Single Payer.

The great achievement of the Affordable Care Act (ACA) has been to extend medical insurance to a large share of the previously uninsured.  The great failing of the ACA has been to fail to address the comparatively high cost of medical care in the United States.

Many foreign countries have single-payer systems.  They also pay a much smaller share of GDP for medical care.  The real issue here is that single-payer countries pay doctors and other medical care or service providers a lot less than does the United States.[1]  American physicians, nurses, hospitals, and pharmaceutical companies all make more than do their European or Japanese equivalents.  For example, British general practitioners make between $81,000 and $122,000 a year, while the average GP in America makes $208,000 a year.  Similarly, the pay differentials between GPs and specialists are much greater in the United States than elsewhere.  Then, some kinds of care are less available or unavailable elsewhere.  (For example, apparently European doctors don’t believe in allergies or depression.  Or try getting a single-patient room in a European hospital.)  One recent estimate holds that a single-payer system in the United States could bargain-down prices for prescription drugs to about 25 percent below the level that Medicare currently pays, which is lower than what the private system pays.  That suggests the scale of pharmaceutical company profits in America compared to other countries.  To get the cost of American medicine down to Western European or Japanese levels, the incomes of these people would have to be compressed.

One economic argument against the Sanders plan is that he proposes to extend coverage beyond the core insurance provided by the Affordable Care Act to include dental care and long-term nursing care.  These would run-up the over-all cost of the program.  At the same time, Sanders would do away with premiums and out-of-pocket costs.  A huge cost increase.

However, the “real” economic argument against the Sanders plan is that it would require a massive tax increase to pay for government-provided universal health care.  This is a misleading argument.  Americans already pay for medical care through premiums, out-of-pocket costs, and lower wages in exchange for health insurance.  They already pay for dental care and for long-term nursing care.  They just do it as private individuals.  (Employer-provided insurance is just an employment benefit that should be taxed like other forms of income.)

The Sanders plan would eliminate private health insurance companies; it would force down the incomes of hospitals and drug manufacturers; it would compress the incomes of doctors and nurses.  None of these institutions or individuals is much inclined to give up the current income structure.  There would be enormous push-back.  Along these lines, Paul Krugman has argued that the U.S. should not try for a single-payer system.  A Medicare-for-all system would require tax increases on the middle class, rather than just on the wealthy.  People with employer-provided health-care would be forced into an inferior system, to their distress.  Republicans would never go for it.  So it is politically impossible.[2]  However, that’s a political argument against the Sanders plan.  It isn’t an economic argument.

There is a lot to be said for this argument from a political realist perspective. Real power doesn’t just reside on Wall Street.  It also resides in suits, white coats over scrubs, and in flowery smocks and Crocs.  Neither Democrats nor Republicans want to bell the cat.  Bernie Sanders’s pull with young people means that the issue isn’t going away when he does.

[1] Margot Sanger-Katz, “Why a Single-Payer Plan Would Still Be Really Costly,” NYT, 17 May 2016.

[2] “Single-payer health care is a pipe dream,” The Week, 29 January 2016, p. 12.

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  1. Pingback: The Social Trampoline. | waroftheworldblog

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