Single Payer System

Earlier this week Marc Steiner’s program on WEAA hosted several individuals who are proponents of a single payer health care system. Some see this as socialized medicine, and politicians shy away. Earlier, I addressed the issue of what we may (or may not) want to socialize as part of system reform over time.

Medical care providers who are proponents of a single payer system tend to focus on positive aspects. There are at least two good economic arguments for a single payer system for which I tend to agree with the proponents. As mentioned in an earlier entry, a single payer system may be more efficient because medical care providers need not deal with the multitude of varying forms that different payers in the United States use. This should make it less costly for providers to perform billing services.

The proponents also argued that a single payer system would facilitate patients’ free choice of provider. Under such a system, providers should have no incentive to discriminate among patients based on ability to pay. Consumers could, in theory, choose any provider. Economists consider more choice for consumers to be a good thing.

However, before we start thinking the economic logic fully supports a single payer approach, let us assess two additional potential outcomes. First, a single payer would have control the whole market share on the buyers’ side. A constant pressure in the United State health care system over the past 40 years (or more!) has been to control costs. A purchaser that controls the entire market is referred to as a monopsonist (similar to a monopolist who controls all the sales). A monopsonist in general influences prices. The government acting as monopsonist can use legal authority to set prices. What is to say that the prices will be set in a way that would rationally reward high quality care processes rather than rewarding special interest groups. Specific proposals may attempt to encourage the use the price setting to facilitate the provision of high quality care, but this is not a guaranteed outcome of the political process..

Additionally, financial access to all providers does not necessarily translate into a greater opportunity to use any provider. A person living on the west side of town who does not have a car may need to take two buses including a transfer to get to a provider on the east side of town. A single payer system would not change that. A single payer system would not necessarily result in more providers locating in rural areas in the short run. Further, there are existing patient relationships. As anyone who has tried to see a popular provider knows, it can take months for a new patient to see the provider—regardless of how generous the insurance is. A single payer system will not solve this either. Improvements in financial access are only one component of making it easier for people to use any care they choose.

Thus, while there are some solid arguments in favor of a single payer system, all incentives should be considered. Making policy without anticipating these outcomes may lead to a worse health care system than we have at present. This is not to say that we should not consider elements of a single payer system—only to say they should be considered with caution.