Monday, April 18, 2011

Why Big Business Opposes Single Payer

I've always thought it was a little strange that one lobbying sector (health insurance providers and pharmaceuticals) had the power to override the remaining sectors. Single payer health care seems very appealing to business. It's half the cost of what we have. Isn't it good for business to reduce health care costs?

And yet here's IBM attempting to destroy single payer in Vermont. That's kind of hard to understand. I understand the right wing claim that the quality of health care would suffer. That claim is totally bogus, but health insurance providers will offer it because single payer threatens their gravy train. But why would IBM care about that? They should care about profits. Cheaper single payer should be more profitable for them.

But here's the problem as described in the linked article. The present state of affairs provides an excellent recruitment and retention tool. Say you are an engineer that's put a bit of money away and you'd like to take a year off. Maybe hike the Appalachian trail or try and bike across the country. That's manageable if health care is provided by the state. But not with our present system. You can't be without health care in this country, which means you need to be employed always.

Also the fear of being unemployed keeps wages low. You'll work for less because you are scared to be without. And you should be scared, because if you develop health problems without insurance you can be in a world of hurt. Worker insecurity is great for the economy as Alan Greenspan explained.

The other thing this does is crush start up companies. Health care is a tremendous start up hurdle for a new small business. The status quo reduces competition.

Big business isn't a monolith. Some sectors might prefer a cheaper, higher quality system. But so far it seems there are not enough in that sector for us to make this kind of a change. The kind of change that would not only deliver freedom for everyone, but would deliver better care, eliminate health related bankruptcies, and eliminate the deficit in one fell swoop. An ideal solution supported by the vast bulk of the population. But not supported by the people that count. That is, some elements of big business.


Darf Ferrara said...

You seem confident that a switch to single-payer would cut the cost of health care in half. Have you considered that there may be reasons that a single payer system in the US may not save money?

Jon said...

Honestly I'm not familiar with any arguments to the contrary that I regard as serious. Even Milton Friedman regards single payer as much better than our system in terms of keeping costs down.

HispanicPundit said...

Personally, I would support a single payer healthcare system if you could guarantee me that it would be just like the Europeans system. But you cant. So I wont.

My problems with single payer are two fold: costs and choices. Unlike European governments, the United States government has a much harder time saying no. Even when the benefit of a certain procedure is really really low and the costs really really high, we cant say no. Europeans can and the populace accepts that. Not here! Atleast with the status quo, private insurance companies can say no and bear the brunt of the populaces anger. Politicians wouldnt be so likely to do the same.

Second, single-payer, atleast in europe, usually results in a reduction of choice. The government will eventually prohibit someone from using ANY part of the single payer system if they decide to get their own private insurance - or worse, will prohibit private insurance completely. That is unacceptable. It will eventually be like our private school system: where the parents have to pay taxes to a public school they never use AND pay their own money for a private school. Not fair, in my book.

But the actual cost cutting single payer system itself I have no problem with. I just dont think it will work out the same way here.

Darf Ferrara said...

HP's point is exactly what I'm getting at. Because of our political institutional structure we could probably expect to get the worst of all world with a single payer system. We would get more limited services, with all the costs.

Jon said...

If you only support policies that guarantee success then you find yourself paralyzed with inaction and status quo.

Here's what I have on my side. Universal experience. Every state that has it has much lower costs, even though these are generally more costly countries to live. You can say "but we're different from them". Everybody is different from everybody. But what is the most likely outcome.

I have experience in the US. The VA is the sole Medicare section that is permitted legally to act as a single buyer for drugs. They get a 58% reduction in costs. They do say no. They remove some drug alternatives to combine products and use their collective purchasing power to negotiate a reduced rate. It works today.

I have numerous reports by independent agencies, such as the Congressional Budget Office and the General Accounting Office.

I have large swaths of people on the left and right, including Milton Friedman.

You have a theory that sounds plausible to you, and won't budge unless you can have "guarantees." I don't think that's rational.

Darf Ferrara said...

Do you endorse Milton Friedman's approach to reforming health care? I think that his version of single payer (basically catastrophic coverage) might be an improvement, although I still think of it as a second-best type solution.

If your evidence relies on estimates of savings handed down from on high, you might want to consider the track record of the estimators. What was the original estimate of the cost of medicare? Or how about the cost of the Iraq war? I prefer to understand the underlying economics rather than take my guidance from a holy book issued by the CBO.

Jon said...

I might endorse Friedman's views over the status quo, but I'd probably need to consider it more closely.

Trusting the experts is a rational move despite the fact that they have been wrong in the past. Are there any respectable studies that demonstrate costs would rise on single payer? I'm not aware of any. We also have universal experience. So which is the more plausible outcome?

Had Bremer not dissolved the Iraqi military and barred anyone that was once affiliated with the Baathist party from employment with the government then those war estimates may have been close. It's rather astonishing the difficulty we've had securing such an impoverished and weak country like Iraq. It would have been difficult to predict how blundering and incompetent the occupation has been.

