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Wednesday, August 15, 2018

The Reason Why Single-Payer Is Cheaper

You have probably heard the arguments about how much cheaper single-payer health care would be than a market-based health system. For example, last summer the New York Times suggested:
Total costs are lower under single-payer systems for several reasons. One is that administrative costs average only about 2 percent of total expenses under a single-payer program like Medicare, less than one-sixth the corresponding percentage for many private insurers. 
This is an accounting ruse. 

The bureaucracy does not go away - it just moves from the health care providers onto a government administration that formally does not count as a cost in the health care system. Just like any other health care system, the single-payer system needs to keep track of how many hours people work, what procedures they perform, how many patients flow through the system, what each procedure costs in terms of work hours, how much pharmaceutical products are prescribed, how many CT scans are performed, the volume of cleaning supplies used...

From the public debate, it is easy to get the impression that none of this has to happen as soon as government takes over our health care system. Well, ask your local school district how many people they have employed in order to keep track of test scores, student attendance, teacher hours worked, textbooks purchased, computer program licenses, cafeteria food consumption, and so on. Then ask yourself how large a part of every $1,000 we spend on a kid's K-12 education goes toward bureaucratic overhead. 

The only difference between a single-payer health care system and a single-payer education system is that the former concentrates all its bureaucracy to a mega-agency in Washington, DC, while the cost of administration in public education is distributed over thousands of school districts across the country. Accounting-wise, the Federal Health Administration would not be part of the health care system anymore than the U.S. Department of Education is part of the cost of your local school district. This creates the illusion of a health-care system with a lean bureaucracy.

Anyway. Back to the New York Times:
Single-payer systems also spend virtually nothing on competitive advertising, which can account for more than 15 percent of total expenses for private insurers. 
This is actually true. There is no way to find out how much money they really spend on certain health products, or where the money is going. There is no way to compare the outcome of procedures between clinics, nor is there any way to assess waiting lists or other access data at the clinic and hospital level. 

You can get systemic data (which we will review in just a moment) but below that, transparency is basically non-existent in single-payer systems. Having lived under two single-payer health care systems for the first 37 years of my life, I know from first hand experience how unfriendly those systems are to anyone who wants to find out how they really operate, where they spend their money and what their success rate is. Again, the only data you can get is at the aggregate level, which does not much help the individual patient. 
The most important source of cost savings under single-payer is that large government entities are able to negotiate much more favorable terms with service providers. In 2012, for example, the average cost of coronary bypass surgery was more than $73,000 in the United States but less than $23,000 in France.
There is a reason for that difference, a reason you may not like. Let us go through some health care statistics from the OECD to see what is really going on in a single-payer system. The data reported here is selected on two criteria: comprehensive coverage of countries, and variety in terms of health care system performance. Since the OECD does not have a fully covering database, we have to make do with what they produce. Therefore, the examples are somewhat selective, but they are the best that any quality-oriented statistical agency or think tank can provide free of charge. 

First out is the waiting list for a specific procedure, namely cataract surgery. Why the OECD reports this with more detail than other procedures, is a question I don't have an answer to; nevertheless, here are the average wait times as of 2016:

Table 1:

Waiting times from specialist assessment to treatment: Avg days
Netherlands 36
Hungary 52
Italy 56
Denmark 69
New Zeeland 73
United Kingdom 74
Finland 91
Chile 108
Spain 109
Norway 114
Portugal 120
Estonia 283
Poland 484

How long would you have to wait if you needed this procedure today? 

The reason why that French health care procedure is so much cheaper than it is in the United States (given that the New York Times got its numbers right - there is no source...) is that the French system rations access. Another reason is that they do not use the same high-quality after care as you get in the United States. They rely more heavily on nurses than doctors, a fact that is statistically visible in the survival rate for various procedures:
American cancer patients, both men and women, have superior survival rates for all major cancers. For some specifics, per Verdecchia, the breast cancer mortality rate is 52 percent higher in Germany than in the US, and 88 percent higher in the United Kingdom; prostate cancer mortality rates are strikingly worse in the UK, Norway, and elsewhere than in the US; mortality rate for colorectal cancer among British men and women is about 40 percent higher than in the US. Removing “lead-time bias,” where simply detecting cancer earlier might falsely demonstrate longer survival, death rates from prostate and breast cancer from the early 1980’s to 2005 declined much faster in the US than in the 15 other OECD nations studied (Australia, Austria, Canada, Finland, France, Germany, Greece, Italy, Japan, the Netherlands, Norway, Spain, Sweden, Switzerland, and UK). The inescapable conclusion from objective data is that US patients have superior outcomes from nearly all cancers. Treatment for heart disease is also superior in the United States. First, a comparison of the US to ten Western European nations (Austria, Denmark, France, Germany, Greece, Italy, Netherlands, Spain, Sweden, and Switzerland) showed that 60.7 percent of Americans diagnosed with heart disease were actually receiving medication for it, while only 54.5 percent of Western Europeans were treated (a statistically significant difference).
Back to waiting lists. They vary significantly, not only within this particular procedure, but also across procedures within one country. The reason for this is that legislators - who control health care costs with their budgets - shift priorities from one year to another. When patients complain about having to wait for treatment longer than their doctor says is medically safe, they voice their concerns and politicians shift resources from one procedure to another. 

