Will decline of employer-based health insurance lead to a single payer system?


Beginning today and spread over the next three days, the US Supreme Court will take the extraordinary step of scheduling six hours of oral arguments on the constitutionality of the Affordable Care Act. In my series of posts on health care, I have said that I am in favor of the single-payer system and have criticized the Obama administration for their ACA plan, even though it definitely has some good points and repealing it would be a step backwards.

The whole idea of having health insurance supplied by private, profit-seeking companies that is linked to your place of employment is truly bizarre and the fact that it is the norm in the US is a classic demonstration of how people who grow up with a ridiculous system and have never encountered anything different can think that it is perfectly reasonable. (This also explains much of religious beliefs.)

Paul Krugman points to a study by the National Institute for Health Care Reform that says there has been a rapid decline in the number of employers providing health insurance due to the recession. As the study says, things are not going to improve even if the recession eases.

Even when employment rebounds to pre-recession levels, a return to previous levels of employer-sponsored health insurance is unlikely. Well before the start of the recession, a steady decline of employer health coverage was underway with fewer firms offering coverage and fewer workers taking up coverage—likely because of rising health care costs. Both of these trends continued during the recession and contributed to the decline in employer coverage between 2007 and 2010. The core threat to employer health coverage is health care costs increasing faster than wages, which makes employer coverage unaffordable for a larger share of the workforce, particularly low-wage workers. For example, among children and working-age adults with incomes below 200 percent of poverty—$44,100 for a family of four in 2010— the proportion with employer coverage dropped from 42 percent in 2001 to 24 percent in 2010.

You can see in this figure from the study how the loss in coverage affects lower income groups more than the higher ones.

In the short term, this is really bad news because it means that many people, especially those who can least afford it, will find themselves confronted with the unpalatable options of not having any health insurance or buying expensive individual policies. Meanwhile even those who retain employer-based insurance are finding that employers are shifting more of the cost to them in the form of higher deductibles and co-pays.

In the long term, this may spur greater interest in the only reasonable option of a universal, state-run, single-payer system that is the norm in almost all countries in the developed world with the US being the sole exception. Even in many developing countries like Sri Lanka, such a system has been in place for a long time.

Comments

  1. plutosdad says

    What do you think of Sweden’s system, which is universal but not single payer? Have you ever compared it to the UK or France’s systems? I rather like it.

    (well I suppose it could be considered single payer in that the government is a sort of re-insurer).

  2. says

    One thing this data does not show is that for a lot of people, even if they have retained their employer-based health insurance, the coverage has gotten a lot shittier. That’s definitely been the case for me. Not that I should complain when I still have health insurance at all! But it’s frustrating, because when I was single and in my 20s with basically no health care costs to speak of, I had terrific coverage; and then right before I got married and started having kids, it got way scaled back. D’oh…

  3. Steve says

    Private and state-sponsored health insurance aren’t mutually exclusive. There are many countries that basically have a mandatory baseline insurance that’s government regulated and/or financed, but if people want better service or coverage, they can get insured privately instead – which is more expensive.

    That health insurance is provided by employers is truly ridiculous though. Them paying a share is fine and again not uncommon, but they shouldn’t have any say in what procedures they cover.

    Americans seem to be completely oblivious that plenty of hybrid systems exist, so all the cries of “socialism” become even more stupid

  4. unbound says

    I agree with James Sweet. There is another aspect of the data that isn’t spoken enough about…namely that health care benefits are either going down or are increasingly being paid for out of pocket.

    In the past 12 years or so, there has been a notable increase in how much money I have to pay on top my insurance premiums for health care. Prescriptions used to be $5 for most generics and $15 for almost anything else. Now prescriptions are $10 (unless the cost is even less which is not uncommon) with 3 additional tiers of $35, $70, and full cost depending on the whims of the insurance company (the list can, and sometimes does, change monthly).

    My company has pushed to keep the premiums low, but the result is that I have to pay the first $800 out of my own pocket for any doctor visits / hospital / emergency care. Then insurance will pay 80% of those visits. At my age (and my wife’s) with 3 kids, I am guaranteed to pay at least $1,500 every year between visits and prescriptions. This is on top of the insurance premiums. Some years have been in excess of $4,000 with necessary surgeries. I can’t imagine being in a lower income job having to foot bills like that.

