Tuesday, May 9, 2017

“Single payer, duh!” (Drops mic, walks off stage)

Sometimes discussions about healthcare get derailed by unserious commentary. My favorite is the assertion that a single payer healthcare system solves all our problems.

Supposedly you don’t get the adverse selection problems you see in the private market. You just force everyone to buy insurance and charge them all the same premiums, or simply declare everyone covered and tax them appropriately on tax day. Actually, this is a bad idea because it forces young people to subsidize old people. Younger people tend to have lower incomes and less wealth than older people, who have decades of experience and wealth accumulation behind them. Forcing the young to subsidize the old is a pretty regressive form of taxation.

Also, supposedly prices in medicine are arbitrarily high because of monopoly power of providers. A single payer could in theory negotiate for lower prices. But this doesn’t really work because you ultimately have a Soviet style central planner dictating prices. You lose the dynamics of the market, and you lose any incentive to actually control costs. You lose innovation, because any new drug or technology that is “too profitable” will be slapped with a mandatory price decrease. Economists don’t agree on much, but they generally agree that price controls have perverse incentives. Price ceilings cause shortages of supply and degradation of quality; price floors cause surpluses and gold-plating. Both stifle innovation. You need a dynamic market to avoid these problems, a market in which customers shop for price and quality. An extremely well-run bureaucracy can get you part of the way there, but will ultimately fail. 

I hate this kind of flippant assertion that government will just magically fix all our problems. Why not have a "single-payer" system for groceries? For auto and homeowners and life insurance? Usually the argument given for single payer isn't specific to health insurance. Adverse selection and moral hazard exist in other insurance markets. And a "single-payer" for food or housing could "negotiate with the suppliers for lower prices." Why not just have the government own and run all hospitals and clinics? It's going to be setting all the prices at will anyway.

Sorry, I don't have any deep point in this post. Just venting my frustration at a very common derailing tactic. Maybe I'll do a more detailed post on a specific argument in the future. Saying, "Single payer! Duh!" just kind of assumes away all of the hard problems without actually solving them. 

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