I enjoyed D.J. Tice’s column “Beware side effects of health care policy” (Aug. 11). But as an economist, I’d like to add a bit more economics and to quibble just a little.
First, be aware that the U.S. spends more on health care (relative to GDP) than any other country. And the worst part? Our life expectancy ranks 30th in the world (lower than countries like Cuba and Costa Rica), and our infant mortality rate ranks 28th. Our health care system is incredibly inefficient, with high costs and poor outcomes.
I argue for comprehensive, universal, single-payer coverage to ensure cost-effectiveness. Let me explain.
Comprehensive care means that along with medical treatment, the system covers preventive care, mental health care, drug treatment and pharmaceutical drugs. The cost-effectiveness of preventive care such as blood pressure checks, immunizations and prenatal care is obvious, insofar as it is far cheaper than treating heart attacks and strokes, contagious childhood diseases and neonatal intensive care for premature infants of low birth weight.
Universal care means that everyone is covered. This is also cost-effective in the sense that the uninsured among us now use expensive emergency room visits for treatment, with hospitals shifting costs to the well-insured and with insurance companies passing these on in the form of higher premiums. About 9% of our population has no form of health insurance.
To achieve the full benefits of cost-effective universal and comprehensive coverage, we need to ensure that there are no out-of-pocket medical expenses in the form of premiums, copays, deductibles and limits on annual or lifetime insurance benefits. These all serve to discourage treatment, ultimately costing more for society.
Now add the part about single-payer coverage by government. This is what brings the enormous cost savings. Imagine the money saved by eliminating the bureaucracy of our current health care system. No more separate billings of Medicare (Parts A and B), Medicaid (federal and state governments), veterans’ health benefits (currently underfunded) and insurance companies, along with the elimination of the profits of insurance companies and excessive charges negotiated with pharmaceutical companies.
Research suggests that by streamlining health care charges, untold hundreds of billions of dollars in bureaucracy, cross-checking, paperwork and mailings could be avoided. Just as in other countries, our health care expenditures would plummet, and our heath care outcomes would rise.
This brings me to Tice’s concept of monopsony, which he accurately describes as a single buyer of a good or service. Monopsony can be a serious problem when a single employer maximizes profits by restricting wages for the labor services it “purchases” (as in the case of a “company town”). I don’t believe this is necessarily relevant for single-payer health care. Tice’s concern about government-negotiated pharmaceutical drug prices being too low to provide incentives for research into new drugs can be corrected through government subsidies to researchers.
We should note that Europeans and Canadians sometimes must wait for nonessential health care. Economists know the solution for a good or service in short supply, which is to offer higher prices or salaries to pay for it. Our current Medicaid program has a similar problem insofar as providers are reluctant to accept Medicaid patients because they are inadequately reimbursed by our government. All health care providers need to be adequately paid if we want to induce adequate numbers of people to enter the medical profession.
As Tice suggests, there is political confusion about funding a single-payer health care system, and Democratic presidential candidates have been struggling with their proposals to cover costs. The beauty of single-payer coverage is that its cost-savings eliminate any need to raise taxes.
Finally, we know there are currently some people who like their private insurance coverage and are averse to losing it. I suggest a gradual approach whereby we begin by expanding the Affordable Care Act, also called Obamacare, to 1) eliminate out-of-pocket expenses, 2) expand Medicaid coverage and reimbursement, and 3) steadily expand Medicare and/or a public option to the Affordable Care Act. Regardless of how we get there, we need to move quickly to a single-payer system.
Jacqueline Brux is an emeritus professor of economics at the University of Wisconsin-River Falls.