If it was up to me, health insurance companies would not continue to exist in their current form, but blaming them for all our healthcare woes is like blaming the doctor for giving you a bad diagnosis. Sometimes, the bearer of bad news is just the bearer of bad news.
The cold blooded killing of UnitedHealthcare CEO, Brian Thompson, has prompted yet another discussion about America’s healthcare system in general, which sadly reveals that both the left and the right remain more confused than anything else. Setting aside the disgraceful, immoral cheering from some at a targeted execution on a public city street, many on the left insist that healthcare in the United States remains irredeemably broken because we do not have a single payer system like Canada (Democrat Socialist Senator Bernie Sanders mentioned this in another context, when once and future President Donald Trump joked about Canada becoming the 51st state). In their view, the (semi-) private nature of our system, where insurance companies serve as intermediaries between patients and providers rather than the government, results in both the denial of care and the potential for people to go bankrupt from healthcare costs as well as higher costs overall because these companies are run for profit. Medicare-for-All, or some other single payer model would solve those problems, they insist. Conservatives, perhaps, needless to say fundamentally disagree, insisting such solutions are socialism and result in worse outcomes anyway, while conveniently ignoring the reality that healthcare costs in the US truly are higher than in other developed countries and people do go bankrupt. (Ironically, progressives are generally maligning a system that was reformed by a Democrat, President Barack Obama, leaving conservatives to defend it at least in part, but I guess that’s just the strange bedfellows politics is legendary for making.) Rarely, however, does anyone truly define the goals of any reform in any meaningful way beyond the blandest platitudes, or why one particular approach to reform is better than others at addressing the most goals for the most people. For example, if your primary objective is to prevent medical bankruptcies, single payer systems can certainly do that because the government pays for everything and people pay nothing or a very limited amount out-of-pocket (though this isn’t as obvious as it seems, Canada has more medical bankruptcies per capita than the United States despite Senator Sanders endorsement of their system). If, however, your goal is to ensure no one is denied care for any reason, single payer systems aren’t optimal because rather than a private company denying care, the government does. Whatever progressives may claim, the government being the sole payer for healthcare doesn’t necessarily increase the supply of care, anymore than the government contributing to food stamps automatically results in more food. The only difference is who does the denying, a bureaucracy in the government or at a large company. We might debate which is preferable, but moving a problem around doesn’t solve it. It might well make it worse.
At the same time, we need to acknowledge that American healthcare costs are exorbitant compared to the rest of the developed world. In 2022, we spent an average of $12,555 per person compared to an international average of $6,651, almost double. By relative size, we are paying approximately one third more. By service, we are sometimes paying much, much more. An MRI costs around $1,120 in the United States, which is over 40% higher than the United Kingdom, and an incredible four times higher than Australia. Prescription drug costs are also high, more than double the average of Australia, Austria, Belgium, Canada, Denmark, and the other Organization for Economic Cooperation and Development Countries. While the high costs for American care are due to a wide variety of factors, experts have highlighted three primary drivers: Administrative costs, physician and nurse salaries, and the cost of inpatient and outpatient care. Administrative costs account for 8% of healthcare spending in the United States, compared to one to three percent in similarly developed countries, physicians and nurses earn about twice as much, and care delivered at either hospital or a physician practice is $4,531 higher per person, accounting for about 80% of the overall difference in costs according to the Kaiser Family Foundation. The differences in healthcare professional compensation can at least partially be attributed to the high cost of both college and graduate school in the United States, which can be several times higher than other countries and where it is widely believed student loans funded by the government have dramatically increased costs over the past four decades. For example, the average tuition for a Canadian citizen to attend medical school at even a prestigious university like the University of Toronto is approximately $13,000 per year. In the US, it is almost $60,000. Medical malpractice, though the issue appears to be much less studied than other factors, also contributes to the differences in overall healthcare spending. Estimates vary from somewhere between $50 to $150 billion per year on a general bucket for “medical malpractice” which includes an incredible $45.6 billion spent on “defensive” care simply to prevent lawsuits, as well as higher insurance fees for providers to protect against lawsuits. Overall, the United States is believed to have the highest malpractice costs in the developed world, accounting for around 2.4% of total healthcare spending and whatever the specific figure, these costs ballooned by almost 65% between 2006 and 2015, likely rising even higher today.
