’ll ask that the rates be increased to replace the lost income.
Steve,
Doctors and their advocacy organizations constantly tell us they would go out of business if they were forced to pay Medicare rates for their services. I don’t think that’s actually true (but don’t know for sure), but it ties into my point above – the US government hasn’t been able to must the political will drive down costs before and there’s no reason to believe that will automatically change with single payer.
‘I think the public needs to be educated as well’
Of course! We’ll start in preschool, have the children put on skits about going to “government clinic”. We’ll mix in TV ads showing popular actors eschewing private clinics for government ones. We’ll need to mix in shame for selfishly extending one’s life. Hollywood can help. Films are already available to remake. ” ich klage an” comes to mind. Maybe Spielberg could bring it into the 21st century.
OK, to me, the fallacy here is the one that says that there is only so much health care to go around, so Government must ration it. That is not how free enterprise works. If there are too few doctors, maybe we should let there be more by loosening licensing regulations. Or decommissioning the AMA.
Around here anyway, we have three hospitals, most time half the beds empty, but just like idle dentists, they won’t lower prices for more business.
And then it took congressional pressure to get Eli Lilly to offer generic brand insulin pens for half price. Generic brand= same thing. Since they recently doubled their prices, that shouldn’t hurt too much. If this keeps up, we might see the Mexican cartels smuggling insulin. Diabetics buying on street corners.
I think the only answer is to let anyone make and sell pharmaceuticals. That would cause much lower prices and some risk of death, which we already have because people can’t buy their meds.
Let the market shake it out.
The federal government has been rationing health care for more than a century. Check out the Pure Food and Drug Act of 1906. The federal government rations health care in hundreds of ways, has done so for a very long time, and no doubt will continue to do so. We haven’t had a free market in health care in over a century.
But health care prices didn’t go off to the races until after Medicare and Medicaid were enacted in 1965. In 1960 Blue Cross/Blue Shield would insure a family for $100/month. That’s $660 in today’s money. It costs twice (or more) that today.
Now some of that increase is insurance administration. But most of it isn’t.
“But health care prices didn’t go off to the races until after Medicare and Medicaid were enacted in 1965.”
Health care, public pensions, education, the Pentagon, just about any government agency you can think of…………..
I was trying to think of any significant example where costs don’t spiral out of control when government touches it.
In fairness the increases in health care spending from 1965 to 1975 were driven by increased utilization. After 1975 until fairly recently increases in health care spending were largely driven by just plain price increases. However, in more recent years utilization has increased as Baby Boomers have aged.
In the 1960s there was an actual problem that needed to be solved. Seniors were being impoverished by their medical bills and in many cases just doing without. There were more targeted alternatives than the ones ultimately selected.
“Doctors and their advocacy organizations constantly tell us they would go out of business if they were forced to pay Medicare rates for their services.”
The ones making $800k might make $500k (some surgeons) and the ones making $300k would go to $200k. Would they be pissed? You bet. Would they go out of business? Not many. What else would they do? The ones making $200k would make $140k. They would have trouble paying for medical school and trying to have a life. There are ways around that and there isn’t any real reason the transition would have to be sudden. In short, I think it is doable but it would not be painless.
Steve
““But health care prices didn’t go off to the races until after Medicare and Medicaid were enacted in 1965.â€
Before 1965 we didn’t have CT scanners or MRIs. Cardiac stents or laparoscopic procedures. Cataract surgery often failed and when it work it took a week in the hospital just to recover. We weren’t really doing joint replacements. 36 week old premies died. Still didn’t really have pediatric ICUs for most of the country. Neurosurgery was pretty primitive and heart surgery mostly didn’t exist. There really wasn’t much to buy with your medical dollars.
“Let the market shake it out.”
There is no functional free market model of medicine anywhere in the world. None. Places that have tried to take a more market oriented approach (look at Singapore) saw prices quickly rise and coverage decrease. All those red states that believe so heavily in markets. Any of them adopting free market medicine? Nope. Heck, look at what you wrote. We need the free market, but you needed the government to keep Eli Lilly from scamming patients.
Steve
Japan has the highest number of MRI machines and CAT scanners per 100K population in the world. They’ve lowered costs there. In every field except medicine technology has lowered costs.
I challenge you to produce documentary evidence that capital expenses (which is what technology is) is a significant factor in U. S. health care prices being the highest in the world. I don’t think you can do it.
