Canadian Healthcare Inflation Harms Case for Single Payer in USA

Hundreds of millions of payers – rather than a single-payer – is the path to making American healthcare affordable.

By KEN BRAUN

What they said:

Five lessons from Canada on single-payer health care

  • The Chicago Tribune, September 24, 2017

In a commentary for the Chicago newspaper, Allan Rock, formerly Canada’s minister of health, and Colleen M. Flood, director of the Centre for Health Law Policy and Ethics at the University of Ottawa, provide advice to Americans considering single-payer healthcare:

The United States is about to debate the merits of [U.S. Sen] Bernie Sanders’ proposal for a single-payer health care system. While cost will be an issue, evidence shows that many countries provide access to quality care for all their citizens through a single-payer model while spending far less than the U.S. does now.

How can this be?

Single-payer systems are… more economically efficient than the private market alternative. Having one payer simplifies the administration of health care by avoiding multiple insurers processing claims.

Costly administration is one reason why the U.S. spends by far the greatest percentage of gross domestic product on health care in the Organization for Economic Co-operation and Development (while having the largest percentage of uninsured).

What they didn’t say…

Healthcare price inflation in Canada is nearly as severe as what is experienced in the United States. Applying Canada’s single-payer system and getting the same results will do very little to slow down the hyperinflation that is making the American system unaffordable and unsustainable.

It is true that the critical concern with healthcare in the United States is out of control prices. By contrast, food, clothing, cars, most of our necessities and most of our wages experience price increases that keep pace with inflation. In real terms this means the prices we paid for these things in 2016 were roughly the same as what we could have afforded in 2000.

For far too long we’ve accepted healthcare price hikes that have been jumping upward at rates far above inflation. For example, compared to 2000 the real cost of healthcare spent for each American in 2016 had increased by several thousand dollars more than inflation, robbing us all of raises, jobs, college savings and a better way of life.

Similarly, and according to the same OECD statistics cited by the Canadians writing above, the price of healthcare per person in Canada increased 2.3 times more than inflation between 2000 and 2016.

In real terms, if Canadian healthcare had kept pace with inflation since 2000, rather than experienced runaway prices, there would now be about $5,000 more available every year for each family of four. Canada’s single-payer system has literally ripped away what could have been a very nice raise for every middle class breadwinner.

And in Sweden, another single-payer nation frequently praised by Sen. Sanders, healthcare prices since 2000 have soared upward at nearly four times inflation. That’s the equivalent of nearly $9,800 less every year for every Swedish family of four, compared to what they would have if their single-payer system had held its price hikes to mere inflation.

In the United States, healthcare prices increased 2.8 times more than inflation during those years. A little worse than Canadian single-payer, but not nearly as bad as Swedish single-payer.

Healthcare now chews up 17 percent of the economy in the USA, 10 percent in Canada, and 11 percent in Sweden. All of those figures are much higher than where they were in 2000, and will swiftly jump ever higher if these nations continue with their hyperinflationary healthcare spending. Each must either change their systems dramatically or see them collapse long before reaching the impossible point where healthcare consumes 100 percent of the national economy.

Rather than bringing a single-payer system to the United States, a major part of the American problem is that we’ve been very close to having a single-payer system for decades, and getting the same results: out of control prices. The largest “payer” we have is the government: Medicare, Medicaid, Veteran’s Administration, etc… The next largest payers are monstrous private insurance bureaucracies.

The least amount of direct spending is done by the largest group of payers – all of us.

While not a pure single-payer system, what Americans have is in reality healthcare dominated by a tiny group of very large payers.

Compare it to the other essentials of life. Our nation of 325 million people doesn’t have huge single-payer bureaucracies in place to purchase our food, cars, housing and clothes, but instead hundreds of millions of payers – every American consumer. As a result, the price of these necessities increases by just a fraction of what we experience with healthcare.

Is there an example of a rich nation with many millions of payers making decisions about their healthcare spending?

Yes: Singapore. With 5.6 million people and an economy where citizens are earning roughly as much as in the United States (and a bit more than Canada or Sweden), Singapore spends about 5 percent of its GDP on healthcare – well less than half of what is spent by every other rich nation on the planet, and less than a third of what Americans spend. A 2013 report from The Brookings Institution stated Singapore was ranked sixth in the world for national healthcare outcomes.

Singapore’s healthcare insurance system covers everyone – it is universal coverage for catastrophic events – but does not cover every thing.

A very basic, means-tested network of public hospitals and pool of funds cover the poorest residents so nobody goes without care.

But most other Singaporese have a health savings account, funded with a combination of their own contributions and those of their employer. Whereas in the United States funding such as this would be sent off to a private insurance bureaucracy, in Singapore it remains under control of the person who earned it.

These accounts rollover each year, increasing in size if unused, and they are transferable between family members who wish to assist one another with medical bills. Sharing of this sort is so common that 44 percent of each patient’s bill in 2010 was funded from the account of a child, spouse, parent or grandchild.

Importantly, these accounts are a personal asset: When an account holder passes away, the funds are transferable to other family members. That incentivizes the patient to both conserve their own savings and help keep prices down for the entire nation’s healthcare system.

From and with these private accounts, most Singaporese make most of their healthcare spending decisions. While the “big disasters” – catastrophically harmful and expensive injuries, cancers and illnesses that can bankrupt a family – are covered by the mandatory and very low cost catastrophic insurance that must be purchased with the HSAs, everything else is paid for from the HSAs.

When a Singapore patient needs a doctor visit, routine lab tests, a baby delivery or even many more serious forms of surgery and hospitalization, they use the money in their HSA. For example: The Brookings Institution report noted above showed a heart angioplasty that would cost $83,000 in the United States was being performed for just $13,000 in Singapore – well within the price range of a family’s pool of savings.

Because it is their money, patients are frugal with the decisions, rational consumers as they are for all of life’s other necessities. A middle class patient might want the best private room in the nicest hospital for that angioplasty surgery, but will instead be inclined to select a shared room in a less swanky hospital.

Multiplied by every one of thousands of medical decisions made by millions of people every day, this price discipline keeps the cost of Singapore healthcare more reasonable than any other nation. Best of all, it’s a formula well known to Americans: We use it every day for just about everything else we purchase.

If we applied Singapore’s multi-million payer system to the United States and obtained their prices rather than our own, we’d save $6,000 per person each year – about $18,000 per family of four.

What should be said: Hundreds of millions of payers – rather than a single-payer – is the path to making American healthcare affordable.

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Ken Braun is the director of policy and communications for Think Freely Media. He has served as a public policy and communications professional for four different free market policy organizations, and as a chief of staff in the Michigan Legislature. He has also been a freelance political columnist for one of Michigan’s largest newspaper chains. Ken can be followed on Facebook, and when he has something really clever to say he will even use Twitter.

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Affordable Excellence: The Singapore Healthcare Story – A free book published by The Brookings Institution in 2013, authored by renowned health researcher, Harvard Medical School professor and entrepreneur William A. Haseltine.

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What Should Be Said shows effective ways of communicating freedom principles by using a storytelling approach, taking the moral high ground, and staying hopeful and aspirational. Media, politicians and thought leaders often fail to include the freedom perspective at all by omitting critical facts. Alternatively, when they do make a sincere attempt to sell the freedom philosophy, they often do so with a stale and defensive approach that is missing stories that humanize the dry facts and figures. Here we show examples of how storytelling and emotionally compelling changes in message will make all the difference for those trying to advocate for liberty.

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