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Articles    H3'ed 4/30/12

Single Payer Health

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I received enough comments on my last article that I thought I'd respond to all of them in a new blog!  Here goes!

Who should pay for health care?   If health care is a right and not a privilege and we should all contribute to each other's wellbeing, then how do we do that?   Taxation is the main means for governments to raise money, though I suspect that the current profits being generated in our capitalistic health care could go far to reducing the actual cost of health care if we no longer had shareholders and owners to please and CEO's of hospitals and health systems were public servants instead of capitalists.   The last time I checked the CEO of Health Care America was making an annual salary of 150 million dollars plus stock options and other perks.   We wouldn't tolerate salaries like that in the private sector.

I received enough comments related to single payer health systems on my last blog to make me want to write another essay on this topic (rather than respond to each comment one-by-one).

U.S. health care is the most expensive in the world by a factor of four and results in ratings that average about 27th in the developed world, all factors considered.


I think we should subsidize each other's health care because none of us are willing to sit and watch someone die in the waiting room because they haven't bought health insurance.   The Republicans argue that it is their right to eschew health insurance, but I'm sure few people would renounce health insurance if they could afford it.   Their argument is specious because few of them would stand by and let people die in the waiting room, either.   I'm quite sure some would, however, as they would see it as the will of God.   Like the Catholic Church in the Middle Ages, they would not want to interfere between God and man by helping a person to recover from God's punishment in the form of illness.   Once most of us agree that people can't just be allowed to die, then we have to pay for their care and some people's care is more expensive than others.   How are we to answer the question of people's own behavioral contributions to their ill health?   Should smokers pay a higher tax than non-smokers or is that factored into the tax on cigarettes?   Should people who regularly exercise pay a lower tax than sedentary people?   Should vegetarians be taxed at a lower rate than fast food aficionados?   The list is endless.   Figuring out the nuances of human behavior and how they affect health occupies the lives of endless epidemiology departments in public health schools around the world.  


The surprising downside (though maybe it's not) from some of single-payer health is that your health and your health related behaviors become my business.   I have an interest (because I pay for your illness) in controlling your behavior because "bad" behavior costs me money.   Therefore, matters that we have considered private are now public.   We must debate the cost of providing contraceptive care to which some Republicans object.   From a cost perspective, birth control is much less costly than children.   Only poor people could not afford birth control and the costs of not using it are then borne by all of us in the form of paying for the cost of their raising their children or our raising their children.   One Republican answer would be that many childless families (mostly white) are available to adopt children and should do so.


In the International Journal of Health Care Finance and Economics from 2009 (Volume 9, pages 1--24), in a paper on "Why U.S. health care expenditure and ranking on health care indicators are so different from Canada's", A. H. G. M. Spithoven writes about how the U.S. spends most of all developed countries on health care. Nonetheless, the U.S. ranks relatively low on health care indicators. This paradox has been known for decades. The turning point comparing the U.S. and Canada was in 1972. Health expenditure as a percentage of GDP was higher in Canada than in the USA from 1960 until 1972. Since 1972 expenditure on health care has been higher in the U.S. than in Canada.   The U.S. and Canada are two countries that are sufficiently similar to make comparisons useful. The comparison of factors influencing health care expenditure in the U.S. and Canada in 2002 revealed that health care expenditure in the U.S. is higher than in Canada mainly due to administration costs, Baumol's cost disease and pharmaceutical prices. It was not inefficiency in providing health.


What is Baumol's cost disease?   Assuming that wages in low productivity sectors must keep up with wages in high productivity sectors, prices for labor intensive goods or services will rise relatively to prices of goods and services produced by the high productivity sectors (McPake et al. 2003).

Productivity in health care is difficult to improve because health care relies for a large part on a direct face to face relation between the health care worker and the patient.   For example, washing a patient needs time that cannot be reduced beyond a certain point. Health care, where a large part of cost comes from staff looking after patients, is a low productivity sector. Baumol's costs disease may be overstated because the "output" used in measuring productivity in health care fails to capture major improvements in quality or results. So, while the cost of medical spending shot up from 1960 to 2000, largely as a result of the development and wide-spread use of new medical techniques, the cost per quality-adjusted life year decreased.   Health indicators for both males and females, such as life expectancy at birth and infant mortality rates, reveal that the quality of health care did not improve in the U.S. in comparison to Canada in the 1960--2000 period (United Nations 2005 data).


Administration costs prove to be a significant variable to explain the difference in health care expenditure between the U.S. and Canada. America's health care is characterized by a fragmented payer system, while Canada has a single-payer system. The first has less economies of scale in administration than the latter because competition among providers of health care, on the one hand, and competition among insurers of health care on the other, result, among other things, in extra expenses in billing and administrative operations of health care providers who have to deal with 100s of payers and different rules and prices.


Overhead costs in Canada's single payer system are much lower than in the U.S. with 72 US$ health care administration expenditure per capita in Canada in 2002 and 367 US$ per capita in the U.S. For 1999: "In the United States, health care administration cost $294.3 billion, or $1,059 per capita [. . .] In Canada, health care administration cost $9.4 billion, or $307 per capita [. . .] After exclusions, administration accounted for 31.0% of health care expenditures in the United States, as compared with 16.7% of health care expenditures in Canada". Using the same broad definition, this big difference is also reported by Himmelstein et al. (2003): "The U.S. wastes more on health care bureaucracy than it would cost to provide health care to all of the uninsured. Administrative expenses will consume at least $399.4 billion out of total health care expenditure of $1,660.5 billion in 2003. Streamlining administrative overhead to Canadian levels would save approximately $286.0 billion in 2003, $6,940 for each of the 41.2million Americans who were uninsured as of 2001. This is substantially more than would be needed to provide full insurance coverage."

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Lewis Mehl-Madrona graduated from Stanford University School of Medicine and completed residencies in family medicine and in psychiatry at the University of Vermont. He is the author of Coyote Medicine, Coyote Healing, Coyote Wisdom, and (more...)
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