Can A Single Payer Health Care System Work?

Proponents of Single Payer Healthcare (sometimes called Universal Healthcare) generally begin with three facts about the current US healthcare system:

1. We have about 45 million uninsured Americans (to put this in a more realistic perspective see my blog “National Health Care Reform – Understanding The Issues Of  The Plan”);

2. Our healthcare costs more than any other countries; and

3. Our health outcomes as measured by obesity, longevity and infant mortality are mediocre by international standards.

The following blog is based on findings through Gary Fradin, President of Health lnsuranceCE and others.

Five Pro-Single Payer Arguments

Countries with single payer systems – such as Canada and Britain – have lower healthcare expenses than we do. Most developed countries with single payer systems – such as Canada and Britain – have longer life expectancies than we do. We should then switch to a single payer healthcare system.

 1)  Overhead will be significantly reduced. This includes the cost of underwriting, billing, sales and marketing, huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staffs to deal with bureaucracy. By eliminating this unnecessary overhead, a single payer system can save $300 billion or more annually. Perhaps overly simple and poorly thought through.

2)  Equality of Care that covers the rich and poor alike. This position equates “same health insurance” with “equal access to treatment” and raises an empirical question:  Do people living in countries with single payer healthcare actually have equal access to treatment?

3) Uniformity of Treatment issues will be resolved, claiming that establishing a national healthcare system will eliminate these discrepancies because the single payer will dictate treatment processes and practices, in a top down management approach to compliance. Medicare is our national single payer system for the elderly and already has over 100,000 pages of regulations and appendices, but still notes significant regional and provider treatment differences. Would more pages of regulations achieve treatment uniformity? This is unsettling. If you can’t achieve it with 100,000 pages of regulation, then perhaps the regulatory approach to uniform treatment quality is inappropriate. Compliance bonuses and penalties are thought to help compliance. Small bonuses may not induce sufficient provider behavioral change, but large bonuses may stifle innovation and physician creativity and skew provider cash flow unintentionally. The top down management approach is about process compliance and not results improvement.

4) The Guild perspective is Insurance carriers and government regulators interfere far too much with a doctor’s ability to practice medicine. The want them to leave them alone so they can use their own training, experience and best judgment to treat my patients. A doctor is a healer, not a businessman. Health Care is not really an economic market in the Single payer mindset. However, if you rule out economics then language, measures or indicators must be provided. However, single payer advocates rarely provide a detailed blueprint explaining how we can move to a single payer system thus fail to embrace American social and economic evolution.

5) Incentives. The incentive argument starts from this base:  Providers structure their treatments around their financial incentives. A system that pays significantly more for inpatient care than for outpatient will probably have more hospitalizations; a system that rewards specialists more lucratively than primary care physicians will generate an excess of specialists, as many argue we currently have in this country.

Our current fee-for-service healthcare financing system pays for discrete medical interventions; providers are essentially paid piecemeal for their work. The more procedures they perform, the more they get paid. As a result we have more medical interventions per capita in this country than elsewhere – with the accompanying higher healthcare costs per capita than any other country.

The fundamental problem with this financial incentive system: some 70% + of our healthcare costs go to chronic disease treatment. Chronic diseases are long term problems that do not necessarily respond well to discrete medical interventions. Carrier cost control programs may run exactly counter to the care necessary for chronic patients.

Five Anti Single Payer Arguments

1) Life Expectancy as an indicator of healthcare system efficacy. Canada believes that the five most important factors to good health and longevity are in order: Social environments (People with friends tend to be healthier and live longer than people without), Psychological environment (mental health influences physical well-being), Productivity and wealth (Wealthier people tend to be healthier, and live longer than, poor), The Healthcare system (The medical system generally only treats people who are sick – it can only make a limited contribution to the prevention of illness by nurturing overall good health) Longevity is not a particularly good indicator of a country’s healthcare system quality. Instead, factors such as social, physical and psychological environments, and wealth, often have more influence on longevity than the medical system.

2) Waiting Lists and Resource Allocations. Whenever national health insurance has been tried, rationing by waiting is pervasive. Waiting is associated with publicly funded healthcare systems indicates the absence of costly excess capacity. National, single payer healthcare systems compete for funds with all other publicly funded activities: defense, education, transportation, environmental control, social security, etc. Most single payer systems limit medical resources. Waiting lists for many medical procedures is a form of rationing.

National healthcare programs tend to overspend on the relatively healthy while denying the truly sick access to specialist care and lifesaving medical technology. This is for political reasons, in an attempt to keep the masses – who are generally healthy – happy. Remember that about 80%+ of the population is relatively healthy and probably more concerned about its tax rate than medical specialist availability. For this group, easy access to primary care and emergency rooms is good politics.

Thus in Canada, over half the physicians are General Practitioners (Primary Care Physicians); in New Zealand, almost half and in Australia almost 2/3. The lack of specialists is apparently a political decision: that it is more important to maintain the existing tax rates / economic status than to allow easy access for all sick people to specialists.

