Healthcare: Why Single Payer & Why it Will Fail

Rather than talking about single payer, Medicare for all, private insurance, or anything else – perhaps we should talk about why we have health insurance at all.

Why Health Insurance

The basis for health insurance is that most people are mostly healthy most of the time. Their cost of medical care is low. Sometimes, some people become very ill and their care is very expensive. Because anyone could fall victim to such an illness, all of the healthy people overpay for their care so that if they ever become sick, they’ll have the payments of healthy folk to pay for their care rather than becoming bankrupt or being denied care because they cannot afford it.

Why Private Health Insurance

The basis of private health insurance is that it is up to each individual to be responsible for their own health. That sounds great. Unfortunately, if you’re poor you cannot afford it. That is doubly beneficial to those who can afford it. Not only do the poor not consume appointments at the doctors office, it the poor are very often in poorer health. By keeping them out of the system, the affluent save money.

This system ensures minimal payments and optimal care for the affluent, at the expense of the poor. By poor I don’t necessarily mean homeless and destitute. Simply not having ~$1,000 a month for healthcare is poor enough to be on the bad side of this system.

Why Public (Single Payer) Health Insurance?

Quite simply, the private system fails to protect the people who most need health insurance. Remember, the point of health insurance is to enable people to have expensive illnesses covered without financial distress. The private system only satisfies that need for those who can afford it (which is ironic that you need to have a certain base income to have your income protected from illness). The idea of having a single insurance company that covers all people is an attempt to fix the gap of the private system while not throwing away the good parts of our healthcare system (i.e., hospitals and practitioners who need to compete for patients and to grow).

Why Not Public (Single Payer) Health Insurance?

There are a few categories here but we’ll only tackle a few of the most common.

The Taxman

One concern is the prospect of higher taxes. It is true that taxes will go up. However, if the payments for services from the government are similar to current insurers, the overall cost will be less. How is that possible? The payments to healthcare service providers would be about the same, but taxpayers would not be paying for the profits nor dividends of health insurance companies. Thus, the overall amount paid should be less.

Not The Role of Government

Some people believe the role of the government is to ensure there is a competitive landscape for private businesses and to otherwise stay out of the affairs of its citizens. If you think that the purpose of the government is to ensure corporations can be financially successful and not that it’s people can thrive, then that is a simple difference in values. It doesn’t mean that either of us is more correct than the other, but it is an intractable difference in world views that we cannot resolve. Fortunately, it also means you’re a sociopath and your worldview doesn’t belong in public discourse so we’ll proceed without it.

Inefficient Government Bureaucracy

There is a tinge of truth to this, and it is actually the source of the greatest risk to adopting a single payer system that we alluded to earlier. In American politics there is a recurring theme that the government is too bloated and ineffective, so we should cut taxes and privatize services where the open market can compete. However, cutting those taxes means that departments are often not sufficiently funded to have enough people (or the right people) doing the job for which the government is responsible. Thus, the government seems inefficient and a vicious cycle takes root that continues to reduce funding and reduce government efficacy until the system fails. That is what could happen to a single payer solution.

The (predictable) Horror Story

If a single payer system were adopted, it is inevitable that a“financially conservative” politician is going to say that 30% of the federal budget going to healthcare is too much. The crux of this politician’s campaign will be massive tax cuts and corresponding reductions in federal health insurance expenses. Loving the idea of saving money on taxes, the idea will be popular and the campaign will turn into legislation.

Of course, the system would collapse immediately with deep cuts so instead there will be rebates and credits that will deprive the national health insurance company of funding while the wealthy save money. Payments to healthcare providers will decrease as a result, healthcare provider profits will drop, investments in R&D will decrease sharply, shareholders will divest, salaries of healthcare service providers will stall or shrink, people to leave the industry, and ultimately this will ensure it’s collapse. Ironically, all of these events will be touted as proof that the government shouldn’t be in healthcare and there will be a renewed push to privatize in order to push out the poor and save the affluent money. In truth, it was the greed of this group and citizens voting with their pocket book rather than conscience that caused the system to collapse.

However, we can solve that problem permanently before it arises.

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