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This column discusses another controversial national health care question: Whether a single-payer health care system makes sense.

A single-payer system involves the government controlling and financing the delivery of health-care services. Health-care services are centrally planned by the government and are typically funded through taxes.

Michael Moore, quoted in a recent Washington Post article, stated that Obamacare is awful because it “is a pro-insurance-industry plan implemented by a president who knew in his heart that a single-payer, Medicare-for-all model was the true way to go.”

In a single-payer system, the price for health-care delivery is set by the government. These price controls effectively ration medical care by allocating resources based on government mandate.

Consequently, resources are frequently misallocated. The services provided do not keep pace with changes to health-care delivery in an extremely dynamic environment.

The Veterans Administration is an example of a single-payer system that has failed to keep pace with the times.

My neighbor, whose politics are to the left of center, visited France a few years ago when France was considered to have the highest quality health care in Europe. He maintains that, based on France’s experience, we should move to a single-payer system.

In recent years, however, France’s single-payer system has had difficulty dealing with demographic changes and new methods of service delivery. It is now considered the 11th best European health-care system in terms of quality.

Britain, another nation with a single-payer system, has among the lowest- cost health care in Europe, but its health-care infrastructure is showing its age and is experiencing difficulties adapting to changes in the delivery of health-care services.

Quoted in the Jan. 20, 2015, edition of the London Daily Mail, the medical director of England’s National Health Service, Professor Sir Bruce Keogh said, “If the NHS continues to function as it does now, it’s going to really struggle to cope because the model of delivery and service that we have at the moment is not fit for the future.”

Populations are aging while technology is changing the way health-care services are delivered, both from a quality and an efficiency perspective. Do we really want to be constrained by a government bureaucracy lacking the agility needed to keep pace with coming changes?

Physicians for a National Health Program, a physicians’ activist group seeking to implement a single-payer system, agrees with Michael Moore that insurance companies are raping the American health-care consumer.

They maintain that the profits of insurance companies can be eliminated in a single-payer system, resulting in savings that are passed on to consumers.

Michael Moore decries the fact that we pay insurance companies more than $100 million annually, ignoring the fact that insurance companies have relatively low profit margins of about 2.2 percent.

The real profits go to pharmaceuticals and medical equipment manufacturers who earn profit margins of 19 percent and 16 percent, respectively.

According to the website, American doctors earn 35 percent more than their European counterparts in countries with single-payer systems. That is why I am surprised that so many doctors seem to favor a single-payer system.

Several European countries, most recently Sweden, are beginning to allow privatization to creep into their systems. Sweden’s single-payer system is like a gigantic HMO providing low-cost services through a restricted network of providers.

Many non-essential services are delayed until they are funded. Swedes who purchase a private policy get a PPO-type arrangement which moves them to the head of the line in a larger provider network.

The private policies allow an element of free market resulting in a reallocation of resources to keep pace with changes in demand and new service delivery platforms.

Rebutting Michael Moore’s arguments about the rapacious nature of insurance companies requires an understanding of how Obamacare-like systems have worked in other countries. In those countries, the needs of all stakeholders are balanced. Insurance companies compete in a single risk pool across the entire population.

Furthermore, insurance companies collectively negotiate with providers to obtain more cost-effective pricing. Providers then are forced to increase efficiency to maintain profit margins.

Lower costs need to be passed on to the consumer so that the profits are not merely shifted from providers to insurance companies. The government’s role is to see that the consumer is protected, just like our government regulates utilities.

Other countries have demonstrated that properly structured health-care delivery systems afford a better alternative than do single-payer systems.

Jim de Bree is a retired CPA who lives in Valencia. This is the third in a series of columns by the author on health care.

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  • Brian Baker

    As I’ve said before, take three steps. Remove the artificial barriers to interstate availability of insurance products. Streamline the FDA approval process. Reform the medical tort system. Once those changes have been put in place, only then re-evaluate to see what more, if anything, needs to be done to address the problem.

    And further, restrict government interference, and limit it to an actually constitutional approach. This isn’t a “democratic socialist republic” like so much of Europe is. We need to keep that in mind.

    • charlesmauricedetallyrand

      Given my response to your argument in favor of the commerce clause as justification for restricting a state’s sovereignty was marked as spam somehow I’ll post at least one important fact here.

      States are already are able to enter into compacts so that health insurance can be provided by out of state insurers across state lines. Only three states so far have done so. No health insurer I believe has shown any interest in entering into such an agreement.

      • Jim de Bree

        If I understand your position correctly, you state that the insurance companies have to incur losses initially to build a critical mass to bargain for profitable pricing down the road.

  • Gil Mertz

    Thanks again for your columns on Obamacare, Jim. With all the confusion and deception surrounding this scheme, having such clear and concise explanations are very helpful.

  • Ron Bischof

    Nicely done on summing up the flaws in single-payer health care systems, Jim.

    “The government’s role is to see that the consumer is protected, just like our government regulates utilities.”

