The Free Market Hasn’t Worked For Healthcare. How About Single-Payer?

The administration of Gov. Gavin Newsom is poised to launch the latest and newest effort in California’s decades-long flirtation with single-payer healthcare as the remedy for our current overpriced, underfunded and inefficient delivery system.

Included in the current-year state budget is the creation of the Healthy California For All Commission to study and devise strategies to close the health insurance coverage gap and make healthcare more affordable. “California must make continuing progress towards universal coverage, while advancing cost containment, quality improvement and as necessary, reorganization of state programs to meet these challenges,” administration officials concluded in their correspondence to potential contractors who may be interested in working on this project with the commission.

I became interested in the single-payer strategy after decades of watching market-based approaches fail to constrain cost growth rates reaching twice and, in some years, almost thrice the overall growth rate in the U.S. economy.  We are but just a few cents shy of marking one of every five dollars making its rounds in our economy for healthcare, which is insanely high, regardless of the measure one uses to determine value.  Moreover, in just five more years at the current rate of inflation, healthcare will consume one of every four dollars spent in our economy. That is worrisome, but what concerns me more is the rise in the direct costs to consumers.  Over the last 15 years, workers with healthcare coverage saw their out-of-pocket costs increase by more than double our overall inflation rate and more than wage increases by almost 50 percent.  Employers also took a hit.  For the five-year period ending in 2018, the rate of increase in healthcare premiums doubled. 

So, here is where I get into trouble. My colleagues, friends and social network is made up mostly of leaders in healthcare who look at me like I must have been replaced by an alien from another planet when I suggest to them that it may be time consider strategies other than market forces to get a grip on the cost problem we have with healthcare.  After all, we have been waiting since the mid-eighties –when cost-based reimbursement was replaced with contracting strategies-- for market forces to work its magic.  It seems to me that the only thing we got out of waiting is a healthcare market that is becoming less competitive and more oligopolistic and oligosonistic (where a small number of large buyers control the market), as leaders of hospital-centric healthcare delivery systems and health insurance companies seek to increase their market power through mergers and acquisitions. Really, how is reducing competition is good for consumers? 

My industry friends need not rush to fire their M&A and business development consultants just yet, as I’m all but certain that the waivers needed to include our Medicare and Medi-Cal programs in a single-payer model are far from forthcoming, and these programs account for more than half of all private-sector healthcare spending in California.  Add to that the $400 billion price tag the numbers crunchers working for California’s non-partisan Legislative Analyst’s Office placed on the model, and we saw any enthusiasm state lawmakers had about implementing single-payer any time soon turn into a cold, sobering shower.

That said, coming to the table and joining in on a real discussion on how best to tame the rising cost of healthcare is what my industry friends must do.  We must address this issue.  I’m with President Barack Obama regarding Cuba and President Donald Trump regarding North Korea. Both concluded that over a half century of reliance on a failed foreign policy is enough. So, too, it is time to try a new approach to reign in healthcare spending and inflation, something other than continued reliance on market forces.

Jim Lott is a healthcare scholar and consultant in Los Angeles.