    This really needs to stop.

  5. unbound says

    I forgot to mention the competitive aspect of the insurance. I have the choice of 2 insurance companies. However, all costs and benefits of the offered insurance policies have been made identical. “Competition” in this case simply means which particular doctors I might be able to get access to. How this is not illegal is beyond me.

  6. itzac says

    I live in Canada. And I’m rather certain my taxes are NOT $4000 higher than yours. And I can walk into any doctor’s office in the country.

    The insurance industry in the US is explicitly exempt from anti-trust laws. I think it happened in 1947. Details in Griftopia, by Matt Taibbi.

  7. jamessweet says

    Yep, my annual OOP costs are generally in the four figures, on top of whatever I pay in premiums.

  8. markhoofnagle says

    Plutosdad, single payer healthcare is actually the least common universal system and one of the most problematic. Most are actually hybrids of private and public. Our system is likely to end up resembling the Netherlands system which enjoys excellent access with the highest approval rating by citizens of any other program in the world. It is based on private insurance, subsidization for the poor, and a risk-sharing scheme that bans discrimination against preexisting conditions or chronic illness (insurers are actually incentivized to carry these patients). Sweden’s system is interesting as a mixture as well. Government is the payer, but there are private hospitals as well, private insurance is permissible and the government uses a system of co-pays to discourage overuse. Medications are also paid for out-of-pocket with a low limit so that the total out-of-pocket costs are less than a thousand a year. So, Sweden shares a lot in common with Australia, which has a mixture of public and private hospitals (more private care in Au). The major difference between Sweden and other more socialized systems like the UK is they spend more money, have more doctors and have more hospitals. Patients are guaranteed to see a PCP within 3 days. They provide universal care, and have invested and paid for it (9% of GDP, high for Europe – compare to UK’s NHS at 6%)

    The whole idea of having health insurance supplied by private, profit-seeking companies that is linked to your place of employment is truly bizarre and the fact that it is the norm in the US is a classic demonstration of how people who grow up with a ridiculous system and have never encountered anything different can think that it is perfectly reasonable. (This also explains much of religious beliefs.)

    You actually are clearly unaware that the majority of the world has a mixture public and private expenditure and truly single payer systems are the minority. Canada, being the most restrictive with inability to obtain private care, Britain (you can by additional insurance), and New Zealand are the three systems that are really single-payer with government employing the overwhelming majority of doctors, running the hospitals etc. Some would also include Sweden but it’s got a mix too.

    The oldest universal system is that of Germany, which relies on guess what? Health insurance funds paid for by your employer! It’s been in place since Bismarck. France, with arguably the best care in the world, has subsidized private insurance, and private hospitals. Singapore, another very high performer, uses private health savings funds on top of catastrophe insurance. Japan, 9% flat fee in taxes with doctor-run hospitals that are strictly non-profit. Government then pays 70-90% of your medical bills with a monthly cap of individual contribution.

    There are a variety of systems. Single payer systems in Canada and Britain perform substantially worse than the other systems in terms of access and wait times. Excellent care is provided, but there are significant problems with access and supply (note, I’d take any of these systems over our current broken system). Single payer is not necessarily cheaper see a comparison of costs among systems here.

    Take a look around the world and you see single payer is not necessary to provide good care, and mixed systems have significant advantages in terms of access and patient satisfaction. I think Americans would actively dislike a single payer if they got it. It’s just not in our character to like being forced to interact that much with government. I think the ACA, if enforced, might make us more like the Netherlands, with arguably the most satisfied patients in the world.

  9. Ms. Anthrope says

    The problem is that a large number of Americans believe that health care is a responsibility not a right. They tend to advocate the Scrooge approach: if you can’t afford health care due to unemployment or indigence, then you have to rely on the charity of others. Of course, no self-reliant Randian would be caught dead donating time nor money to medical research or free health clinics.

    Until most Americans agree that universal health care coverage is something we should strive for as a civilized society, then the discussion on the best way of implementing such a policy can’t even start.

