I wrote a comment in DrSteveB's diary Is Massachusetts "Health Reform" a model for U.S.? stating that single payer cannot work at the state level. I was asked to explain my reasoning for this conclusion, and to support it with facts where possible. Unfortunately, the facts are going to be hard to come by, since no one has managed to mount even a vague attempt to try a single payer healthcare scheme at the state level. I can however site the facts of current regulations and situations that would completely subvert the goals and rationale of a single payer system at the state level. And I think it is not too far a stretch to assume that a failure would be highly undesirable.
What does a single payer system do?
To make any sense of my contention that single payer health plans won't work if implemented at the state level, you need to have a clear idea of why a sinlge payer plan works at all. When you look at health care and its reimbursement mechanisms, it appears to be a hopeless morass of unrelated accounting schemes, imaginary budgets, and perverse payment mechanisms. And that perception is in large part, correct as it applies to the present schema of health care. The myriad of different components of health care at the present time operate in a completely incoherent fashion, There is no unifying theme, no central purpose, no single vision of how health care should perform. Each component functions as an independent entity, trying in its own way to find out where it fits into the larger scheme of things, and trying to make some sense our of a planning and budgeting process that it really doesn't understand. Small wonder that we are so inefficient and wasteful. At the level of individual patients and physicians, we understand very well what the goals are. At the level of systems integration, we haven't a clue.
The genius of a single payer system is that it cuts to the core of the problem. When you design a system that creates a system vision for what is to be accomplished, the global budgeting mechanisms to allow payment and avoid re-work and waste, and the alignment of incentives for all participants, suddenly there is clarity that supplants confusion. The reason that single payer works is that all of the components are aligned to operate within the same frame of reference. Everyone's interest in the success of the system, of efficiency, and quality, and waste prevention is aligned. The alignment may not be perfect, especially at the beginning. But it is a whole new way of creating a massive win-win out of a traditional zero-sum game.
Now, I can hear the screams of protest from many different corners saying that I don't know what in the world I am talking about. "The savings in single payer comes from reducing the administrative expenses" one group will say. Another will insist "the savings comes from better preventive care". A third will insist that savings come from reduced defensive medicine. And all of these points of view are correct, along with others. The common ground among them is that they are all pieces of the more general idea of alignment of goals and incentives. If you doubt this, ask yourself to idendify any cost saving measure that single payer plans achieve, and then challenge yourself to differentiate it from the concept of alingment of incentives.
I want to emphasize the foundational aspect of this concept of single payer health care. There are obviously many elements and pieces that make up the unique character of any given single payer scheme. But this central core, this alignment of the goals and incentives, is the linchpin that makes it all make sense. If you lose this alignment because you are inattentive to the details that makes the alignment work, you risk losing the value that a single payer system creates. You may still create a system that you call single payer. But you will have doomed it to the same fate as our current mess.
Notice that for the purposes of this discussion, I am omitting all of the details that give a single payer plan its unique character. Those details are important for implementation, but not really relevant to this discussion.
Where is the problem with a state run single payer plan?
So, if you have read this far I am assuming you accept the idea that for a single payer plan to make any sense, it must be constructed in such a way that it maximizes the leverage it can achieve of alignment of incentives and goals. My next task is to show you the problems with a state run single payer plan that inherently limits the achievement of alignment of incentives. Bear with me, because I don't think it takes a lot of work to understand how the present health care environment sabotages this alignment:
I. Fragmentation of populations. The current health care environment has a number of overlapping insurance and entitlement schemes that defeat the notion of alignment. Mandatory participation in Medicare by the population over age 65, coverage by workers compensation benefits for some kinds of injury, differing eligibility for Medicaid, entitlement to Veterans benefits, and disability laws are some of the most obvious ways that fragmentation and stratification of the population occurs. The Federal government has a myriad of regulations in place that would severely handcuff any state that tried to cover all of its citizens under a state covered single payer plan. Without some way of controlling the costs of care or involving the providers in the loop for all of the care provided in these circumstances, states would be unable to control the situation in a way that would make their efforts viable.
II. Eligibility and residence issues Any state enacting a single payers system would find itself having to deal with guests from outside its borders as well as desperate people living on its borders seeking to receive health care. Citizens of the state would need to have some kind of coverage available when they traveled to other states and to other countries. All of these situations create issues in which alignment becomes almost impossible to achieve by state governments.
III. Administrative oversight and infrastructure needs Successful implementation of a single payer system requires expansion of the planning process to leverage opportunities to optimize value. Evaluation of effectiveness of medications, protocols, and specific therapies, and capital expenditures are some examples. Creation of the infrastructure to achieve these goals in a way that achieves credible alignment of incentives probably exceeds the resources and expertise available to individual states.
IV. Federal mandates, regulations, and controls There are multiple Federal laws dictating how health care delivery is authorized, constituted, billed and documented. There are still more laws dictating corporate compliance with regulations regarding quality of care, certification of professional status, environmental regulation, labor practices, etc. The current burden of these laws pushes many health care entities to the edge of their ability to comply. Alignment of incentives dictates that these laws and rules would be streamlined under a centralized agency to reduce the burden and free up resources so that more health care could be provided. This would not be possible under a state single payer system, since Federal laws and rules would remain in place.
This list is incomplete, but I hope it is sufficient to demonstrate the difficulties that a single payer system at the state level would encounter. It is my belief that in combination, these inescapable burdens would simply make a state's attempt to create a single payer system untenable.
For those of you looking for more documentation, links, and other supporting evidence, I apologize for their absence. Certainly plenty of references are available for those of you who wish to explore the web of regulations that exist in the health care industry and that add to the bureaucratic cost of providing health care. My instinct is that none of you really want or need to read the gory details to accept the truth of its existence. As for the pieces that can't be documented by direct links or references, I believe that the case for my examples being fair approximations of the truth speaks for itself. But hey, feel free to disagree in the comments.
Thanks to tegrat, Unbozo, and zeke L for challenging me to write this. I think. I guess I'll know better after I read the comments.