The Hidden Healthcare Crisis
By Matson Boyd
This was a surprisingly good year for progressive candidates and policies, but in some ways it was a step back for single payer health care. For decades, single payer was a popular part of the Democratic Party platform, and had the support of even center-left Democrats like Barack Obama. And health experts have long backed single payer as the ideal model for a national health system. But this year, in the freak out over the Sanders insurgency, many of those backers, including major public voices like Paul Krugman and Ezra Klein, went from critiquing Sanders’ particular policy to outright opposition to single-payer. And earlier this summer, Clinton allies vetoed the inclusion of single payer in the Democratic platform.
Why the shift against single-payer? There are a lot of good explanations for this. Some of them have to do with the institutional advantages that the Clinton campaign had (many of the full time health care experts worked for think tanks that were doing work for the Clinton campaign). And there was a common perception that single payer would get watered down and ruined by the same legislative kludge that gave us Obamacare, so it’s not worth the effort.
But much of the shift actually came about because of disagreements over the seemingly mundane matter of out-of-pocket costs. Sanders’ Medicare for All boldly proposed to eliminate out-of-pocket costs, which exposed a rift among health experts.
Some quick background on out-of-pocket costs: Beyond just having insurance, more and more patients now must pay co-pays (fees for each service), and deductibles (specified amounts that the patient must pay before getting any help from the insurance company). These out-of-pocket or “shared costs” have been skyrocketing. For the most common type of individual insurance plan, the “Silver plan”, the average deductible is now $3,177. And the average deductible for an individual enrollee in a low-premium “Bronze plan” is now $5,731.
Believe it or not, many experts think that higher shared costs are a step forward, and Sanders’ plans were castigated as “puppies and rainbows” for promising cost-free health care for American families.
I think Obamacare (ACA) is vastly superior to what came before it, in providing massive subsidies to low-income people and banning practices such as the denial of access to those with pre-existing conditions. But the ACA didn’t address the fundamental cost problem in American health care, which is on the provider side (we aren’t getting too many services, we are paying drastically more per service). As a result, the cost problem is just shifted around. Because we don’t let insurers shop for customers by denying service to people with pre-existing conditions or selectively pricing people based on their health status, the insurance companies are increasingly raising deductibles and co-pays, which have a similar effect. High co-pays and deductibles make their insurance plans unviable to people who are likely to need them, so only healthy people can buy these plans. This of course is the ideal situation for an insurance company.
It’s often noted that lack of insurance raises the death rate – a 2009 study found that there were 45,000 “excess deaths” each year in the United States due to uninsurance. What’s less well known is that excess deaths from underinsurance — when someone can’t afford to pay out of pocket expenses despite technically being insured — might actually be a far bigger problem. This is a mystery area in current research. We know that high co-pays and deductibles prevent low-income people from accessing care — two out of five low-income adults report skipping needed care because of out-of-pocket costs — and we know that people die as a result.
If the situation is this dire, then why are so many experts in favor of high shared costs? Perhaps the scale of the problem has yet to sink in. But it’s also true that American health care experts generally tend to privilege cost sharing as a tough-minded way to keep people from using unnecessary care. All health systems have to ration care in some way (I agree), and this group of experts wants to use willingness to pay as a mechanism for rationing care. Sanders’ plan for single payer has no cost sharing, so it is immediately suspect as soft-minded in controlling costs. How would it keep people from overusing health services? Many countries with single-payer use a small level of cost sharing but this is not in the main how care is rationed. Care is rationed by doctors and nurses prioritizing giving care to those who need it, and there’s good reasons to believe they are the best people to handle that job.
Using “Willingness to pay” to ration care might sound like a smart idea on the blackboard, but in the reality of an unequal society, it means telling low-income people that they must forego filling prescriptions and getting needed procedures. It should be obvious that cost sharing is not a good means of rationing care – willingness to pay largely comes from ability to pay, and not need for care.
The Clinton campaign’s institutional advantage and the overfocus on cost sharing came together in what I call the “Thorpe debacle”. Kenneth Thorpe is an experienced health policy expert, and like Klein and Krugman, was once a supporter of single-payer. In January, Thorpe released a devastating assessment of the fiscal effects of Sanders’ plan, estimating that it would be more than a trillion dollars over budget each year! This led to a feeding frenzy of hippy-punching directed at Sanders supporters from the Washington Post, New York Times, and of course, Vox. Sanders doesn’t come from the same background as most national journalists and politicians, so perhaps it was easy for them to believe that his campaign was simply innumerate.
Those who have rigorously evaluated Thorpe’s estimate have found it is riddled with errors. For one, Thorpe calculates national administrative costs as a direct multiple of those he put together for Vermont’s multi-payer plan, where many more administrative workers were needed to handle the complexity of multiple competing insurers. Secondly, Thorpe assumes an explosion of use of health care, well beyond what is technically feasible given the number of hours doctors and nurses can possibly work. He takes the lack of cost-sharing in Sanders’ plan as a cue to assume no rationing at all, showing a fealty to economics 101 that supersedes international evidence. I will stop there, but there are several other stunning problems with the Thorpe piece that are worth understanding.
The political obstacles to single-payer are real and longstanding — in a world of highly-profitable health care providers, success will not come easy. But single-payer advocates can now be forgiven for thinking that the “political obstacle” they must first overcome is the former single-payer advocates who now campaign against it.