“Our health care mess: Now what?”

The argument for an all-payer system.

Waiting for a jab in America. (Wikimedia Commons)

JANUARY 23—Among the numerous other disasters the Covid–19 pandemic has wrought, it has proven to be an existential threat to America’s largely employer-based health care provision. This long-established system has indisputably added greater weight to the challenges of dealing with this crisis.This faces those who favor and depend on the principle and structure of employer-based medical insurance with a conundrum they have heretofore been able to dodge: The Covid–19 pandemic makes it perfectly clear it is not long-term sustainable that the loss of a job often means the loss of access to healthcare. This stark contradiction is exacerbated by a well-known problem: For Americans, ordinary medical services and treatments, not least pharmaceuticals, remain grossly overpriced by international standards and with very middling outcomes.

Debate until now has counterposed this unwieldy, inefficient system with single-payer alternatives such as Medicare for All. But given the massive disruption this would create in the existing health care structure, it behooves us to consider another alternative: namely, what is known as an all-payer system. It has political advantages over M4A insofar as it would not entail a head-first attack on the powerful private health insurance lobby, but it would still create a degree of centralization that would lower costs for Americans while  facilitating a better logistical response to pandemics going forward (particularly in the area of vaccine distribution).  And it works well elsewhere, notably in Germany.

In essence, the incoming Biden Administration has two interrelated problems to address: One, a long-standing problem connected to the exorbitant costs associated with employer funded health plans, the source of healthcare delivery for almost half of all Americans, and two, a healthcare system where access is largely predicated on employment, which in turn mitigates our ability to control the pandemic. No question, introducing a major healthcare reform in the midst of a severe pandemic is challenging. But the problem isn’t going to go away. Until the U.S. deals with the health crisis and gets the virus infections under control, it cannot hope for a sustainable economic recovery, especially as other Covid–19 types of crises lying ahead in our future, as the epidemiologist Laurie Garrett, presciently forecast years ago. 

The problems have been even more acute for those of the now-estimated 58 million people working in the so-called “gig economy” (a feature of which is the general lack of private employer health insurance coverage). This is why the Affordable Care Act remained vulnerable to the GOP’s attacks on the system—although Donald Trump himself never delivered a serious alternative during his time in the White House (a fact recently lamented by Republican Ohio Representative Anthony Gonzalez).

The Biden administration must therefore grasp the nettle. The early signs,  however, are not good. The president’s initial proposals make no structural changes to address rising costs while contributing further to the private health insurance industry’s skyrocketing profits. Here are Andrew Perez and Julia Rock in Jacobin earlier this week:

Biden’s plan would shovel billions of dollars to private health insurers by providing subsidies for Americans to buy coverage through the Affordable Care Act marketplaces, which are far more expensive than government health care programs and have at times been plagued by high rates of claim denials. The plan would also subsidize COBRA continuation coverage through September, allowing workers to keep their employer health insurance plans when they’re laid off.

Whatever one’s political beliefs, or one’s economic stake in a privatized health care system, the reality is that the pandemic is a social (as against individual) problem that requires us to address the costs and accessibility of health care. This is lately even more urgent, given that 10 months after the initial virus-related economic shutdown, we are now living through a second wave of infection-reduced activity against a backdrop of economic contraction. The cushion provided by the CARES Act has largely run its course. Unemployment and business failures of all sizes are accelerating again—this is all readily evident to the public—along with a ticking bomb in the health care system: It cannot ensure pandemic mitigation via economic restrictions when, for very many, access is predicated on the very employment put at risk by those restrictions. The latest set of restrictions has led to yet more layoffs in the hospitality and recreation sectors, which has pushed the U.S.GDP back into contraction.

American healthcare today is a free-for-all.  Each private insurer (or third-party administrator of self-insured employers) negotiates separately with each healthcare provider (e.g., hospitals, primary care physicians, local pharmacies, therapists, etc.)to the point one can experience significant variations in price for the same service across the country.

This doesn’t happen in a pure single-payer system because you have a single public or quasi-public agency that takes responsibility for financing healthcare for all residents and uses its “monopsony power” to make bulk purchases and thereby keep prices down.The U.K. and Canada are two of the leading examples of a pure single-payer system (although the U.K. does offer some forms of supplemental private insurance).

The U.S. government does this to a degree via Medicare. However, the vast majority of people under age 65 have the experience of a hodge-podge of private insurers, for-profit hospitals, and other players that add cost without adding value.The free-market model doesn’t work because, put simply, purchasing health care isn’t the same as buying a smart phone or shopping for groceries.For one thing, one often doesn’t know in advance what kind of “care” one needs to purchase. A routine trip to the doctor might suddenly show the need for an emergency triple bypass(which doesn’t often give the “consumer” time to explore the most cost-effective options). For another, in the absence of price controls of any kind hasn’t exactly given the United States a massive qualitative edge in health care provision, as the Commonwealth Fund has illustrated:

1. The U.S. ranked last place among the 11 countries for health outcomes, equity and quality, despite having the highest per capita health earnings.

2. The U.S. also had the highest rate of mortality amenable to healthcare, meaning more Americans die from poor care quality than any other country involved in the study.

