Proposed changes to federal health care legislation have sparked a national debate about the rising costs of health care. Recent headlines prompt the questions: Why does health care cost so much in the first place? Is California justified in thinking that a single-payer system could save the state money?
Perhaps the biggest reason that health care is so expensive in the United States is administrative costs, which comprise 25.3% of all health care spending in the U.S., according to CBS News. Because there are so many payers involved in the system, hospitals and physicians need to negotiate amongst them all to get the bills paid, and it requires a multitude of billing clerks to get the job done. This wouldn’t be necessary in a single-payer system.
So is a single payer system the answer? The New York Times wrote that in a single-payer system, virtually no money is spent on competitive advertising. For a private insurer, advertising could comprise as much as 15% of total costs. They also stated that in a single-payer system, the biggest cost saving measure is that the government has the opportunity to negotiate with the provider to secure a more favorable rate. For example, in 2012 a coronary bypass in the United States cost an average of $73,000. In France, a country that utilizes a single-payer system, the average cost was less than $23,000. The numbers don’t lie.
The challenge of adopting a single-payer systems lies in the structure of the current U.S. public healthcare system and the public perception of its expenses for taxpayers. In most other countries with a single-payer system, the entire population is covered, and the majority of these individuals don’t have costly health care needs. Components of the American public health care system that currently utilize a single-payer model, such as the VA, Medicare, and Medicaid are designated for those who will undoubtedly incur high medical costs because of their demographics. These programs are not an accurate barometer of the cost for taxpayers if the U.S. adopted a national single-payer system to cover everyone.
CBS News consulted economist David Cutler of Harvard University, who believes it would be much easier to begin lowering health care costs once everyone, or at least the vast majority of the population, is insured. I disagree with this statement. I don’t believe it’s a matter of everyone being insured as much as it’s a matter of the high risk pool being spread as thin as possible. That can only be accomplished with a one payer system.