    The rationale for regulating utilities is that they are natural monopolies that aren’t conducive to competition. Health care services and health insurance have no such natural monopoly and they exist only where governments create one.

    Can you clarify if you’re proposing a utility regulatory model for medical services? Specifically, if Federal and/or state governments should monitor and/or control pricing of health services and insurance?

    • Jim de Bree

      Ron–I believe that the government needs to step in and ensure that providers or fiscal agents (i.e., insurance companies) do not take advantage of the patients.

      An example would be to set pricing constrains on providers whereby what they charge out of network patients is limited to a multiple of what they negotiate with the insurance company. It is unfair that a person with insurance coverage pays $50 for a service that a person who is not in the network has to pay $1,000 for.

      Furthermore, why should a person who has an employer sponsored plan not have the payment of those benefits treated as taxable compensation.

      I will discuss this in greater detail in a subsequent column.

  • Jim de Bree

    Mr. Wiley, if I may call you Wade, thank you for your commentary. I have been looking to have an insightful discussion of this topic. I am sorry that my points disappointed you, I hope that you are not disappointed because we disagree.

    You have added connected the dots and put words into my mouth where perhaps they don’t belong. Is it fair to presume that you are affiliated with Physicians for a National Health Program (PNHP)?

    As I have said in my series of columns, I am not a medical professional, but I am a retired CPA who is trying to figure out what is going on and to cut through all of the BS. I have a 31 year old daughter who has cystic fibrosis, so I am extremely familiar with our healthcare delivery system and its benefits and failures. For the record, I have spent seven figures of out of pocket medical costs during my daughter’s lifetime, so I know what we have currently is sub-optimal.

    In terms of comparing single payer systems to other systems-have you looked at the Dutch system? It is NOT a single payer system, but it has adapted very well to changing environments. It is, as one might say ObamaCare done right.

    You stated: “While the UK system is criticized based on how it operates today, this is not to say the financing system is wrong. In fact, the UK system is adjusting to new societal demands, just as any private or public entity must do in a dynamic society. To suggest the private sector can adjust more quickly or more efficiently to these changes is a myth not supported by evidence.”

    Again, I suggest that you look at the Dutch, Swiss and Australian systems—none of which is a single payer system. There is no mythology involved with those systems. The UK system has issues delivering services. My wife is an oncology nurse at a leading cancer treatment institution in southern California. She has two patents who recently moved here from England. They tell her that the English system is terrible. I am a retired CPA. One of my former clients is a UK citizen who worked in Los Angeles for many years. He became a dual UK/US citizen when he lived in LA. Now he lives in London and he is 63 years old. He tells me he can’t wait to become eligible for Medicare because the English system is so bad. If the UK system is adjusting to societal changes as quickly as you suggest, why are we hearing these comments from people who are dissatisfied with the English system? There is considerable documentation on line and elsewhere to suggest that the UK system is not as nimble as you imply.

    Furthermore you stated: “Among the top eleven industrial economies ten of which have universal payer systems, the market based U.S. system ranks dead last in outcomes access and cost according to the broadly cited Commonwealth Fund survey of national health indicators.”

    I agree with you 100%. The United States has an incredibly dysfunctional group of systems, because there is not a single system. As a result administrative costs are duplicated, purchasing power is compromised and special interests have too much say in what is going on. While I believe that there should be a single system, that does not mean that a single payer system is the optimal solution.

    Furthermore, you stated: “To fairly compare the effectiveness of single payer and private market solutions one must blindly default to private sector solutions as more effective. This is particularly true when the fundamental premise behind the private sector argument is free market incentives will drive behaviors. For this to be true there must be complete transparency in pricing of services, a condition that does not exist in U.S. healthcare, largely due to insurance industry bureaucracy and the oversized influences of political donations and lobbying efforts that result in distortions to the actual healthcare industry supply and demand curves.”

    I am not sure I understand the logic behind your first sentence. Why does a comparison require a blind default to anything? I wholeheartedly agree with your assessment that there is a lack of transparency in the pricing of medical services and more importantly of pharmaceuticals in the United States. I never stated that free market incentives will drive optimal behavior, but market forces will drive behavior. You assume that this impossible and that the only alternative to a free market approach is a single payer solution.

    I believe that the healthcare industry is effectively a three legged stool. Providers, insurers (or other fiscal agents) and the patients are the three legs. Each has to be treated fairly or else the stool will collapse. You suggest that insurance companies cost the system 30%. I have read elsewhere that this is not the case. I am not a right wing zealot who believe that the market place can cure everything in this industry that has multi-faceted complexity. My next article will discuss some of my suggestions which are an alternative to the single payer system.

    Finally, you stated: “This means prices can be negotiated on a fair and open basis that would also no longer necessitate a role for the health insurance industry. By eliminating the burdensome insurance bureaucracy, also known as the multi-payer system, and implementing a streamlined single payer approach, research indicates we can save over 30% in health care expenditures.”