Studies have shown that Canadians visit their primary care doctors about as often as Americans 8 but wait an average 8.3 weeks to see a specialist. The median time in 2003 to see an orthopedic specialist, however, was 13.3 weeks for initial consultation, followed by a median additional wait of 18.9 weeks for treatment, for an average total orthopedic specialist wait of almost 8 months. Uncounted are waits for second opinions.

Some post year 2000 waiting examples in Britain:

• 20% of colon cancer cases are considered curable at the time of diagnosis but incurable at the time of treatment. Roughly the same situation exists for lung cancer patients in Glasgow
• 25% of British cardiac patients die while waiting their turn to receive treatment.
• 1 in 6 people on waiting lists for elective surgery are removed without ever being treated.

Most single payer systems charge nothing – no copayments or deductibles – at the point of service, generally for political reasons. One result: systemic inefficiencies, waste and bed congestion.

Copayments and/or deductibles reduce unnecessary usage. The classic National Health Insurance Experiment conducted by the Rand Corporation during the 1970s concluded:

• Participants who paid for a share of their healthcare used fewer health services than those who did not;
• Cost sharing did not significantly affect the quality of care received; 
• Cost sharing had no adverse effects on participant health.

The Canadians and British, for example, seem to have made their own social decision: they will maintain economic stability and limit medical spending and services. Some – a fairly small number of people – will receive sub-optimal care. But society in general will benefit financially.

Remember that about 5% of the population consumes about half the healthcare. Single payer systems have, in effect, decided to protect the economic and financial interests of the remaining 95% or so. This is a clear, presumably rational and reasonable resource allocation decision for them.

Americans have, to date, rejected this value structure. We believe that each patient should receive all care, regardless the price. One result: we spend more for sick people than single payer countries. Are we right? Are we more compassionate? Or are we being economically foolish?

3) Effects on Outcome. Constraining medical budgets result in less medical high technology available in single payer systems. Less technology results in higher mortality rates. Countries with single-payer health insurance limit healthcare spending by limiting supply. Often there is a separate budget for high-tech equipment, to make sure that high cost procedures are curtailed.

4) Can a Single Payer Systems Innovate? Many technological and treatment innovations come from our competitive medical environment. Trial and error competition – attempting to provide better services at lower cost – has historically been the most effective innovation engine in business.

Single payer systems with its strong administrative controls, with constrained resources and little provider competition, tend to lack our innovative experience and instead, outsource R & D innovation. Rarely a good environment for innovation, but often the source of high cost, low quality products.

5) Should We Build a Single Payer System on Our Existing General Hospital Base? Hospitals provide all services to all people in a community and are quite inefficient businesses.

The Institute of Medicine has stated that our current, general hospital based healthcare system, does not provide consistently high quality medical care to all.

Without significantly reforming general hospitals – our major healthcare suppliers – a single payer system will do nothing to improve healthcare quality. Hospital reform is a huge problem, raising both managerial and political issues.

Some May Believe A Single Payer Healthcare is a Bad Idea

 A national, single payer healthcare system is a bad idea for the following reasons:

Single payer systems restrict access to appropriate care for the sick;

Single payer systems under-invest in medical specialties and technologies leading to inferior outcomes;

Single payer systems will codify treatment processes and reduce medical innovation;

By ignoring general hospital inefficiencies, single payer financing will not improve American healthcare quality or decrease the per unit cost.

Canada Single Payer Health Care

Canada has a single payer healthcare system in which virtually all medical care is government paid. Consumers have no copayments, no deductibles and no medical cost sharing. There is almost no private medical insurance that competes with government programs.

Canada spends about 10% of GDP on healthcare, compared to about 17% in the US. Canadians live about 80.7 years; Americans about 78.2. About 16% of Canadian men are obese compared to 28% of American men.

Canadian Medicare exists to achieve a number of social goals, only some of which are medical. Other goals important to Canadians include promoting national equity, maintaining economic independence, controlling healthcare expenses and sharing a common experience among all Canadians.

Canadians have chosen to make these alternative-type healthcare investments more than Americans. Compare, for example, Ottawa’s (population 1 million) 105 miles of publicly maintained bike paths to Houston’s (population 2 million) 20. Or see Quebec Province’s $88 million investment in 2700 miles of public bike paths during the 1990s. No American region did similarly.

Canadian cities are generally more densely populated than American with less surrounding suburban sprawl. Canadian metropolitan population densities are about 50% higher than American, while Canadian metropolitan job densities are about 60% higher. As a result, Canadians make shorter – more easily walkable or bikable – work, shopping and pleasure trips from home. Canadians bicycle about twice as much as Americans and walk more than Americans in their normal daily routines.

Canada, consequently, developed a better infrastructure to support these physical types of transportation.

Canadian land use and zoning patterns – denser urbanization than America – encourage more walking and exercise in normal daily life. Canadian social investments support this. Exercise acts as preventive medicine. As a result, Canadians are less obese and live longer than Americans, while spending less on healthcare.

In these and many other kinds of investments, Canadians choose to encourage exercise and healthy living; these are Canada’s real healthcare investments.