Darf Ferrara said...

Feel free to trust the experts after they have been wrong time after time. I don't know the details of most of the reports that you link to, but I do have a pretty good general understanding of the statistical methods that are used. The outcomes have a great deal of variance associated with them. There are high dimensional data sets that are being estimated, and that leave a lot of wiggle room to produce numbers that make the right policy maker happy. In addition, many of the quantities that have to be estimated in order to produce the output have to be completely fabricated. It simply isn't possible to know many of the things that have to be known in order to estimate all the parameters. For a simply example, here is a story about how Amazon decided to charge $79 for prime membership. The short answer is, they picked it randomly. The difference between Amazon ecomonomist getting it wrong and the CBO getting it wrong is the difference between Amazon losing some profit margin and a sovereign debt crisis.

That's why I'm not going to look for a study that claims that costs would rise on single payer. If I found one, it would be like trying to argue that my god is greater than your god. It is just a matter of faith, with little basis. Economics is a little more solid. The fact that goods are scarce, and the law of demand can generate more insight that a claim that some agency released a report that said something.

Jon said...

The finances in health care in this country are at a state of crisis. We're going to have to do something to reduce costs despite the fact that perfect knowledge can't be had. We've got universal experience, both in this country and everywhere else that single payer/public option care reduces costs. We've got the consensus of the experts. That's a pretty solid basis for the conclusion that yes, it would reduce costs. If you have a strategically feasible alternative that the evidence suggests is more likely to reduce costs in the same way let's hear it.

Darf Ferrara said...

Friedman's suggestions were good, and I've suggested alternatives in the past. My point is that you have the kind of faith in experts that would make religious zealots jealous.

Jon said...

Bob Dutko says that the speed of light may have been faster in the past, so that's why the earth may still be only 6000 years old. Does he have any data to confirm that claim? No. Any experts agree with him? No. But so what? Scientists have been wrong in the past. Also the theory sounds plausible to him. Does he sound more like you or like me?

Darf Ferrara said...

I'm not going to claim that you are irrational to believe experts, but to believe the same people that have repeatedly been wrong about simpler problems? And been wrong many, many times? In other words, presenting reports by experts is at best very weak evidence. Kenneth Arrow was tasked with weather prediction during the second world war. When he realized the futility of the effort, and requested different (useful) tasking, he was informed that even though the command realized that his predictions were useless, they were needed for planning purposes. Arrow came to understand that his models were not helpful, but at a higher level his data were used as if they had some real information. Treating these reports as oracles is not convincing to me.

The fact that other countries have implemented single-payer and pay far less for approximately the same level of care as the US is greater evidence. But it doesn't account for legal differences, cultural differences, or government differences, and those could make all the difference.

HispanicPundit said...

I'm curious Jon, have you actually read the Friedman take on healthcare? I know you linked to it...but you have a history of either not really reading or simply glossing over right-wing posts. I'm asking because I really want your thoughts on it. Its well reasoned and well thought out and I'd like to see where you disagree? I read it a few years back and cant say I found anything there to strongly disagree with. What's your likes and dislikes?

Also, I am curious, what do you think the rights answer to this claim you made would be:

I have experience in the US. The VA is the sole Medicare section that is permitted legally to act as a single buyer for drugs. They get a 58% reduction in costs They do say no. They remove some drug alternatives to combine products and use their collective purchasing power to negotiate a reduced rate. It works today.

What do you think an honest, thoughtful, say Republican or Libertarian would say to this? (honestly, statements like this make me wonder if you have actually read, let alone thought about, any right wing alternatives)

I'm trying to get you past talking points to actually addressing what right-wingers actually think! Your thoughts?

Btw, here are some respectable views against single payer (via public option) that I personally agree with. See here and here.

Jon said...

My position is that you should make decisions based on the best information you have. That's all I'm advocating. You seem to want to emphasize that I can't know with certainty. I acknowledge that and I think you should take that as implied in my comments. Technically if I drop a ball I don't know with certainty that it will fall. I can only have some level of confidence it will fall.

Darf Ferrara said...

What if your best information is a coin flip? Or if your best information is some tea leaves interpreted by a sorcerer? My point is that the reports claiming that costs will drop have about the same amount of information as a magic 8 ball. In this case a causal mechanisms describing the problems, such as those used by Friedman, carry much more weight. Thought experiments, such as the one used by Mankiw, are also more convincing to me than government reports. And these evidences would imply a move in exactly the opposite direction that you advocate.

Chad said...

I'm late to the game, but still wanted to bring the Elephant in the room to center circle.

Jon - your wasting your time and breath on the single payer thing it will never ever happen in America. The first and most important reason it will fail is that there is still a lot of people who believe in America and freedom of choice she stands for.