    So as I understand it, you would replace the insurance industry with the government as the fiscal agent. Do you really believe that the government would be less bureaucratic than the burdensome insurance industry? From personal experience dealing with Medicaid is much worse than dealing with an insurance company. Assuming that your hypothesis is true (which I find hard to fathom), how the government going to be motivated to forward think? Why is Sweden privatizing a portion of its system? From what I read is that the privatization will put pressure on the Swedish system to be more innovative because it adds an upper end to the continuum of health care delivery thereby ensuring that innovation is implemented sooner. Why do you believe that providers will have more negotiating power with a single fiscal agent (the government) rather than dealing with multiple fiscal agents. A single payer has a monopoly that likely will be influenced by partisan interests.

    Technology is going to drive an unprecedented level of change in the delivery of health care services over the coming years. Contrary to what you say about the system in the UK, they have struggled to keep pace with changes.

    Also, if you truly speak for physicians, consider that physicians in single payer systems earn less than they do in the US and certainly earn less than they do in the Netherlands, Switzerland and Australia.

    Wade, I enjoyed your comments and would like to encourage a continued discussion of the issues we both raised. Also, please refer to my other columns in the series I am writing. My goal is to throw out as many thoughts about the process of improving our healthcare system because there is so much political spin on the discussion that the average citizen does not know what to make of it.

    • Jim de Bree

      I have a few additional thoughts. From what I have read, comparing the stated administrative costs of a single-payer system with that of the US system is NOT an apples to apples comparison. For example, insurance companies have to sell policies, collect premiums, etc. All of those costs are included in the purported insurance company administrative costs. Single payer systems generally rely on tax collections to fund their system. The costs of collecting revenue are off the books of those systems as those costs are born by the tax authorities. Similarly, insurance companies bear the cost of fraud protection while the government bears the cost of fraud protection in a single-payer system without passing those costs onto the system. So it appears that not all of the components of the single-payer system administrative costs are not being considered in the analysis.

      The purported 30% savings that can be achieved by switching to a single-payer system is based on a study conducted by the New England Journal of Medicine which is based upon information that is decades old. Since then technology has automated much of the administrative process. Yet this is never mentioned by people who espouse the implementation of a single payer system.

      A more recent study on the cost of health insurance administration in California undertaken by James G. Kahn, Richard Kronick, Mary Kreger and David N. Gans suggest that the administrative costs are considerably lower.

      This study analyzed costs and showed that private insurers spend 9.9 percent of revenue on administration of which 8 percent is spent on billing and insurance related functions (BIR). The median annual BIR costs per patient amounted to $177 for commercial plans, $153 for Medicaid, and $650 for Medicare.

      In their study, Mssrs. Kahn, et al stated:

      “Single-payer analysts Steffie Woolhandler, David Himmelstein, and their colleagues have argued that moving to a Canadian-style system would reduce U.S. administrative costs by 10–15 percent of total health spending. These estimates, the most comprehensive for the United States, have been taken to task for a variety of limitations. Some criticisms are purely methodological, while others reflect underlying philosophical differences in designing and evaluating a health care system. Nonetheless, in our opinion, the evidence demonstrates that substantial U.S. resources are devoted to administrative activities in health care.”

      In a Washington Post column, Ezra Klein makes a strong case for using a single unified administrative system. See While he discusses this in the context of a single-payer system, adopting a single unified administrative system, used by multiple providers and insurers will likely result in a huge reduction in administrative costs.

      Thus, I think the purported administrative cost savings of adopting a single payer system do not necessarily result from using a single-payer, rather they result from using a unified system of billing, administering claims, etc. In the United States we have multiple medical systems (private insurance, Medicare, Medicaid, the exchanges, the Veterans Administration, workers compensation, et al) each of which has its own administrative set of practices and procedures. This results in incredible inefficiency with duplicative systems that lack the requisite economies of scale to effective manage administrative costs.

      Ezra Klein concluded his column by stating:

      “It’s also important to note that you don’t necessarily want administrative costs as low as they could possibly be. Some activities that are considered “administrative” are useful. Disease management, for instance, which accounts for some of the difference between Medicare and Medicare Advantage. Mental health counselors who are available by phone. Good-faith investigations into waste, fraud and abuse. Care coordination. Nurses who use e-mail or telephones to remind patients to take their drugs. Administration is not always wasteful.

      “But no matter how good you got at slashing administrative costs, they will never be a panacea to the problems of the system. Rick Kronick, a political scientist at the University of California at San Diego, has done some of the best work on administrative costs, and he summed the situation up quite well. “The main question,” he said, “is why are health care costs going up at 2.4 percent a year faster than GDP? And most of the answers to that question have nothing to do with administrative costs. The answers are that we do more stuff and have more technology. Even if we could wring administrative savings out of the system, which I’m all in favor of and would be a good thing, we’d still be facing the question of how to slow the rate of cost growth.”