Blog Post: What’s Wrong with Margot Sanger-Katz’s Single Payer Analysis

Yesterday, New York Times health care reporter Margot Sanger-Katz, whose work I very much respect, entered the debate on the costs of Sanders’ single payer plan in a piece I find problematic, headlined “A Single-Payer Plan From Bernie Sanders Would Probably Still Be Expensive.” I should first concede, however, the central argument of her article: it is true that a US single payer system would still be relatively expensive as compared to other single payer systems. We would, that is to say, continue to spend more than the United Kingdom or Canada if we transitioned to single payer. At the same time, there would nonetheless be enormous savings from such a transition, and these savings would allow us to affordably achieve real universal health care. This, in my opinion, would still be an excellent deal.

The background to this debate are two analyses of the Sanders’ single payer proposal—the first by economist Kenneth Thorpe and the second by the Urban Institute—both of which claimed that the actual costs of Sanders’ single payer plan would be significantly higher than what his campaign has predicted. The assumptions of each have been convincingly contested by colleagues David Himmelstein and Steffie Woolhandler: among other points, they argue that both analyses underestimate administrative savings and overestimate the cost of increased health care use resulting from a coverage expansion.

Anyway, without delving into the details, there is something rather puzzling when looking at the analyses of Thorpe and the Urban Institute from a broader perspective. How is it that single payer would massively increase costs in the United States, as these reports contend, even while countries with single payer-type systems—like Canada and the United Kingdom—have much, much lower health care costs than we do?

To answer, a quick side note: our total health spending is, by definition, equal to the quantity of health services delivered multiplied by their price. The US does not consistently use more health services than other high-income nations. Therefore, the fact that we have higher health care costs is mostly explained by higher unit prices for services, as Sanger-Katz and others note. Now us single payer advocates cite lower administrative costs (and lower drug spending) as the major sources of savings under US single payer (effectively lowering the “price” side of the equation). But Sanger-Katz argues that this would be insufficient: prices would have to be slashed across the board, and some services would have to be cut:

Making the American health care system significantly cheaper would mean more than just cutting the insurance companies out of the game and reducing the high administrative costs of the American system. It would also require paying doctors and nurses substantially lower salaries, using fewer new and high-tech treatments, and probably eliminating some of the perks of American hospital stays, like private patient rooms.

Such a transition would, she notes, have some scary sounding downstream consequences: “…making big cuts all at once to doctors and hospitals could cause substantial disruptions in care. Some hospitals would go out of business. Some doctors would default on their mortgages and student loans.” My understanding is that we aren’t really allowed to effectively default on student loans, but admittedly this all sounds rather dicey.

But this frightful health care meltdown isn’t even in the cards. She is correct in a narrow sense: it’s true that immediately lowering US health care expenditures to, say, that of the United Kingdom — i.e. from 16.4% to 8.5% of gross domestic product — would require major, disruptive reductions in spending across the board. However, nobody is contending that we do that. The central claim for US single payer is more modest. Use the enormous administrative savings generated under single payer financing in combination with pharmaceutical savings to cover everybody with comprehensive benefits and no cost-sharing. Overall national health spending would, it is true, remain roughly the same (though we could better control cost growth moving forward). But this scenario of widespread hospital bankruptcies and the end of private (or semiprivate?) hospital rooms is a fantasy: nobody wants it to happen, and it’s not happening.

It’s worth noting that there is also a jarringly inconsistent aspect to single-payer critiques that warn of the threat to health care workers’ income. As Woolhandler and Himmelstein note in an article in the Huffington Post, the Urban Institute simultaneously asserted that the coverage expansion under single payer would lead to an enormous increase in spending on physician services — by $1.6 trillion over a decade!—while simultaneously asserting that physician salaries would be “squeezed.” Whatever one thinks of how much physicians should be paid, it’s hard how these would both happen at the same time.

Transitioning to single payer will not mean reducing our health care expenses to British levels: that is probably not possible, and is certainly not desirable. But that’s not to say that the savings from adopting a single payer financing system wouldn’t be substantial—we’re talking hundreds of billions annually on administrative savings alone, plus more by reducing drug prices to European levels. With that money, we’ll build a much more decent health care system for all to use without having to worry about the cost of being sick, of being pregnant, or simply of obtaining preventive care. No wonder a majority of the country wants it.

Physicians’ Proposal for Single Payer

Yesterday was an important day for the single payer movement.  We launched the “Physicians’ Proposal for Single-Payer Health Care Reform” at a 1 PM press conference at the National Press Club in Washington.  Dr. Robert Zarr, president of Physicians for a National Health Program (PNHP), presided.  Participants (from left to right in this photo tweeted by AMSA President Kelly Thibert) included co-founder of Public Citizen’s Health Research Group Dr. Sidney Wolfe, National Nurses United Co-President Karen Higgins, Dr. Claudia Fegan, Dr. Zarr, myself, and Dr. Steffie Woolhandler:

The Physicians Proposal is a detailed blueprint for a single payer system, as well as a comprehensive critique of the shortcomings of our current system.  It was formulated by a 39 member working group, co-chaired by Dr. Marcia Angell, Dr. David Himmelstein, Dr. Steffie Woolhandler, and myself.  It was published yesterday alongside an editorial we wrote in the American Journal of Public Health.  The proposal is available here (and is open for more endorsements), and the AJPH editorial is open-access and available here.

The release has gotten some good coverage so far, including in:

US News & World Report (“Doctor Group Pushes for ‘Single-Payer’ Model”)

The Guardian (“‘We need fundamental changes’: US doctors call for universal healthcare”)

The Washington Post (“2,000 doctors say Bernie Sanders has the right approach to health care”)

The Hill (“More than 2,000 doctors join call for single-payer healthcare”)

Morning Consult  (“More Than 2,000 Doctors Back National Single-Payer Proposal”)

I also had the opportunity to discuss single payer on Thom Hartmann’s show “The Big Picture,” which aired at 7 PM last night:

 

The fight for universal health care in America continues.