from – forbes.com – by – John C. Goodman
What we now call “single payer” health insurance is what we used to call “national health insurance” and before that it was “socialized medicine.”
Do these name changes make the underlying ideas more palatable? Apparently not.
Vermont has now thrown in the towel on its plan to create single-payer heath insurance – presumably an option states are permitted under the Affordable Care Act. State officials decided that even in blue state Vermont voters would be unwilling to agree to the huge tax hike needed to pay for the scheme: an 11.5 percent payroll tax and an income tax of up to 9.5 percent, on top of the current one.
Giving up cannot have been easy. It came at the end of a four-year, very expensive effort. Democratic Governor Peter Shumlin was elected in 2010 on an explicit single-payer platform and he has been trying ever since to make it a reality. As the Wall Street Journal editorial page explained:
“Health and Human Services bestowed a $45 million grant for planning, and since 2011 Mr. Shumlin’s team has worked closely with HHS, the Treasury and White House budget office. “
The state hired William Hsiao of Harvard and Jonathan Gruber of MIT to design the program. The former economist created Medicare’s price controls in the 1980s and the latter is sometimes called the “architect of Obamacare.”
So what was the point of the whole exercise?
That’s not clear. Almost everybody in Vermont already has health insurance (the uninsurance rate is 6.8%). And the insurance they have is more comprehensive than what most other Americans have. It’s even more comprehensive than what Obamacare promises. As Avik Roy explains, Silver plans, used as the benchmark for Obamacare’s subsidies, have an actuarial value of 70 percent. That means that for every dollar of expected health costs, the insurance company will plan to pay 70 percent and patients will pay 30 percent in the form of co-pays and deductibles. By contrast, the actuarial value of the average Vermont private plan in 2011 was 87 percent, according to Hsiao and Gruber.
The traditional argument on the left is that other countries (with a much bigger role for government) have been more successful than the United States in controlling costs. Yet that hasn’t been true for the past 50 year. Megan McArdleshows the per capita increases in health care spending over the last decade and concludes: “our health-care cost growth is right in the middle of the OECD pack.”
A more common argument these days is that government-run health insurance is more efficient than private insurance. This is a claim often made by New York Times columnist Paul Krugman, who would like to enroll everyone in Medicare. But as Tom Saving and I pointed out at the Health Affairs blog:
“Medicare is not actually managed by the federal government. In most places it is managed by private contractors, including such entities as Cigna and Blue Cross. To argue that Medicare is more efficient is tantamount to arguing that when Blue Cross is called “Medicare” it is more efficient than when it is called “private insurance.” Further, there is nothing particularly special about the way Medicare pays providers. Private insurers tend to use the same billing codes and their payment rates are often pegged as a percentage of Medicare rates.”
In Vermont, Medicare is managed by WellPoint, which in many places goes under the name “Blue Cross.” The largest provider of private insurance in the state is Vermont Blue Cross, a different company. It is almost certain that if state instituted a single-payer plan, one of these two companies would manage it rather than the state of Vermont.
Another argument is that competition is wasteful and monopoly is more efficient. Also, if there is only one insurer, it can use its “monopsony power” to squeeze lower prices out of the providers. The problem here is that Vermont is close to having a health insurance monopoly already. Blue Cross in Vermont has 74% of the small group market, 78% of the large group marketand 90% of the individual market.
Plus (and you wonder why this isn’t obvious to everyone) if the goal is to shift resources from providers to patients, there is a much simpler way to do that – one that does not require bargaining with all the all the doctors and hospitals over thousands of different services and the fees to be paid for each. Instead, the state could assess a special tax on the providers and rebate the money to the patients. Voila. Mission accomplished.
But wait a minute. There is something odd about this very discussion. Since when did anybody on the left ever care about efficiency?
Concerns about efficiency and waste are what you ordinarily hear from the right. Remember the Grace Commission? They are much more likely to come from Oklahoma’s Senator Tom Coburn rather than Vermont’s (“socialist”) Senator Bernie Sanders. People on the left almost never complain about duplication and waste – whether it is the Postal Service or any other bureaucracy. The Democratic Party, after all, is the party of government.
InPricelessI offer a different theory about why some people are so enamored of government health care: they are collectivists. They don’t believe in single-payer heath insurance because of some derivative goal. It’s not because they think it will deliver more care, cheaper care or better care. For them, collectivism as such is the raison d’etre. Collectivism is an end in itself.