For this discussion lets go ahead and assume that the Socialist get control and push that type of legislation through. Assuming that an Atlas Shrugged situation doesn't happen crippling the governments cash cow the first thing that will happen is several states succeeding from the US or if not that radical they will fight it in court which eventually it will be deemed as unconstitutional by at least half the states or more - hell Obama is only on first base of trying to make a single payer system established and he is getting clobbered.

Fine lets pretend that doesn't happen which brings me to my biggest problem with progressive and Jon - what about the secondary affects? First - there will be a laundry list of companies and individuals who will get permission to opt out. Next the mass exodus of private practices will be unprecedented and doctors will be disappearing at a rapid pace - far quicker than can be replaced. Next - the drug companies - those evil bastards according to Jon - will stop going after new medicines and cures because it doesn't pay so Jon of course will make that another function of the government, insurance companies - well with less profit they will close so unemployment will rise leaps and bounds.

My favorite quote comes into play here - your freedom to be you allows me my freedom to be free from you. I don't want anything to do with a single payer system that eliminates my choices and freedoms. You have every right as an American to start Jon's Health Care Business Plan 101 - hell if it is something that will cost less and improve health care you won't need to steal any money from us conservatives. Any idea that good should be able to stand and succeed all on its own so get to it.

Jon said...

Don't speak too soon on single payer. Vermont passed this legislation. It may still be an uphill battle. Big corporations hate competition. Single payer is a boon for small businesses and start ups. So they'll fight, and may win. But this is progress.

What I think, Chad, is that liberterians love to indulge their "Going Galt" fantasies more than they like to present actual evidence that their policies would produce a better world. All of these terrible things would happen you say, despite the evidence to the contrary. There's not much I can say to the speculative doom scenarios that you spin out of your head. I can likewise spin out of my head the nightmare scenarios associated with unregulated free market capitalism. Would that matter to you? What I presume matters is evidence offered in support of a claim. If you could offer that, then I'll have something to respond to. And I think what you'll find when you start culling the actual evidence is that it doesn't in fact support the liberterian fantasies. That explains why it so infrequently offered by liberterians.

Mike said...

Hi there! I just started checking out your blog about a week ago (I think I got linked here for the FAIR anniversary recordings...?), and I wanted to let you know that it's awesome stuff, keep up the good work!

I also have a bit of insight I can contribute to this specific post. I can't say in general why big business would oppose more efficient healthcare, but I can point out that IBM might have a special interest here. IBM stopped being a purely research and PC building company a long time ago, and has adopted a whole slew of really monotonous business-to-business services that it pays the bills with while their research teams come up with Jeopardy bots and whatnot. Most of these services are through sub-contracted companies. One of these services is offsite data backups...lots of corporations with large databases (credit card companies, retail, insurance) use these services to make sure their databases are never lost. And the insurance companies make up a decent chunk of that you could infer that any healthcare legislation would threaten them too, because they're riding on the coattails of the very same gravy train.

This is of course not to scream "zomgconspiracy!!1" so much as to point out that they're partaking in that pie too. Also, it's fun to point out that some of your insurance money was used to fund R&D for Watson. I guess skyrocketing insurance costs aren't...*all* bad? lul.

Jon said...

Interesting point, Mike, and thanks for the compliment. So you're saying it's a good business move for IBM in that it helps their customers (health insurance providers). Seems plausible.

Bob Hertz said...

IBM may have the very prosaic fear that the payroll tax for single payer may be larger than what they are paying now.

IBM nationally has been getting rid of older workers for years. IBM has always had a preponderance of males in their workforce.

A 38 year old male in a white collar job is the cheapest risk of all for health insurance -- no pregnancies, no accidents, too young for much heart disease, etc.

If IBM pays this person $60,000 a year and pays $3,000 for his health insurance, that is a payroll loading of 5%.

The Vermont single payer plan calls for a 14.5% payroll tax in its current projections.

I myself am a great fan of single payer plans, but the arithmetic is daunting. The firms which stand to lose money in single payer plans will be very vocal in their opposition if a payroll tax is utilized.
The income tax is a better source of funds.

Bob Hertz - The Health Care Cruade

Bob Hertz said...

IBM may have the very prosaic fear that a payroll tax will cost them more than their current health plan.

IBM nationally has been getting rid of older workers for years. The remaining workforce has a lot of young males, who are cheap to cover.

If IBM pays a young man $60,000 in salary and $3,000 in health insurance, that is a 5% loading.

The Vermont single payer design team has proposed a 14.5% payroll tax.

Single payer has many merits, but it will be hard to pass if the losers outnumber the winners.

The income tax is a better source of funds than the payroll tax, I suspect.

Bob Hertz - The Health Care Crusade

Jon said...

I think a family plan is something like $14K, give or take. That's paid for by IBM and the employee in monthly premiums. The evidence is that the move would be cheaper for IBM, but then as the link I provided indicates this takes away an important recruitment and retention tool.