Try modest health care reforms before any move to single-payer system

March 17, 2006|By MICHAEL KINSLEY

In the March 23 New York Review of Books, Paul Krugman makes the case for a health care system that is not only "single-payer," meaning that the government handles the finances, but also in some respects "single-provider," meaning that the government supplies the service directly.

Mr. Krugman and his co-author, Robin Wells, correctly diagnose the problem with the Bush administration's pet health care solution of encouraging people (with tax breaks, naturally) to pay for routine care a la carte instead of through insurance.

Annual checkups and sore throats aren't bankrupting us: It's the gargantuan cost of treating people who are seriously ill. People who can get insurance against that risk would be insane not to, and the government would be insane to encourage them not to.

Most lucky Americans with good insurance are doubly isolated from financial reality: They don't pay for their health care and they don't even pay for most of their insurance; their employers or the government pays. Of course, one perversity of the current system is that you can lose your insurance either by losing your job or by taking a job (and losing Medicaid).

Mr. Krugman and Ms. Wells are persuasive about the nightmarish complexity and administrative costs of the current fragmented system. But they don't do much more than assert that a single, government-run program would be more efficient.

Mr. Krugman and Ms. Wells duck the issue of rationing - saving money by simply not providing effective treatments that cost too much. They say, let's try single-payer first. So I say, let's try some more modest reforms before plunging into single-payer.

Mr. Krugman and Ms. Wells note repeatedly that 20 percent of the population is responsible for 80 percent of health care costs. But that doesn't explain why health insurance should be different from other kinds of insurance. The small fraction of people involved in auto accidents in any year is responsible for almost all the cost of auto insurance. You insure against the risk of being in that group.

What's different about health insurance is the opposite: Much of it isn't insurance at all but a subsidy. The value of the subsidy is the difference between what the individual pays and what the insurance would cost in the free market. If people were buying health care or insurance, with their own money, they might or might not spend too much, but no one else would need to care if they did.

A subsidy has to take from someone and give to someone else. Everybody can't subsidize everybody. In other words, society cannot give the average citizen better health care than the average citizen would choose to buy on his or her own. And this is what people want. Mr. Krugman and Ms. Wells believe that the average citizen will be sated by whatever bonus comes out of single-payer efficiencies. In this day of $100,000-a-year pills, I doubt it.

Mr. Krugman and Ms. Wells say that private insurance is flawed by "adverse selection": Insurance companies will avoid riskier customers. Only a single payer can insure everybody and spread the risk. But anyone is insurable at some price - a price that reflects the cost they are likely to impose on the insurer.

If you're not as hopeful as Mr. Krugman and Ms. Wells about being able to avoid rationing, you face the question: Should people be allowed to opt out of rationing if they can afford it? That is, if the system won't pay for the $100,000 pill, should you be able to pay for it yourself?

Fear that this would not be allowed helped to kill the Clinton health care reform 13 years ago. But explicitly granting some people life and health while denying these things to others is hard, even though this disparity has existed throughout history and is probably unavoidable. In fact, a serious defect of single-payer is that it makes all sorts of unbearable trade-offs explicit government policy, rather than obscuring them in complexities.

There are the makings of a deal here. Better-off or better-insured people could be told, individually or as a group: Give up your health care subsidy and you may opt out of any rationing-type restrictions that the system imposes. And if a few smaller reforms like that don't work, maybe it will be time for single-payer.

Michael Kinsley is a social commentator who lives in Seattle.

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