  10. unbound says

    Unfortunately, the $4,000 is on top of the monthly premiums I have to pay which add up to another $2,500 in a year. So my best year is, in total, $4,000…and my worst years are about $6,500. Uncertain about dental benefits in Canada, but I pay another $1,100 or so each year in dental premiums.

  11. Henry Gale says

    Single payer may not be the best or most popular system but it is likely the most fair.

    A tiered system, where everyone has a base level of insurance and those who can buy ‘better’ access or services, promotes inequity in health care.

    In addition, a tiered system (which we have now with those over 65) encourages providers to move to the more profitable private arena. This results in some doctors not accepting Medicare patients. In 2010 the American Academy of Family Physicians reported 13% of docs didn’t accept Medicare. That’s up from 6% in 2004.

    It’s also interesting to note that when China started shifting to more private health insurance costs were so high most couldn’t afford it. So much so they decided to shift back.

    http://www.newscientist.com/article/dn14986-worlds-largest-health-system-rejects-free-market.html

    “Before the reforms of 1978, more than 90% of the rural population was covered by a cooperative medical scheme,” says public health researcher Margaret Whitehead of the University of Liverpool, UK, and author of an analysis of the health system in China. “After market reforms, less than 10% of the rural population was covered,” she says.

  12. Nathan & the Cynic says

    Can anyone concisely explain to me why people in the U.S. expect health insurance to pay for routine visits, whereas car insurance or home insurance only pays for major expenditures?

  13. Steve says

    The German system is actually paid roughly half employer and half employee. But unlike in the US, the employers don’t have a direct say over these health care funds. They can’t just decide what to cover and what not. Employees pick a health insurer, tell the employer which one they use and a little less than half of it is paid by them. The mandatory public insurers all cost more or less the same (the service may vary though) and all have to follow the same standards, so companies aren’t disadvantaged by the choice.

  14. Steve says

    Having mandatory checkups and not letting routine problems get out of hand and develop into major cases actually cuts down on the healthcare costs. It’s in the government’s best interest to have such coverage

  15. markhoofnagle says

    I guess that depends on how one perceives fairness. I believe government providing or subsidizing a baseline level of coverage with individuals opting to pay more for better coverage or services seems to be the most fair. Forcing everyone to receive the same level of care seems like an extraordinarily bad idea, especially for Americans, as they really like having some choice. It seems very unfair to those who have worked hard and earned more to say they can’t use that money to buy more healthcare whether that is cosmetic procedures or access to a private hospital, a private room etc. I’ve worked in all sorts of hospitals, from VA medical centers, to academic centers, to rural hospitals to private. In my experience people that pay more get the same medical care (it was me providing it in every case), they just get a nicer room better food and the attendings tend to be more available in the private hospitals. Residents are still treating everybody.

    It depends on your values whether you think it’s more important for every person to get the same thing, or whether you think it’s more important that the safety net exists to provide a baseline of quality care. I have no problem with tiers. If people want to pay more let them. More important to me is that there is access for everybody, everyone has a doctor, and when people get sick or have a chronic illness it doesn’t bankrupt them.

    That’s why to me the single-payer systems aren’t as appealing. The data show there are access problems, with excessive wait times for physicians and necessary procedures. The exception would be Sweden which just pays a ton more and has explicit access guarantees. Check out the data in my Netherlands link and you see on most measures Canada and Britain performing worse than France, Netherlands and Germany.

    So, to me, the French, German, or Dutch systems are preferable as they are all high performing systems, and to me fairness doesn’t mean pushing everyone into a lower level of care, regardless of their ability to pay for more (Canada). A compromise would be England or Australia, which have their public system but private coverage and fee for service is an option on top of the NHS.

    Mostly I reiterate that most systems are single payer so that liberals in the US realize that the ACA will be a huge improvement even though it isn’t single payer. Universality will ultimately be the most important step, and who the payers are, whether it’s employers or government are secondary to whether or not everyone is safe from being bankrupted by illness.

  16. markhoofnagle says

    That last sentence should read “Mostly I reiterate most systems are not single payer”. Sorry

  17. Nathan & the Cynic says

    That’s obviously very true, but someone who has house insurance doesn’t expect it to pay for routine inspections to detect potential problems.

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