California governor Gavin Newsom, who campaigned on bringing single-payer health care to California, has taken the next step by proposing to replace the state’s existing health-care advisory commission with a new commission that is narrowly focused on single-payer health care.
Newsom stated that “a single-payer financing system is the best way to achieve universal coverage.… My goal is to get everybody in and to stabilize costs. To the extent you could provide me evidence that a multi-payer system is less costly than a single-payer system, I’m looking for that evidence. I haven’t found it.”
There are two particularly dangerous mistakes single-payer advocates make about single-payer health care, and this is one of them. Governor Newsom indicates he has never found any evidence that competition among providers leads to higher efficiency. But if you ask economists, they will turn Newsom’s question on its head and remark that they have never seen a monopoly provider of any good or service achieve the same level of efficiency as producers in a competitive marketplace.
Governments are monopoly providers of thousands of goods and services, ranging from motor vehicle registration to trash collection, but can you think of any that are particularly efficient? The evidence regarding the efficiency of government-owned or -operated enterprises is very clear, and it sharply contrasts with Newsom’s views about the efficiency of a single provider. For the last fifty years, local and national governments both in the United States and in other countries have increased competition or privatized various industries, and the record shows that increasing competition increases efficiency, because inefficient producers are unable to survive in the face of vigorous competition.[ii]Single-payer health-care systems contain costs by denying or substantially rationing treatment, rather than by being more efficient. This fact raises a second dangerous mistake about single-payer health care. Single-payer advocates often support this approach by stating that “healthcare is a right, not a privilege” and “you can’t be denied” with single-payer. These are attractive but misleading views. The fact is that a politically appointed administrative board will determine what treatments will be offered, which will be denied, which will be rationed, and by how much. Yes, you can—and will—be denied or receive delayed treatment, depending on the cost of treatment and whether an administrative board chooses to pay.
You would be extremely surprised at what medical services are highly rationed to “contain costs” under a single-payer system. Britain’s National Health Service (NHS), the oldest continuously operating nationalized health-care provider, strictly rations cataract surgery, which is one of the most common and successful eye surgeries. The average cost of cataract surgery in the United States is around $5,000 per eye, which is not particularly expensive in the world of surgery, and it can mean the difference between having very good vision and blindness.There are roughly 750,000 cataract surgeries per year in the United States, and the success rate is about 98 percent.[iv]But in Britain, patients are put at risk of blindness by being placed on long waiting lists for cataract surgery, simply because of cost cutting. The NHS severely rations cataract surgery in more than half of Britain.[v]One hundred and four out of 195 NHS clinical approval groups identify cataract surgery as having “limited clinical value,” despite the empirical success rate of the surgery. Seventy-six of these groups have assumed that patients can wait up to fifteen months before surgery. But US eyesight experts note that the progression of eyesight loss due to cataracts is very hard to predict. The NHS is not only substantially compromising quality of life by making people wait but is also playing the equivalent of Russian roulette with patients’ eyesight by placing them on long waiting lists.
Not surprisingly, many NHS clinical approval groups also consider hip and knee replacements as having “limited clinical value,” even though these replacements can mean the difference between a very active life and severe disability and dysfunction.
NHS representatives indicate that they must make “tough choices” regarding treatments because of budgetary considerations. And this one sentence is remarkably important when it comes to thinking about health-care delivery.
There simply is no magic wand that allows government-provided health care to avoid the basic law of economics, which is that resources are scarce and society faces trade-offs. Single-payer systems in other countries invariably contain costs by rationing health care and forcing people to wait, often for a long time. Every delivery system faces “tough choices” when it comes to providing health care, but this fundamental issue seems to be swept under the rug in single-payer discussions.
Moreover, Newsom’s view that single-payer systems “stabilize costs” is not supported by Britain’s experience. Despite sharply curtailing many treatments and forcing patients to wait, the NHS finds itself facing a budget crisis. The operating deficit of NHS hospitals doubled between 2017 and 2018, while nearly half of professional staff state that they do not have adequate funding to perform their jobs at an acceptable level.[vi]What about Governor Newsom’s argument that a single-payer system will achieve greater efficiency? Ironically, the NHS is now turning over some NHS operations to for-profit companies with the expectation that they will achieve higher efficiency levels.[vii]Interestingly, Newsom has received some pushback from state legislators who understand the enormous tax increases that would be required to fund a single-payer system. Most independent estimates suggest that California would need to spend roughly $400 billion to finance a single-payer system, which is nearly double the state’s entire budget.
Unfortunately, no discussions about single-payer, either in California or at the national level, seriously discuss market-based reforms that would reduce costs by making consumers of health care more cost conscious.
There is no more tried-and-true way of controlling costs than by incentivizing consumers to economize on spending. But so far, the principle of incentivizing consumers to economize on health care is anathema to the many single-payer advocates who have already made up their minds about how health care should be delivered in the United States, irrespective of how their preferences may affect people’s lives.