Interestingly, European countries have even denser urban areas with more mixed use zoning than Canada, due largely to their historical development. European countries also have even higher automobile operating costs than Canada, more extensive public transportation and more inviting walking environments. Europeans walk and cycle even more per capita than Canadians, and thus far more than Americans.

Canadians ask a difficult cost-benefit analysis question regarding purchase of expensive medical technologies and investment in expensive medical specialists. Do they get a higher social and economic return (however measured) by investing $2 million in a CT scanner or in environmental and exercise programs? Should they put money into prevention and wellness programs or disease detection and treatment?

Which healthcare investments generate the highest return? Canadians, traditionally, have invested heavily in the non-medical healthcare arena.

British Single Payer Healthcare

The British National Health Service (NHS) is a single payer system in which the government funds healthcare for all Britons. The NHS mantra is ‘free at the point of delivery, provided on the basis of need. Unlike Canada, however, the British allow private health insurance to compete.

The wealthy and politically connected get the best health care. Within the health care system, the nephrology department may have more political clout and savvy than the neurology department and may thus gain at neurology’s expense, almost without regard to relative need. Patients need to see their primary care physician first to see a specialist.

British physicians now report that their younger patients are becoming more demanding, like Americans. This rigid referral system – developed over many years – is starting to break down.

British waiting lists for medical care have been a huge problem. Twenty percent of colon cancer patients were considered ‘treatable’ at the time of diagnosis but incurable at the time of treatment.

About 11% of the population has private policies that supplement government policies. Most people buy these policies to avoid waiting for medical service. In Britain “You pay to avoid waiting, or wait to avoid paying”.

The British do not value “shared experience” as highly as Canadians. Instead, they value economic stability more highly.

Healthcare resources are not evenly distributed around Britain. The wealthier areas around London get a disproportionate share. Even within London, wealthier areas get better facilities than poorer areas.

The British purchase new medical technologies less aggressively than Americans. They first determine the return on investment from the medical purchase to determine if the new technology is significantly better than a previous technology. Also, their rigid budgetary system and resource constraints reduce resources available for technology purchases.

The British have made a fundamental healthcare finance choice that differs from Americas. The British have decided that financial stability, rather than unlimited healthcare for all, is their key social value. They are apparently willing to trade off waiting lists, technology lags, and inequality for financial stability.

This contradicts the American medical approach which we can summarize as “do everything possible for the individual” even if this includes paying the highest healthcare prices in the world by a large margin. The British have made a fundamental healthcare finance choice that differs from Americas. The British have decided that financial stability, rather than unlimited healthcare for all, is their key social value. They are apparently willing to trade off waiting lists, technology lags and inequality for financial stability. Medical malpractice lawyers, for example, make their livings by showing where providers failed to do everything possible for the individual. American society is far more individualcentric than Britain.

The British healthcare cost control comes from restricting healthcare services that include:

• Number of hospital employees, by the budgetary process, 
• Number of physicians, by budgets, medical school acceptance policies and physician licensing policies,
• Number of procedures, by annual budgets,
• Number of specialist visits, by GP referral power and hospital management procedures,
• Number of medical tests, by waiting lists,
• Technology investment, by budgets

Americans demand more healthcare options. We have voted with our pocketbooks since the 1990s for fewer healthcare restrictions, easier referrals and wider provider access. Though we often complain about health insurance prices, we are generally loath to trade-off lower cost plans for tighter carrier restrictions.

Single payer healthcare systems vary. Canadian Medicare apparently works reasonably well for Canadians; the British National Health Service similarly works reasonably well for Britons.

Both systems evolved in unique ways from unique sets of cultural and social values. Both systems will continue to evolve as both societies evolve.

But the underlying social value question remains. Is high quality care for a small number of very ill people an appropriate national economic investment? The answer depends on our shared values. Americans seem to believe that everyone should have all the medical care they need as exhibited by our current tort system and Medicare regulations and reimbursement mechanisms.

Canadians or Britons answer these questions differently. The Canadians seem to think that other values – equality of funding, easy primary care access and a shared experience – are more important than systemic efficiency and exceptional treatment for the sick. The British seem to think that economic stability is a more important social value than “access to appropriate care for all when necessary.”

By underfunding healthcare, the Canadians and British have decided to protect their economic resources rather than give all citizens easy and unlimited access to medical care. Is this a good decision?

It all depends on the country and its population. Some countries, such as the US, think that offering easy access to healthcare is more important than controlling costs. Others, such as Canada, think that offering everyone the same experience is more important than offering easy access. Still others, such as Britain, think that promoting financial stability is the key social value. Single payer relies on the government to define health insurance, benefits and appropriate treatments. 80% of people are healthy and 5% use 50% of the Health Care budget. Single payor systems keep the voters happy with short waiting periods and cap the costs associate by sick people with tremendous waiting periods during which time some people die. As the Britons say with availably private insurance, “don’t pay and wait or pay and don’t wait”. Britons look at technology ROI before purchasing any new equipment.

What are your thoughts? Can a single payer health care system work in america based on our history and expectations?

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