If universal coverage is the sine qua non of health-care reform, then I can understand the appeal of a single-payer system, such as the one Bernie Sanders recently proposed. Single-payer is a conceptually simple way to ensure that every American receives the same coverage. Advocates are on much shakier ground, however, when they claim that single-payer is not merely more equitable, but more cost-effective as well.
Robert Frank made the familiar cost-effectiveness case in the New York Times earlier this summer, and, as usual, it left me with more questions than answers. Frank made three points. First, administrative costs are lower in single-payer systems. Second, single-payer systems save money by not having to advertise. Third, the government can use its monopoly on demand to negotiate lower fees paid to providers.
Even if all three points are true, it is unclear why they are unique to health care. Someone arguing for single-payer plumbing or single-payer automotive maintenance would probably make the same points. To what extent is the case for single-payer health care different from the case for government financing of all goods and services? Frank doesn’t say.
As for whether costs are indeed lower, “you get what you pay for” would seem to apply regardless of whether the payer is the government or a private insurance plan. Want better fraud detection? Administrative costs have to go up. Want more program utilization? Increase advertising costs. Want better doctors? Compensate them more. How a single-payer system is supposed to change this basic relationship between cost and quality is not clear.
Compare health care with education. Public schools are essentially single-payer education systems within the areas they cover. When was the last time we heard anyone argue that public schools are a great tool for containing education costs? When has Bernie Sanders or any Democrat called for the government to push down teacher salaries in order to save money? Any suggestion that teachers should be paid less is met with the obvious counter-argument that teaching quality would suffer. And yet single-payer health care, which comes with the explicit promise to pay doctors less, is supposed to reduce costs without reducing quality. By what magic?