Single-Payer System: Is the Crystal Ball Any Clearer?

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Single-Payer SystemIs the Crystal Ball Any
Clearer?

• March 14, 2006
• Rick Mayes, Ph.D.
• Assistant Professor of Public Policy

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Lifes Unavoidable Tradeoffs

• Individuals, families, organizations, companies,
  states, nations constantly strike balances
  between
• Security and Freedom
• Egalitarianism and Individualism
• Every health care system has its strengths
  weaknesses
• (problems).

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Lifes Unavoidable Tradeoffs
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Lifes Unavoidable Tradeoffs
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Health Care Spending as of GDP, 2002(in
purchasing power parity - U.S.)
Source OECD Data 2003
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Why is the U.S. so Different from Other
Countries?
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Why is the U.S. so Different from Other
Countries? Its primarily because of higher
PRICES (less efficiency).
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The Uninsured, 15.6 of the U.S. Population
(Census, 2005)
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Consequences Care Postponed Not Received
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Extreme Consequences Bankruptcy Earlier Death

• 50 of uninsured patients have debts from
  previous medical care a 1/3rd are being pursued
  by collection agencies
• Uninsured women with breast cancer are twice as
  likely to die as women with breast cancer who
  have health insurance.
• (Kaiser Commission, 2002)
• Men without health insurance are nearly 50 more
  likely to be diagnosed with colon cancer at a
  later, more dangerous stage than men with
  insurance.
• (Kaiser Commission, 2002)
• Upwards of 750,000 families are bankrupted by
  medical debt each year, even though 80 of them
  have some form of health insurance single
  largest cause of bankruptcy (Health Affairs,
  2005).

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Arnold and Sharen Dorsett with their children,
Dakota, Zachery and Jessica, back. Though they
had insurance, health-care costs for Zachery led
the Dorsetts to file for bankruptcy this year.
Nicole Bengiveno/The New York Times
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Why no Universal Coverage in the U.S.?

• Popular explanations
• -- it would be too expensive
• -- American welfare policy is too stingy
• -- traditional opposition by medical providers,
• particularly physicians (the AMA)

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Americas Accidental Health Care System

• Critical Junctures Tipping Points
• ?
• Increasing Returns
• ?
• Path Dependency

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Critical Junctures Tipping Points

• rare, often unpredictable, and hugely
  consequential for what comes after
• (e.g., QWERTY keyboard, VHS/Betamax, health
  epidemics)
• personal examples
• (e.g., college major)

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Increasing Returns

• Each subsequent step after a critical juncture
  reinforces the initial event/decision due in part
  to large set-up or fixed costs
• (e.g., frequent flier-programs, entitlement
  programs Medicare/Social Security)
• Momentum builds due to decreasing marginal costs
  and increasing benefits for continuing down the
  existing path.
• At the same time, increasing penalties and costs
  for exiting from the current path.

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Path Dependency

• The benefits of sticking with a particular
  program or decision ultimately increase to the
  point that they virtually outweigh any dramatic
  departure.
• senior professors Vietnam Iraq

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Americas Accidental Health Care System

• Truman and NLRB ruling in 1948
• regarding collective bargaining
• famous GM-UAW 1948 contract

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Americas Accidental Health Care System
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One Problem with Employer-Provided Health
Insurance

• It creates gaps! . . . for the unemployed and
  the elderly (classic market failures).
• Answer build on the existing public social
  insurance program, Social Security
• Medicare Medicaid, 1965
• Still took
• (1.) the assassination of a President (JFK)
• (2.) a landslide Democratic victory in 64
  (thanks to Goldwater), and
• (3.) a financial deal with the AMA and the AHA
  to pass Medicare.

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One Problem With Medicare Cost ()
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Americas Accidental Health Care System
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Path Dependency and Americas Accidental
Health Care System

• Clintons health reform effort in 1993-94 showed
  just how entrenched our patchwork system of
  health care is.
• Only 2 options available to Clinton
• large income tax increase or employer mandate
• RESULT health care in the U.S. is rationed ad
  hoc,
• person by person, child by child . . .

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The Oregon Health Plan Deliberative Rationing

• 1987 Death of 7-year old Coby Howard from
  leukemia
• 1989 Dr. John Kitzhaber, ER physician and
  President
• of the Oregon Senate advocated changing
  Medicaid
• 1991 Prioritized List of diagnoses
  treatments
• 1994 Oregon Health Plan begins operation, adds
  100,000
• 2003 sliding-scale premiums increased and new
  co-pays

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Two Major Developments Hindered Oregons Plan

• (1.) 2001 recession
• (2.) crystal-meth epidemic

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State of U.S. Health Care System

• Since 2000 . . .
• health insurance premiums have increased 73
• (versus 14 in general inflation and avg. wage
  growth)
• - avg. cost of single coverage (4,000
  annually in 2005)
• - avg. cost of family coverage (11,000 annually
  in 2005)
• The percent of companies offering health
  insurance to their workers has fallen from 69 in
  2000 to 60 in 2005
• (5.5 million working Americans have lost their
  coverage since 2000)

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Segmentation of U.S. Health Care Increasing
CONCIERGE MEDICINE
Patients like Ilse Kaplan, left, receive more
personal attention from Dr. Bernard Kaminetsky in
exchange for an annual fee of about 1,650.
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Consumer-Directed Health Care Health Savings
Accounts
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The Moral Hazard Argument Against Expanding
Health Insurance Coverage

• Term used to describe the paradoxical fact that
  insurance can change behavior of the person
  insured.
• example employer-provided donut insurance or
  auto insurance
• avg. annual amount spent on medical care (by
  uninsured person) 934
• avg. annual amount spent on medical care (by
  insured person) 2,347
• Conclusion I co-pays, deductibles, utilization
  reviews make patients use health care more
  efficiently (frugally, wisely, sparingly, etc.)
• Conclusion II instead of expanding group health
  insurance, reduce it

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The Moral Hazard Argument Against Expanding
Health Insurance Coverage

• Fallacy I Moral-hazard argument only makes sense
  if we consume health care in the same way we
  consume donuts, car repairs or consumer goods.
• Fallacy II Having to pay for your own care does
  not automatically make ALL of your health care
  consumption more efficient. How could it?
• example wifes appt. with dermatologist
• Reality cost-sharing is a very BLUNT instrument
• example RAND Corporations Health Insurance
  Experiment (1971-86)
• BOTTOM-LINE health insurance is moving in the
  actuarial direction and away from the social
  insurance model w/enormous consequences to come

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Alternative Model?