Of course, the question for proponents of single payer is what savings does the government provide in these areas that couldn’t be achieved otherwise? Many have taken aim at healthcare profits, particularly insurance companies which are private companies run solely for profit as all private companies are. While this might seem like an easy target for single-payer healthcare to eliminate, total profits across healthcare insurance companies were about $25 billion in 2023, less than half the lowest estimates for medical malpractice. As a percentage of total healthcare spending, they are barely a rounding error, about .5% of the $4.8 trillion spent annually. In addition to profits, some have claimed that the higher administrative costs are due to the bloated organizational structure of insurance companies while single payer would be more efficient. If we assume the current 8% spending on these costs could be reduced to 2% via the government (admittedly, that’s a rather large if), that would represent a savings of $288 billion. This is undoubtedly a substantial figure, but it only represents about 6% of total healthcare spending and even should it be achieved, would bring down healthcare costs per person to about $11,800, still 77% higher than other developed countries. Putting this another way, the net savings – assuming everything comes to fruition – of single payer health insurance on profits would be less than $800 per person per year and we’d still be paying one and three quarters times everyone else. Whatever progressives may claim, eliminating insurance companies would not solve the underlying problem without substantial other reforms that address the primary drivers of the high cost of care. Presumably, the government could go one step further, eliminating both health insurance and taking over the delivery of care itself, turning doctors and nurses into employees of the state as the United Kingdom has done with those who work for hospitals. This would allow the government to dictate costs, as in reduce salaries and other measures, but it is hard to see how such a dramatic move would not invoke the iron-clad law of supply and demand, having an equally dramatic impact on outcomes, either by reducing the number of qualified caregivers available or lowering the overall quality of caregiver. In this regard, there is at least some evidence that single payer systems suffer from a lack of availability to care. Studies are mixed, but in the United States only about 27% of people need to wait more than a month to see a specialist. In Canada and Norway, that figure is 61%. In Sweden, it’s 52%, in New Zealand, 48%, in the United Kingdom 41%. France and Australia also average higher wait times, while only Germany, the Netherlands, and Switzerland average less. In Canada, it can take an agonizing 122 days on average to wait for a knee replacement. In Norway, it’s 152, and in Australia it is a staggering 209, suggesting at a minimum that countries with single payer medicine suffer from a shortage of specialists who provide advanced surgeries and other treatments.
But, if Americans are spending more, are they at least getting more? Once again, studies are mixed. Many claim that the United States produces worse healthcare outcomes by citing life expectancy, about four years lower, infant mortality, the highest of developed countries, maternal mortality, also the highest, as well as the prevalence of chronic conditions such as heart disease and obesity. At the same time, these statistics can be misleading, based on factors beyond the healthcare system itself. For example, Americans are more obese in general, but that has nothing to do with the costs of care at a hospital or any service a hospital provides. Because obesity leads directly to heart disease and diabetes, it greatly shortens life expectancy and accounts for a substantial amount of the difference between the United States and other countries. While the infant and maternal mortality rates are far more concerning, it’s not clear whether the root cause is poor care, limited access to care, or other factors, much less whether any improvement in the outcome can be attributed to government run healthcare. Further, there are some areas where US healthcare outcomes are measurably superior. America ranks among the highest five and ten year survival rates for those diagnosed with cancer for example. Likewise, on major orthopedic surgery such as knee replacement, the US ranks among the best in the world beyond shorter wait times with a higher utilization overall, more access to rehabilitation, shorter hospital stays, and less major complications. While heart disease mortality rates in the US are unacceptably high, treatments are among the best in the world with survival rates of 99% for mitral valve repair, 98.1% for aortic valve replacement, and 97.8% for bypass surgery. We might not be able to reach a definitive conclusion based on these disparate data points, but certainly there is no shortage f data to suggest that the shorter time period required to access specialized care, as well as the level of care given for major procedures in the United States is among the best in the world. Whether we can attribute this to the private nature of our system compared to the government run systems in other developed countries, isn’t entirely clear either, but it indicates there is a risk that government employed physicians making significantly less money than private practitioners result in either a shortage of expertise or a lower quality of expertise. Conceivably, a government run system could mitigate these factors, but if your chief goal is reducing costs, it’s very hard to see how and if nothing else, the disruption alone to replace insurance companies with a government administered plan, essentially to save $800 per person, is likely to have significant unintended consequences that will result in a lower quality of care.
