A Better Alternative to the Affordable Care Act

The employer mandate of the Patient Protection and Affordable Care Act (PPACA) has been delayed by the Obama administration for one year [1], and while that action may not be indicative of an inherent flaw in the system’s design [2], it does highlight a weakness in the plan that hasn’t been given much attention. The weakness is that employers will continue to bear the cost of employee health coverage to the detriment of their profitability. While providing insurance for employees will only exist as a mandate for those companies that employ at least 50 people [3], smaller firms will not uniformly seek to avoid doing so as they try to attract the best and most qualified employees.

It might seem strange to an American reader that a system involving the provision of health insurance by employers would be characterized as a weakness. Such employers are, after all, exactly the ones that prospective American employees seek out. But the fact that American employers have to meet this burden places them at a competitive disadvantage with respect to companies from countries that have a single-payer universal health coverage system, which is the system of many developed nations, including nearby Canada. [4]

Under a single-payer system the government is the only or the major health insurer, creating a monopsony or near monopsony in the health care market. A monopsony is a situation where there is one buyer for many sellers, the opposite of a monopoly where there is one seller for many buyers. Just as a monopoly places control of prices in the hands of the seller, a monopsony tends toward the opposite effect. Of course, both a monopoly and a monopsony are limited as to what they can do to control prices; a monopoly cannot charge more than a sufficient number of buyers can pay, and a monopsony cannot insist on prices that will make it impossible for sellers to meet their costs or be profitable. But where the price of healthcare has been rising precipitously, as is the case in the United States, the implementation of a monopsony in that market would provide a logical and effective remedy.

A single payer system has another advantage in that it involves less administrative costs than does a system with multiple insurers. [5] One reason for this is that health care providers have to process paperwork for a number of different insurers where there are many of them, as opposed to a single payer system where providers only have to bill a single insurer and hospitals can negotiate a lump sum budgeted amount and don’t even have to attribute charges to individual patients.

Contrary to its reputation, a single payer system doesn’t require that there be one single health care provider that is a government employee. It is wrong to call it socialized medicine. It may, with some justice, be called socialized health insurance. But there is nothing in a system of single payer universal health coverage that prevents every physician and hospital from being both private and profit seeking.

What’s more, there is nothing in a single payer system that restricts either the quality or amount of health care one receives. Private insurers, motivated by the need for profits, actually have that added incentive to deny coverage in circumstances where there might be ambiguities in insurance contracts. Health insurance CEOs must answer to stockholders, whereas members of Congress or state legislatures, which would have ultimate oversight of a single payer plan, must answer to the electorate.

The specter of a centralized bureaucracy is a legitimate concern, but it is only the funding that needs to be centralized in a single payer system. Administration of the plan could be handled at the state or even local level, and responsibility for that administration be given to state or local legislatures.

What would be a real advantage of a single payer system over what is provided by the PPACA and the system that preceded it would be that it would really cover everybody. According to the Congressional Budget Office, some 23 million Americans will still lack health insurance in 2019 after key provisions of the PPACA have been in effect for five or six years. [6] Among those will be people for whom health insurance premiums will cost more than 8% of household income. So under the PPACA there will still be certain low-income people who will remain marginalized by the healthcare system.

A single payer plan would cost less, cover more people, and be less burdensome to businesses than either the PPACA or the system that preceded it. But it gets very little consideration in policy making circles. Misinformation and disinformation about what it would entail has been useful in the cause of preventing its adoption and implementation.

Jack Quirk

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