Slow Down on Single Payer

A political party is forced to embrace increasingly extreme and unrealistic policy positions to placate base voters driven by hatred of a sitting president. Upon its return to power, the party finds itself trapped between the widespread unpopularity of those positions and grassroots voters in no mood for compromise.

A description of the Republican Party in 2017? Certainly. If the Democrats are not careful, however, it could apply to them in 2019 or 2021. Inspired by the leadership of Senator Bernie Sanders, a growing number of party activists are making support for “single-payer” health care a litmus test for their support.

Sanders released a new version of his single-payer bill, the Medicare for All Act, in September. The bill was co-sponsored by virtually all of the Democrats’ likely presidential candidates in 2020, including Senators Elizabeth Warren (D-Mass.), Cory Booker (D-N.J.), Kirsten Gillibrand (D-N.Y.), and Kamala Harris (D-Calif.).

But while the broad concept of single payer often polls well, its details (e.g., large tax increases) have often been seen as politically toxic. As Business Insider columnist Josh Barro recently put it: “single payer is the left’s ‘repeal and replace Obamacare.’ Popular mantra, fatal details.”

Although virtually all industrialized countries have some form of national health insurance, the programs vary widely in how they are designed. In Great Britain, for example, the government directly owns and operates the clinics and hospitals and most physicians, nurses, and other health-care workers are public employees. In Germany, by contrast, most physicians are in private practice, hospitals are run as nonprofits, and insurance coverage is provided by a network of more than a thousand “sickness funds.”

Historically, when grassroots activists talked about single payer, they often had the Canadian health-care system in mind. Often thought of as a “national” insurance plan, the Canadian system is moderately decentralized with each province or territory operating its own plan. Each provincial plan must cover a standard package of benefits established by the federal government.  While those services are free at the point of service, the provincial plans are not required to cover the cost of prescription drugs, long-term care, or dental and vision services. About two-thirds of Canadians take out private policies to cover the cost of those services and often pay some of the cost out of pocket. As a result, about 30 percent of health-care spending in Canada’s “single-payer” system comes from private sources.

Because the provinces are the single payer for most hospital and physician services, they can exercise a significant degree of control over costs. The provinces engage in a form of collective bargaining with physicians over their fee schedules and provide hospitals with a fixed amount of money to spend. As a result, Canada spends less than half as much on health care per person as the United States does. While Canadians often face longer waits than privately insured Americans for certain types of specialists and procedures, there is little evidence—despite the occasional Fox News horror story—of a negative impact on health outcomes.   

A single national-health-insurance plan covering all Americans has been a goal of progressives for almost a century. President Franklin Roosevelt considered including a health-insurance system for the poor in the Social Security Act of 1935, but was concerned that opposition from physicians might doom the entire legislation. His successor, Harry Truman, supported a universal national-health-insurance plan, but lacked a supportive Congress.

By the early 1960s, the significant expansion of employer-based health insurance (spurred by its favorable tax treatment) led many policymakers to look for ways to fill the gaps in that system rather than embrace single payer. President Lyndon Johnson and a heavily Democratic Congress were able to push through Medicare (a federally administered program for those over sixty-five) and Medicaid (which provided federal funding to states so they could operate programs for the very poor). In the 1970s, President Richard Nixon supported requiring employers to provide health insurance to their employees if their employees were willing to pay some of the cost, but the proposal was opposed by many Democrats who favored a more universal approach and objected to the plan’s cost-sharing provisions.

By the 1990s, the rising cost of health insurance and the growing number of uninsured led many single-payer advocates to believe their time had come. Pointing to the relative success of the Canadian system, they argued that adopting a similar model could provide universal coverage while slowing the growth of health-care costs. President Bill Clinton’s proposed Health Security Act, however, embraced a “managed competition” approach, whereby employers and individuals would buy their insurance through large purchasing cooperatives.

In a nod to those who argued that the plethora of overlapping public and private programs led to confusion and excess costs, Clinton tried to bring Medicaid, state and local government plans, and private plans with fewer than five thousand employees into the purchasing cooperatives. The resulting backlash from all those stakeholders was an often unappreciated factor in the bill’s failure. In the end, Clinton, like many of his predecessors, had to accept a small patch to the current system, expanding coverage to uninsured children through a new Children’s Health Insurance Program.

Nor did supporters of single payer fare any better in the Obama administration. Neither Obama nor his Democratic primary opponent Hillary Clinton had much sympathy for it, and Obama’s subsequent bill resembled a system developed in Massachusetts by Republican governor Mitt Romney. Obama’s one concession to single-payer advocates was the inclusion of a “public option,” where a public-health plan would compete alongside private plans. That provision, however, was subsequently dropped during congressional negotiations because of opposition from the insurance industry. Obama, like Clinton, learned that disrupting existing insurance arrangements can be politically dangerous. His famous pledge that “if you like your plan you can keep it” was widely derided after several insurers announced they were terminating plans that were not compliant with the ACA’s coverage requirements.   