In other words, at best a single payer system unaccompanied by other major reforms saves very little and risks very much, meaning it doesn’t provide the benefits progressives are advertising, though it just as well might not result in the catastrophe conservatives claim. Therefore, regardless of who pays, the focus should be on the reforms themselves. While much is made of private health insurance, little attention is paid to the fact that health insurance in the US isn’t really insurance at all. Rather than pooling risk against potentially catastrophic costs, as we do in auto, home, disability, life, and other markets, health insurance stands alone in managing day to day transactions, both hiding and increasing costs. I don’t think anyone of sound mind and body would choose to contact their car insurance company anytime they needed an oil change, or their homeowner’s when they needed fresh mulch in their yard. Why does health insurance work this way and more importantly, why should it? In my opinion at least, it shouldn’t. It makes the costs sky high and involves insurance in everything in a counterproductive fashion. How much do you spend every year and how much does the insurance company pay out while you are healthy? Any reform should start not with eliminating health insurance, but putting it back in its rightful place, using a part of the difference in costs to fund healthcare savings accounts invested in the market like a 401K with the government as a backstop to ensure no one goes bankrupt. While people are younger and healthier, they will amass tens if not hundreds of thousands of dollars to be used as they get older. Simultaneously, the healthcare market is also unique in that no one knows what anything costs or what it should cost. In a world where a Google search will show you prices from dozens of providers, there’s no reason why we cannot have more transparency in the healthcare market. Coupled with consumers actually paying for day to day care like your annual check up (presumably from their savings accounts), it’s hard not to see how this alone wouldn’t reduce costs substantially simply by causing people to be more price conscious and look for the optimal price point, with or without a government subsidy. The government, in my opinion, also has a role in standardizing and reporting on both insurance and care. Under our current system, we actually have 50 systems, where each state licenses and manages healthcare insurance and providers, resulting in dramatic differences in cost from state to state. The benefit of this is entirely unclear – assuming there is any benefit – and the costs of large companies maintaining 50 different corporate offices and legal teams is undoubtedly substantial. It’s also archaic, given this was the way corporations ran before the turn of the 20th century. While I’m generally a proponent of state’s rights, it seems clear to me that this is a case where the federal government is better suited to set the overall standard with some state level flexibility as to how they are implemented, or at least it makes no sense to me why I can’t buy health insurance from Pennsylvania rather than NJ, especially when large insurance companies operate in both states. Medical malpractice and the cost of education also need to be reformed, potentially with the creation of a medical court system that would expedite malpractice claims.
Finally, we should consider experimenting with care cooperatives, subscriptions, and other group arrangements that allow the pooling of resources and purchasing power. At least part of the problem is the number of hands in the trough – the physician needs to get paid as does their staff, as does the facility, as does the insurance company, as does the drug company if any medicines are involved. The drug companies work through distributors, who maintain near monopoly control and also need to get paid, as does the final reseller like CVS or the dwindling number of local pharmacies. Each layer adds cost and complexity, compounding the problem in a way not present in other businesses that have adopted modern supply chains, streamlined purchasing, and other advancements over the last century. Ultimately, no industry on Earth is run like the American healthcare system, nor would anyone starting a business recommend half of what happens every day. Insurance companies are an easy target because they arbitrate what services you receive and what you do not, but they have little, if any control, over the underlying costs and complexity. I don’t think they should continue to exist in their current form, but blaming them for all our woes is like blaming the doctor for giving you a bad diagnosis. Sometimes, the bearer of bad news is just the bearer of bad news.
Confessions of a Conservative Atheist 