Senate Republicans’ failure to enact a health reform bill has created a big policy vacuum, and liberals in Congress and elsewhere are eager to fill it.
Their solution: Move to a “single-payer system.” That anodyne term actually means a government monopoly over the financing and delivery of health care.
Rep. John Conyers (D-Mich.) has already introduced a single-payer bill. His “Medicare for All” proposal has 117 cosponsors, more than half of all House Democrats. Sen. Bernie Sanders, the Vermont Independent, says he will soon introduce a “Medicare for All” bill in the Senate. It will doubtless be based on a plan he posted on his website last year.
The “Medicare for All” moniker is politically attractive, due to the existing program’s popularity among seniors. But traditional Medicare is neither a purely single-payer system (e.g., most participants rely on private plans to fill crucial gaps in coverage), nor is it without problems. For example, it has generated reams of costly regulations, shifted administrative costs to doctors and other medical professionals, and burdened taxpayers with tens of trillions of dollars in long-term obligations. Some model.
The economic dynamics of a government health care monopoly—like Britain’s National Health Service—are tiresomely familiar: broad-based and heavy taxation and the imposition of government cost controls. Those controls may take the form of an overall spending limit or reductions in payments to health and medical providers. The result is usually trouble for patients getting access to care, mainly because of lengthening waiting lists and, in some cases, denial of service.
State attempts to implement single-payer health systems have thus far been met with failure. But California seems poised to give it a try.
The Healthy California Act, a “single payer” bill that would displace existing private and employer-based coverage, has already passed the state Senate. Coverage would extend to illegal immigrants and—if the state gets the necessary federal waivers—persons enrolled in Medicare and Medicaid, regardless of their preferences in the matter.
To control costs, the proposal would create a politically appointed board (the Healthy California board) to set payment rates for doctors and other medical professionals. Working against these cost-cutting measures, however, are provisions to prohibit co-payments and deductibles, which today are routine in both Medicare and private insurance. Abolishing these consumer “skin-in-the-game” features on the front end guarantees higher overall program costs on the back end.
And costs are a huge problem. Analysts estimate the California plan will cost anywhere from $330 to $400 billion dollars annually—an amount larger than California’s entire state budget. (Total state spending amounts to $183 billion for FY 2017-2018.)
A state legislative analysis estimated that the proposal would require a $200 billion tax increase, with the remaining $200 billion coming from the federal, state, and local funds now financing Medicare and Medi-Cal (the state’s Medicaid program). The analysis estimated that a new 15% payroll tax could secure the additional $200 billion in revenues needed to fund the program.
A tax hike of this magnitude, of course, would only intensify the out-migration of California’s middle class, exacerbating the state’s financial woes.
California lawmakers seem to think that they will somehow manage to do government health care “right.” But it hasn’t worked out so well elsewhere.
Consider what happened in Sanders’ home state. In 2014, former Vermont Gov. Peter Shumlin realized that a proposed 11.5% state payroll tax, plus the premiums needed to fund the state’s “single payer” initiative (“Green Mountain Care”) would cause serious “economic disruption” for families, businesses, and the state as a whole. The plan—which also included physician and hospital payments—quickly died.
Last year, a “single payer” initiative in Colorado faced similar problems. The “ColoradoCare,” with its estimated $25 billion annual price tag, called for a 10% payroll tax. But even that hike wouldn’t have been enough. The Colorado Health Institute estimated that, even with federal Medicaid matching funds kicked in, ColoradoCare would run a $253 million deficit in the first year of operation alone.
When the Colorado initiative was put up to a vote in a popular referendum, it failed spectacularly. Almost three out of four voters opposed to it.
Nonetheless, state experimentation, particularly in health policy, is a good thing. In America’s federal system, states should have broad authority to experiment in public policy, to try or test new and different solutions to public problems.
Effective this year, however, states have to get waivers from federal rules. Under Obamacare, liberal states find it easier to get waivers, since their applications are compatible with government-centric health programs, like “single-payer.” States pursuing conservative, market-based solutions to health care problems, however, find that a harder task under current law.
Congress should loosen up Obamacare’s regulatory restrictions, level the playing field, and encourage state officials to pursue a wide variety of policy prescriptions—approaches that best fit the needs of their people and their own political culture.
What if one of these experiments fails? Washington can limit the damage by making sure that federal taxpayers won’t have to bail out state failures. That way, if “Healthy California,” for example, crashes and burns, the fallout will at least be limited to that state’s taxpayers, doctors, and patients.
That’s one of the advantages of state experimentation. But if Sanders and Conyers succeed in imposing a federal monopoly on health care, no American would escape the damage.
This piece originally appeared in The Daily Signal