To many on the Left, this history shows how progressive activists have continually been betrayed by Democratic politicians beholden to corporate special interests, particularly the health-insurance industry. While granting that there is some truth to this assertion, less ideological observers might point to the enormous technical and political challenges involved in transitioning from the current patchwork of private and public programs to a single streamlined system.

The most serious of these challenges is, of course, the ubiquity of employer-provided health insurance, which has proved far more resilient than many expected. Health-policy experts who believe we need to move beyond employer-based coverage were hoping that more employers would substitute cash for coverage and encourage their employees to purchase coverage on the ACA’s health exchanges. Most employers understand, however, that even if the legal and technical obstacles to such an approach could be overcome, the result would be an enormous backlash on the part of their employees and the likely departure of key talent. Only in the face of serious business failure are most employers likely to contemplate such a move.

If employer-based coverage remains the default system of coverage for most working-age Americans, it is an obstacle to single payer that will be extraordinarily difficult to overcome. While polls do show that a very large share of those in public plans like Medicare and Medicaid are satisfied with their coverage, roughly two-thirds of those with employer-provided coverage are similarly satisfied. As Clinton and Obama learned, making even relatively small changes to the employer-based system is fraught with political peril. The forcible movement of more than 150 million people (a population greater than the combined enrollment of Medicare and Medicaid) from private plans to a single public one is something that few political leaders will be willing to defend once its contours become clear.

Supporters of single payer believe the opposition will melt away once those enrolled in employer-based coverage see that they will have better benefits and lower costs in a government-run program. This is true only if one grants the highly questionable assumption that the extraordinarily generous benefits envisioned by most single-payer proposals—which exceed those provided by any national health insurance system on the planet—would survive the legislative process unscathed. Senator Sanders’s single-payer bill, for example, covers several items not covered in the Canadian system, such as prescription drugs, long-term care in a skilled nursing facility, home health, vision, and dental. Sanders would provide all this with virtually no cost-sharing, a departure not only from most private plans, but also from Medicare, which requires seniors to pay for 20 percent of the cost of many of the services they receive.

Such generosity, while laudable in many ways, creates an enormous financing challenge. An Urban Institute analysis of an earlier version of the Sanders bill found that it would cost $32 trillion over ten years. By comparison, projected total federal spending over the next ten years under current law was $54 trillion. The institute also found that Sanders’s proposed financing was woefully inadequate, covering less than half the cost of the program. The most recent version of the bill does not solve the problem, as most of its potential financing mechanisms are not contained in the bill itself but rather in a separate document that lays out a set of options.

To be fair, one could imagine a less ambitious approach to single payer that would address some of these concerns. A less generous benefits package with modest cost sharing would reduce the amount of revenue that needs to be raised through taxation. Allowing employers and individuals to buy into Medicare or Medicaid voluntarily would allow those programs to demonstrate their value to those skeptical of government-run insurance.

But even this approach is likely to run into fierce political opposition. Insurance companies will complain (not unjustifiably) about having to compete against public programs that can simply dictate the prices they are willing to pay. Members of Congress are likely to be particularly sympathetic to the arguments of doctors and hospitals in their districts who are convinced—rightly or wrongly—that they cannot survive on what Medicare and Medicaid are willing to pay them for their services.

One would think that in the face of these challenges, advocates for single payer would show some humility in dealing with lawmakers. If anything, however, the opposite has been the case. In California, a fight over single payer is threatening to split the Democratic Party. Earlier this year, the powerful California Nurses Association (CNA) demanded that state legislators support its proposed single-payer bill, S.B. 562, despite the lack of a clear financing mechanism. Because of the bill’s generous benefits package, the state’s Legislative Analyst’s Office estimated it would cost $400 billion, only half of which could be raised by repurposing existing state spending.   

The bill passed the state Senate but was pulled from the floor of the Assembly by Speaker Anthony Rendon who described it as “woefully inadequate” due to its financing problems. The CNA’s executive director, Rose Ann DeMoro, responded by tweeting a picture of the California flag showing its iconic bear with a knife in its back labeled “Rendon.” Rendon also received death threats by phone and by Twitter. He was subsequently defended by other labor leaders in the state, most of whom are publicly committed to single payer.

For all its faculty-department viciousness, the California debate may be a good sign. It suggests that the state’s Democrats have not completely lost sight of the complexities and tradeoffs involved in the work of serious governance.   

The national party could be a different story. With its grassroots increasingly committed to maximalist positions and virtually all of its likely candidates for president committed to backing the Sanders bill, there is a risk that the Democrats will succumb to ideological groupthink. The feasibility of single payer will be taken for granted, much in the way that the feasibility of repealing Obamacare was taken for granted by Republicans. That unanimity blinded the party to the policy challenges and political risks associated with its position, leading to a legislative failure that may yet imperil the party’s control of Congress and the presidency. Democrats would do well not to follow this example.