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States Where Single-Payer Health Care Could Work

Image: States Where Single-Payer Health Care Could Work
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By Megan McArdle   |   Wednesday, 31 May 2017 07:18 AM

Single-payer health care is the dream that just won’t die.

Eight years ago, when President Barack Obama came into office, there were folks on the left who hoped that somehow, his campaign concept of health-care-reform-by-mandate-and-subsidy could be transformed into a single-payer system like Britain’s or Canada’s. When it became clear that this wasn’t going to happen, they latched onto the idea of a “public option” that could, by out-awesoming all the private insurers, function as a backdoor route into a unified government system.

The public option vanished from the final bill, but the dream did not die. In 2014, as Obamacare finally rolled out, Vermont proposed building its own single-payer system, and hearts went a-flutter at the thought that plucky Vermont might show the rest of us how it’s done.

I predicted at the time that the plan would be too expensive, and therefore never go into effect. Eventually Vermont’s government confessed that it was too expensive, and would not go into effect. Vermont was not done with us, however, and in 2016, Vermont Senator Bernie Sanders kind-of-almost-came-close to winning the Democratic nomination on the slogan of “Medicare for All.” He lost to Hillary Clinton, and she lost to a candidate whose platform turns out to look more like “Medicaid for None.”

Hope springs eternal, however, and so do single-player plans. Their last run at the federal government having failed (along with a referendum in Colorado that voters rejected four to one), advocates are back at work in state legislatures. California and New York are both considering plans at the moment, and not just in the “Hmm, interesting. What’s for lunch?” sense. Say what you want about single-payer advocates, but say this too: You can’t stop them with much less than a Howitzer.

Of their plans, there are a few things to say. The first, and most obvious, is that none of them have solved the main obstacle to enacting single payer in the U.S.: the price tag.

Casual believers in single payer often eyeball European governments, eyeball what the U.S. spends, and conclude that there must be fabulous cost savings to be had from a single-payer system, making it easily affordable even for states on a tight budget. Folks actually charged with designing a single-payer system know the truth: single payer will not make health care cheap. Analyses by single-payer-friendly sources (such as Gerald Friedman of UMass Amherst, and the heavily Democratic California State Senate) tend to indicate that moving to single payer would involve roughly doubling the budgets of even high-tax, high-spending states like New York and California. Less friendly sources suggest that the cost might be substantially higher than that. Unless they find some way to dramatically slash the incomes of health-care workers (not gonna happen), then single-payer advocates are going to have to persuade voters to support breathtaking tax increases. It hardly needs pointing out that this will be difficult.

The second thing to say is that New York and California represent absolutely the best possible scenarios for single payer in this country. If they can’t make it work (and I’m betting they can’t), then single payer cannot be done in this country--full stop, end of story, print as written.

These states are, obviously, extremely liberal and firmly under the control of the Democratic Party. That is a huge advantage in the battle for single payer. But it is not the only advantage that they have. New York and California are also, for example, very big. That’s important for a state looking to move toward single payer. Though not, as you might think, because health care offers economies of scale (it does, some, but it also offers diseconomies of scale: the bigger your state and population, the more layers of bureaucracy that will be required to supervise its health-care system, making it more prone to inefficiencies and fraud).

For these states, size is helpful because they don’t have to worry so much about people, companies or doctors moving to other states when confronted with the high taxes and limited choices of your new health-care system. Bigger states also contain more health-care options within state borders, which mitigates a problem that confounded Vermont: how to get providers in other states to accept the reimbursement schedule necessary to make your health-care entitlement even remotely affordable.

That advantage is not perfect, to be sure. New York’s population and economy are concentrated around New York City, which is, from the perspective of the tax man, inconveniently close to two neighboring states. Still, all else equal, if you’re going to be implementing a statewide single-payer system, you’d always rather be a bigger state than a smaller one.

And if you’re going to be implementing a statewide single-payer system, you would very definitely prefer that your state have a major industry which

  1. Throws off boatloads of cash, and
  2. Is somewhat difficult to move or outsource.

California has Hollywood and Silicon Valley; New York has finance and entertainment. These businesses could theoretically take themselves elsewhere, but ironically, these days it’s probably harder to move a knowledge cluster than it is to move a factory. Each business gains enormously from proximity to a high-quality labor pool, and the cross-firm information flow that runs through local social networks. Moving your firm away from such a cluster is very difficult, and so is coordinating a mass migration to somewhere with lower taxes and more health-care options.

When you add up the benefits of the political landscape, the geography, and the economic terrain, it’s clear that these two states are far and away the best case for single-payer in this country. Which is why we should all be watching what they do very closely. If they take the plunge -- well, maybe they’ll show the rest of us how it’s done. But if single payer can’t make it through these legislatures, then its American advocates are going to have to either resign themselves to a lifetime of certain failure, or find themselves another dream.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of “The Up Side of Down: Why Failing Well Is the Key to Success.”

© Copyright 2017 Bloomberg L.P. All Rights Reserved.

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Single-payer health care is the dream that just won't die.
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