3. Poor access to primary care in the U.S. has contributed to inadequate chronic disease prevention and management, delayed diagnoses and safety concerns, among other issues.

Consequently, a growing number of Democrats have advocated moving to full-on “Medicare for All,” a single-payer system (although the new president is not among them).The argument against single-payer is that it is problematic to introduce such widespread change into a system against the backdrop of a raging pandemic.

But there is another way, which is potentially less disruptive:  an all-payer system.

How would an all-payer system work in the U.S.? The late Uwe Reinhardt, a noted health care economist, put it quite simply: “All private and public insurance programs in a region would pay all physicians, hospitals, and other providers of health care on the basis of a uniform fee schedule common to all payers, and the cost of uncompensated care rendered to uninsured patients would be covered by a separate fund.” In effect, by centralizing the bulk purchasing power of the insurance providers (whether public or private insurers), you give them the leverage to control prices, much as occurs under a single-payer system. In countries where such a system currently exists—Germany, Switzerland, and Japan are good examples—rates are established through negotiations between payers and providers; as is the case in Germany, this usually covers two to three years, which gives a greater degree of cost certainty and allows providers rationally to plan and allocate resources more efficiently.

And under a uniformly imposed fee schedule, the cost of, say, an appendectomy or a cancer treatment remains the same, regardless of one’s insurer, the hospital, or the state in which one lives. Of course, there would have to be antitrust exemptions built into the proposal, as insurers today never jointly negotiate to establish one single price for various procedures or drugs, because that would be deemed to be collusion.

The big advantage of all-payer is that the administrative burdens are significantly reduced—not to mention the cumbersome complexity of our current health care system (a complexity that is encouraged by health care providers, as it generally means fatter profits).

This kind of a system still entails some change to what we have today, but it does not cut against the grain of the existing structure. Rather, it seeks to centralize it to a degree so as to bring down overall healthcare costs. And while there are some risks in implementing reforms in the midst of a health crisis (“legislate in haste, repent at leisure”), let us note in this connection: The executive branch could issue an extraordinary measure setting pricing rules on the critical range of medical goods and services most needed to address the pandemic, with a promise to provide adaptive remedies to any structural costs of enacting. It would also need to be combined with some sort of public component to ensure universal coverage, so that economic restrictions that create additional unemployment do not result in a loss of health care access (and thereby undermine efforts to curb the spread of Covid–19).

The German system provides a good template for the U.S., and given that even in GOP circles there is a new openness to consider importing industrial structures from that country (such as work councils and co-determinist board structures), some might well consider this is an alternative to Medicare for All. In the U.S., the most efficient and least disruptive way of covering the uninsured in a structure that replicates the German one outlined above by Reinhardt would be via the expansion of Medicare.

In essence, the goal is to ensure that everybody pays the exact same price and the same rate for any procedure or medicine, regardless of where you live or work. Equally significant, everybody is covered if the system is modeled similarly to Germany’s, whether by public or private insurance, so it would address the principal risk associated with more stringent pandemic prevention measures: namely, that a potential loss of a job does not mean loss of access to health care provision.

For those who decry the risks of moving to a more centralized and allegedly more bureaucratic system implied by a move to all-payer, it is worth noting that America’s fractured and decentralized system has considerably hampered efficient delivery and distribution of the various vaccines approved for use to contain the rapidly spreading coronavirus. By contrast, as Whitney R. Robinson, associate professor at the UNC Gillings School of Global Public Health recently highlighted, the U.K.’s relative success in rapidly vaccinating its population is largely a product of the centralized structure of the National health Service:

Unlike a universal, single-payer health care system like the United Kingdom has, the US health care system is famously fractured and decentralized. In the United Kingdom, the National Health Service has a roster of nearly everyone in the country and an existing point of contact through their assigned primary care providers. So there’s the infrastructure there to identify everyone in a community of a certain age and contact them during their vaccination tier. U.S.health departments do not have such lists and infrastructure. Our first rounds of vaccination were setting-based (hospitals, nursing homes). I suspect that these will be the easiest. Workplace settings have updated rosters of employees and residents and ways to track them. Moving this effort to the community setting will be enormously complicated.

The U.K. has pulled ahead of other advanced economies in the race to vaccinate against coronavirus, having inoculated over 8 percent of its population by the end of last week (vs. 5 percent in the U.S. or 1.25 percent in France).

The all-payer system has many of the virtues of a single-payer system in terms of cutting costs and reducing administrative complexity. But in contrast to a nationalized healthcare system, such as Britain’s NHS, a proposed 50–state, all-payer system would cut less against the grain of the existing American health care architecture. In fact, the system is already in use in the state of Maryland and could easily be extended across the country.

Longer term, a policy response that entails increasing economic restrictions to mitigate pandemic spread is not viable when a consequence of those restrictions creates a loss of healthcare as part of the collateral damage. In effect, it is a case of robbing Peter to pay Paul. This must be addressed sooner, rather than later, and all-payer seems an optimal way to square the circle. Covid–19 is surely not the last pandemic that this country is likely to face, and we don’t want to go into the next crisis with the same flawed institutional healthcare structure.