Politicians also have to prioritize everything else that government is promising us, such as education, welfare and universal basic-income checks, pensions, mass transit and - as a residual - national defense. Therefore, they cannot raise appropriations for health care without prioritization battles in budget committees and hallways. Lobbyists for school districts will want their money; lobbyists for universities will want their money; lobbyists for mass transit providers will want their money. 

The health care system will just be one voice among all the others trying to get their hands on increasingly scarce tax revenue.

Next set of data is for breast cancer screening. Again, the OECD's database is not perfectly continuous; the last year with data from a comprehensive list of countries was 2014. Oddly, numbers for Chile and the United States are available from 2013 and 2015, but not 2014. Therefore, their numbers for 2014 are averages, calculated from their numbers for 2013 and 2015:

Table 2

Percent of women 50-6 screened for breast cancer
Sweden 90.4
Portugal 84.2
Luxembourg 81.0
United States 80.2
Netherlands 79.8
Spain 79.8
Czech Rep. 76.7
France 75.0
Germany 73.5
Austria 72.7
Slovenia 72.1
Italy 71.0
Korea 67.6
Hungary 64.9
Greece 59.6
Poland 58.6
United Kingdom 57.9
Chile 54.2
Slovakia 54.1
Estonia 39.0
Turkey 24.7
Source: OECD

In other words, American women have good access to mammography, better than in single-payer countries like France or Spain, and far better than the United Kingdom with their "Medicare for all" National Health Service. 

It is worth noting that since 2014, the Swedish health care system has made significant cutbacks in mammography. There are almost no professionals available anymore to provide this procedure. The official explanation from the national health and social services agency, Socialstyrelsen, is that mammograms are no longer a reliable preventative-care technique. In reality, the reason is major cost cuts across all health care regions, where - again - the priority decisions on who gets health care, what health care and who is discarded, are made by bureaucrats in some office in Stockholm.

Speaking of breast cancer. Here are the five-year survival rates by country: 

Table 3

Average 2010-2014
United States 90.2
Australia 89.5
Japan 89.4
Iceland 89.1
Sweden 88.8
Finland 88.5
Canada 88.2
Israel 88.0
Norway 87.7
New Zealand 87.6
Portugal 87.6
France 86.7
Netherlands 86.6
Belgium 86.4
Korea 86.3
Switzerland 86.2
Denmark 86.1
Germany 86.0
Italy 86.0
United Kingdom 85.6
Spain 85.4
Austria 84.8
Slovenia 83.5
Latvia 82.2
Turkey 82.1
Ireland 82.0
Czech Rep. 81.4
Estonia 76.6
Poland 76.5
Chile 75.5
Slovakia 75.5
Lithuania 73.5
Source: OECD

French women are less likely to get a mammogram than American women, and less likely to survive breast cancer. They are also less likely to see a nurse when in hospital, regardless of why they are there. This is despite the fact that their system relies more heavily on nurses than doctors for actually providing health care:

Table 4:

Nurse-to-bed ratio, hospitals, 2015
Denmark 3.42
Iceland 2.7
United States 2.7
Norway 2.45
Canada 2.44
New Zealand 2.22
Switzerland 1.88
Ireland 1.69
Luxembourg 1.4
Mexico 1.38
Italy 1.36
Belgium 1.33
Spain 1.11
Austria 1.09
Portugal 1.08
Israel 1.07
Slovenia 1.01
France 0.93
Estonia 0.91
Greece 0.81
Czech Rep. 0.8
Turkey 0.78
Germany 0.74
Lithuania 0.73
Japan 0.59
Latvia 0.57
Poland 0.53
Hungary 0.52
Chile 0.36
Korea 0.32
Source: OECD

Good luck getting a CT scan in a single-payer country. Table 5 reports the number of CT scanners per 1,000,000 citizens, by country, in 2016:

Table 5

CT scanners per million citizens
Australia 62.95
United States 41.82
Denmark 39.11
Switzerland 38.93
Iceland 38.76
Korea 37.8
Greece 36.66
Latvia 36.23
Germany 35.17
Austria 29.07
Finland 24.2
Lithuania 23.01
Spain 18.26
New Zealand 17.9
Estonia 17.48
Poland 17.33
Slovak Republic 17.31
Ireland 17.24
Luxembourg 17.14
France 16.92
Czech Republic 15.52
Turkey 14.53
Slovenia 14.04
Netherlands 13.04
Israel 9.71
Hungary 8.86
Mexico 6.12
Source: OECD

Plain and simple: the reason why we have a more expensive health care system is that we actually provide health care. 

There is more data to review, but this will have to do for now. 

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