In addition other OECD countries use cardiac stents and laparoscopic procedures, too. They don’t seem to raise costs there the way you’re claiming they do here. Prices for procedures were much more tightly clustered among OECD countries than they are now. We’re way higher than the rest and I doubt it can be explained by insurance costs.
Additionally, insurance costs don’t account for the difference between prices in the U. S. and in the other OECD countries. Part of the difference, perhaps, but not all of it. Wages throughout the sector are obviously a much more significant factor. Not just physicians. As one health care manager put it some years back too many people making too much money.
Dave-That comment was in response to Drew noting that medical costs started climbing in 1965. Back then medicine didn’t have a lot to offer. Without CT scans and MRIs you couldn’t diagnose very much. We didn’t have the technology for much of the surgery we do now. Medicine in the early 60s was mostly a limited suite of surgeries and long inpatient stays for antibiotics or to die from your cancer. You didn’t have 27 week premies spending 3 months in the hospital running up millions in hospital bills because they died the first day. They were not putting in stents in 1965 because they didn’t have them.
As to the effects of technology, most economists who have studied the topic seem to think it is a significant factor. Link to the Hastings Center (hope you know them) expressing that belief.
https://www.thehastingscenter.org/briefingbook/health-care-costs-and-medical-technology/
Next link is to one of the better articles I have seen questioning the belief.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3686328/
Finally, let me add one more thing that many people can understand. Lots of people now have GERD (reflux disease). We have lots of ads on radio and TV for prilosec or whatever to treat it. When I was in training, GERD did not exist. We didn’t have the technology to diagnose it easily and we didn’t have the drugs to treat it, so functionally it didn’t exist. In reality, it was there all along. Once we had drugs to treat and could easily diagnose it is now common as all get out, and something we weren’t spending on in 1965.
Steve
There are good reasons to be skeptical of the notion that technology is the primary driver of increasing health care costs, the most important of which is that the numbers don’t add up. Technology shows up on a balance sheet in one of two ways, either as capital expenses or as consumables. Neither of those is rising particularly fast, indeed, at many hospitals and practices those are actually declining.
What is increasing is payrolls. Not just physicians but including physicians. Everybody up and down the sector, not just in how big their paychecks are but how many of them there are. I think there’s an argument to be made that our whole health care delivery system is unsuitable to task.
However, if we’re looking for causes for the high price of health care in the U. S., we should look at where we’re outliers not where we’re the same as other OECD countries. Those include but are not limited to our system of paying for health care, medical education, and differences in our society from those of other OECD countries.
Where I think that you and I differ most is that I think that our system of paying for health care adds 10-20% to total costs where you seem to think it’s a lot more. Canada’s administrative costs are half ours not 10% of ours. I think we might be able to cut our administrative costs in half but I doubt even that. That leaves wages and, indeed, the present strategy of single-payer at least in the form it is taking in the House in the U. S. is to cut wages. I don’t think that’s going to happen. I think the stink over it will be more than our political leaders will be willing to bear—that’s what’s always happened in the past. That will leave us with a system that nobody can afford.
One last remark about medical technology. The CAT scanner was invented in the UK, coronoary stents in France. Our system isn’t as great as we think it is. I expect many of the major medical advances in the coming years to emerge from India.
“Technology shows up on a balance sheet in one of two ways, either as capital expenses or as consumables.”
It is not the cost of the MRI machine or the CT scanner that drives up costs. It is the procedures that one can then do because you can diagnose stuff with them. In 1960 you really couldn’t, with rare exceptions, diagnose brain tumors until it was too late to do much about them. Now we can precisely diagnose and treat. You see $10 million on the balance sheet as the cost of the machine. You dont see the $200 million in surgeries that result from having the machine.
Take a less obvious example like cataract surgery. It took so long to recover and the results so poor that few people had it done. Now it is 45 minutes at your local surgicenter then back home. 98% success rate. The phase machine itself may cost only $400,000, but it generates $10 million dollars of surgeries. So, I think you undervalue the effects of technology. I dont think it is the only driver and not the main one, but it is big.
I think the admin costs are higher than you since I work with them. I think that if you actually cut wages people will scream. If you just dont advance them as fast, people will grumble but they won’t go anywhere. Just need the will to do it. Also need to reign in the very high paying specialties. They become entitled jerks anyway.
Steve