Economy / Healthcare / Politics

Breaking Down the Single Payer System

Overview

Late June, legislation that would transform California’s health care system to a single-payer system was brought to a halt by Assembly Speaker Anthony Rendon, despite approval in the state Senate and loud public support. Single-payer health insurance eliminates the numerous private and government health insurers and replaces them with a single public organization that collects taxes, which are then used to fund government health care for everyone living in the state. Known as “Medicare for all” the single payer system sounds beneficial; however, the reality is that this plan would cause many more problem than it solves.

Funding a Single-Payer System

California’s proposed single-payer system comes with a $400 billion price tag that practically guarantees slowed economic growth. Supporters of the bill claim that the state will save $200 billion by streamlining the health care insurers and cutting out the “middle man.” But even if $200 billion is saved, that still leaves $200 billion unaccounted for, which is more than California’s entire budget of $180 billion for 2017.

The government plans to gather all of the funds from Medicaid, Medicare, Affordable Care Act Subsidies and public health funds to raise a total of $200 billion for the new health care act. Democrats propose creating new taxes to raise the remaining $200 billion: a 15% payroll tax, a 2.3% tax on businesses and a 2.3% sales tax. This bill requires that individuals pay the government for their health insurance instead of paying private health insurance companies. As American Action President Doug Holtz-Eakin explains, replacing the private health insurance plan with a government system hurts both the economy and the industry as competition on the market is eliminated and innovation and discovery is discouraged. With the ability to set premiums, deductibles, and payment rates, the government is effectively price-setting the entire health care industry, which removes the incentive for companies to create generics to existing drugs and to discover new drugs, as they will receive funding regardless.

Impacts on Providers

In addition to straining the economy, this plan will also hurt patients. By attempting to give the entire state health insurance overnight, California legislators are dramatically increasing the number of patients that doctors have to serve. The high volume of patients will lead to lower quality service from physicians and will make it more difficult for patients to obtain appointments to see a doctor. These strains will be felt especially in the beginning of the program as millions of people who had not been previously covered by an insurer will suddenly receive health insurance. Since they were not insured and had most likely not been seeing a physician regularly, they are likely to have more health issues than the average person and will stress doctors’ offices and resources.  Additionally, giving the government ownership of the health insurance industry may force physicians to withdraw from the system. If physicians are receiving inadequate funding for their services and losing money by participating in the government system, they will simply withdraw from the system.

Supporters of the single-payer system are claiming that the model for this program is “Medicare for All.” However, if we examine Medicare as the model for health care, then we should be extremely concerned about a key issue with the program: it is increasingly difficult for individuals to find a doctor that accepts Medicare and even more difficult to see that doctor within a reasonable amount of time. In a 2015 study, the Kaiser Family Foundation/Commonwealth found that 28% of primary care physicians are no longer accepting Medicaid patients, which is higher than private insurers’ refusal rates. California will not be able to accommodate the rapid increase in patient volume and it will create a huge backlog in California’s health care system.

Issues with a Fee-for-Service Model

California is attempting to expand health insurance coverage but it comes at the expense of the state’s economy. Under the single-payer system, individuals would be forced into paying for the government-controlled health insurance regardless of whether that individual wanted health insurance or not. If California legislators need further proof of the system’s shortcomings, they can study Vermont’s attempt to implement a single-payer system, which ultimately failed in 2014 because taxes would have caused too much damage to the state’s economy.

One of the reasons that this program is so unrealistically expensive is because it is based on the outdated fee-for-service payment system, which charges patients for each service they receive.  Based on this model, the more X-rays, screenings, CT scans, etc. the doctor runs, the more revenue the provider accumulates, which creates incentive for doctors to run unnecessary tests on patients in turn increasing costs for the patient and payer. The government will pay physicians for each individual service that they conduct, encouraging physicians to administer unnecessary and potentially time-consuming activities, which will only make it harder for other new patients to be seen.  Not only is California’s health care system planning to create a massive deficit, but it is doing so in large part to fund pointless procedures and care.

A study published in 2011 compiled the types of unnecessary testing that doctors conduct, such as brain MRIs for patients with no symptoms of brain damage and CT scans for lower back pain and concluded that just twelve of those tests cumulatively cost $6.8 billion in 2009. The most expensive inappropriate practice was the prescription of brand name statins without first trying a generic statin. Statins are a drug class used to lower cholesterol and could potentially result in billions of dollars of savings for the health care industry: in this study, $5.8 billion of the 6.8 billion in total wasteful spending was due to the prescription of name-brand statins.

The Future of Single-Payer Health Care

For now, Rendon has postponed the potential passage of a single payer health care system until 2018. However, this decision has been met with widespread protest and its supporters are demanding that Rendon put it back on this year’s agenda. Rendon rightfully explained that this bill provides no means for a single-payer system to be implemented in California and that legislators need more time to figure out exactly how this system will work. Luckily, if Dems are forced to actually articulate how this program would work, the bill will likely never make it out of the Senate because this model simply does not work in the United States.

 

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