Whose efficiency?

“At this point, I’m a glorified data entry clerk. I spend more time doing data entry in my office than I do seeing my patients… our systems are incredibly optimized for sending bills. I can send a bill in like, three keystrokes. But, recording an allergy can be four different screens. “— Atul Gawande, surgeon, author (Freakonomics podcast)

There are a lot of crazy arguments made in the debate over health care policy. One of the interesting ones lately involves the supposedly high cost of single-payer health coverage. How could we possibly afford it?

Of course, this ignores the fact that we’re already paying for it. Somehow, it’s expensive if paid through taxes, but not so when paid through your employer. And, of course, in every country where it is publicly funded, it is far cheaper.

But there is one argument that has some merit. Singlepayer health care would reduce competition and thus make the market less efficient. This is almost certainly valid. In a capitalist world, any monopoly, government or not, is likely to reduce efficiency and innovation.

But, that ignores the truly massive inefficiency in the current system.

Let’s start with the insurance industry. Single-payer insurance wouldn’t be perfect, but done as is usually proposed, by extending Medicare to everyone instead of just the old, it would be a game-changer. The overhead costs of Medicare are far lower than those of the private insurance companies, not to mention that the government has no need to make a profit, so breaking even would be sufficient. Medicare for all would cost far less what we pay for-profit insurance companies.

Then, there’s the billing system. Does Medicare have inefficiencies? I’m sure it does. But it couldn’t possibly be as convoluted as the private sector. I had an emergency room visit last year and received at least four bills for it, maybe five, and most of them were months later. The hospital, multiple separately-billed doctors, everyone wanted a cut. And, though I’m reasonably educated, it wasn’t exactly easy to figure out what service each bill referred to and whether they were legitimate.

Consider the inefficiency built into the current system, in which medical billing is actually a college major because it is so complicated. Incorrect codes are commonplace and result in numerous denials of legitimate claims.

The average consumer has little to no idea what anything might cost either before, or often long after making the decision to accept a particular service from a particular provider. With no price transparency, there simply is no health care marketplace.

Then, let’s consider the decisions of employers. They have to pay attention to byzantine rules regarding who must have coverage and what kind. Eliminating these rules leads to fraud and abuse, but attempting to deal with them requires employers, both public and private, to make decisions they otherwise would not.

How many employers are hiring two 20-hour per week employees instead of one 40-hour one to avoid paying benefits? How inefficient is that for both employer and employee? In an efficient marketplace, a full-time employee would not cost so much more than multiple part time ones. Do we even consider the time that employers spend monitoring the number of hours they have employees work so as to avoid benefits when that time could be better spent on business decisions?

Our current system is built on a historical anomaly from World War II, when wage caps encouraged employers to provide health coverage as an incentive to draw workers. Since then, health insurance and employment have been inextricably linked, first by accident, then by regulation.

Free-marketeers dream of an efficient marketplace without this linkage, one where individuals buy insurance, or even buy care directly, without involvement from employers. Some add a caveat that government could help by providing catastrophic care, but should otherwise stay away.

This all sounds like it could plausibly work, but it is hypothetical since no nation has ever successfully attempted such a model. More importantly, they have made no case for how they’d use policy to get us from our current mixed-market situation, with employer-based coverage and no price transparency, to the kind of marketplace they envision.

President Obama attempted the next best thing with the Affordable Care Act, using market-based incentives to improve both coverage and care, with some impact on cost. Coverage has improved and there is some evidence that care has improved as well. Health care inflation has slowed overall, but costs have shifted from older and sicker people to younger and healthier ones, generating anger and resentment.

A single-payer system would include its own inefficiencies, but it’s difficult to imagine that they would be worse than we already have.