If We Can’t Manage Single-Payer, Then What?

Megan McArdle chimes in on Vermont’s shelving its plans for a single-payer healthcare system within the state:

While I was away last week, Vermont decided to scuttle its single-payer health-care plans. I predicted as much six months ago, for one simple reason: A single-payer system would cost too much. When faced with the choice of imposing double-digit payroll taxes or dropping his cherished single-payer plan, the governor of Vermont blinked.

The entire post is worth reading. However, this is the key point:

So even if we could have had a much cheaper health-care system if we moved to single payer in 1970, that doesn’t mean that we can get the same happy results by doing so now. Today we’d be building a single-payer system with the price schedule of our current health-care workers. Which means it would cost an absolutely breathtaking amount of taxpayer money, as Vermont just found out.

That is what I have meant when I’ve said that our basis is too high for a single-payer system to be practical. It was better a decade ago than it is now and better twenty years ago than it was a decade ago.

I’m also not as sanguine as Ms. McArdle is about the growth in healthcare spending. For me the question isn’t how fast healthcare spending is rising here or even the absolute amount of healthcare spending but that healthcare costs are rising faster than prices in the rest of the economy, faster than revenues, and, especially, faster than incomes. That implies a continuing treadmill of tax rate increases would be required to pay for healthcare spending and it should be obvious that’s politically impossible. Clearly, there will be reckoning and, as usual, its burden will fall most heavily on those least able to pay.

Then what is the solution to our healthcare spending problem? One of the great ironies of the healthcare policy debate is that systems other than our present are treated as foreign and things with which we have no experience. The truth is quite different.

Here in the United States we run the largest fully-socialized national healthcare service in the world, larger than Britain National Health Service, the Veteran’s Administration system. We also run the world’s largest single-payer system, larger than France’s, in Medicare.

We could replace our existing system with a fully-socialized system but, as Ms. McArdle ably notes, that has met with incredible resistance in the U. S. We could gradually ratchet down healthcare spending based on a pre-determined formula, something the Congress committed itself to do more than a decade ago and has steadfastly refused to do (the “doc fixes”). Or we could change the rules that govern how healthcare services are provided and how we compensate providers for them.

Given the political realities some combination of the latter two are probably necessary. The only question remaining is the margin by which we’ll be too late in applying them.