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The single most important question about single-payer plans

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My colleague (and Weeds co-host) Matt Yglesias wrote a lengthy pieceTuesday urging liberal health policy wonks to start writing single-payer plans, ones that get into the details of how the system is organized and who pays for it.

Kevin Drum homes in on a few key questions that any single-payer plan would need to answer, like whether it preserves any role for private insurance and how we transition into it from our new system.

But in my mind, there is one question that any single-payer plan needs to answer that looms above all others: How much are you going to pay doctors?

The amount you pay doctors (and hospitals and drugmakers and medical device manufacturers) is, in so many ways, what determines what a health care system looks like.

Right now we pay our health care providers the highest prices in the world. This (unsurprisingly) means we have the most expensive health care system in the world.

American health care isn't expensive because we're going to the doctor all the time; we use just as much medical care per person as do people living in Canada or France. It's just that each time we go to the doctor we pay a significantly higher price for the visit.

It is completely possible to build a single-payer system that maintains the prices we currently have in American health care, where doctors remain one of the top-paid professions in the United States and where an arthritis medication costs twice as much to receive here as it does in Britain.

This would be a system that covers all Americans, and that would be an achievement in its own right. But it still probably isn't the single-payer system that most advocates want. If we reorganized our whole health care system — kicked 150 million people off private insurance and moved them to a government plan — only to find we still had the most expensive health care system in the world that would only be a partial victory.

Instead, the allure of a single-payer system — where the government covers everyone through one big plan — is that this new mega-insurer will have more bargaining power. It will set prices for health care services that are lower than the prices we have right now. This will relieve the burden that exceptionally high prices currently put on Americans. You won't have wild stories anymore about a $629 Band-Aid provided in an emergency room. Single-payer systems regulate those kind of prices — and presumably choose a rate significantly lower than $629 for a disposable bandage.

A single-payer system built with $629 Band-Aids isn't going to be affordable at all.

Where a single-payer plan sets prices will determine how much revenue the government needs to raise to pay for it — in other words, how big of a tax hike Congress would propose. A system with lower prices doesn't need as much federal financing. That, in some ways, makes it an easier political lift in Congress and in stump speeches, where legislators could avoid discussions of double-digit tax increases.

But spun another way, low prices also make the politics of single-payer much harder. While a single-payer plan with low reimbursement rates would require smaller tax increases, it would near certainly lead to outrage from doctors and hospitals facing a massive pay cut.

American doctors have planned careers (and often gone into significant student loan debt) around our current health care prices. Hospital systems have built multi-billion dollar businesses, often the largest employer in a rural area, around them. A significant reduction in health care prices would near certainly lead to layoffs in those systems and fewer jobs in health care overall, a sector that currently employs one in nine American workers.

Prices are a vexing issue. They are the reason our health care system is so expensive, and the main vehicle for reducing health care spending in a single-payer system. But they also have a fiercely loyal lobby in Washington, which can rightly argue that jobs are on the line if prices get slashed.

In my view, this is the most crucial, most difficult question that single-payer plans need to grapple with. There isn't a right answer, but there are difficult tradeoffs to be made that will determine what a single-payer system could look like in the United States.

Table of the Day

Maryland Department of Insurance

Maryland Obamacare prices are set to rise. The state's marketplace will see premiums rise, on average, by 33 percent — less than the 43.1 percent average increase requested by insurance plans but still a big increase. Those hit hardest will be individual market enrollees who earn too much to qualify for financial subsidies and will have to pay the full increase. Read the full report from the Maryland Department of Insurance here.

Kliff’s Notes

With research help from Caitlin Davis

Today's top news

  • "Pressure grows to fund Children's health program" "State officials increasingly worry that this year’s turbulent health-care politics could threaten funding for the Children’s Health Insurance Program, a popular initiative that usually wins broad bipartisan support." —Stephanie Armour, Wall Street Journal
  • "LePage tries to block Medicaid expansion by calling it 'welfare'" "Mainers have until Friday to weigh in on the exact wording of a ballot initiative, which if it passes would allow Maine to join the 30-plus states that have expanded Medicaid under the Affordable Care Act." —Alice Ollsten, Talking Points Memo

Analysis and longer reads

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