5: What’s wrong with “Single Payer”?

Many people point to “single payer” as the solution to our healthcare woes.  Although this concept has some merits, I am not a fan of this plan.

Single payer is essentially Medicare for all.  Under this plan, the government or a quasi-governmental agency would make payments to private healthcare providers.  It would function much like Medicare currently does, but everyone would participate.

The downside?

Not a system: It’s not a system.  Like other payers, Medicare is a system for PAYING a bunch of independent healthcare providers.  It is not system of providing healthcare.  There is no one making certain that the activities of the  various healthcare providers are coordinated with one another.  There is nothing to create a system that functions more efficiently.

Administrative costs: Medical billing expense doesn’t go away.  This added expense is significant, so I will discuss it repeatedly.  Here’s how it works:  When a patient sees a new doctor, he/she typically has to fill out a large quantity of paperwork, which includes providing the healthcare provider with his/her third party payer (i.e. insurance or medicare or single payer, etc.) information.  The provider might check to make certain that this information is valid and understand what will or will not be paid for.  In any case, the payer’s information is entered into the healthcare provider’s computer system.  Sometimes the payer refuses to pay for a certain service.  When that happens, the healthcare provider and/or patient must argue with the payer, and the payer’s employees take part in that argument as well.  At some point, the healthcare provider bills the payer (insurance, medicare, single payer, etc.), and the bill might or might not be paid.  At any rate, the healthcare provider renders a service before being paid, and risks not being paid.  Sometimes the healthcare provider does get paid, then some time later, the payer realizes that an error has been made and demands the money back.  My point is that there is a huge amount of cost and risk involved in the process of billing a third party for a patient’s medical expenses.  These added costs do nothing to help provide better medical care, so I believe that we would be better off with a system that doesn’t include this administrative burden.  With single payer, we would still have this unnecessary administrative expense.

And waste:  I had a friend who frequently expressed his opinion that the third party payer system is inherently wasteful.  (Thanks David R !)  The idea is that if a patient and doctor are spending someone else’s money, then there is no reason to try to minimize costs.  As a third party payer system, single payer is critically flawed.

And fraud:  I made a quick search of the Internet to see how many Medicare claims are processed annually, and how many providers submit these claims.  The following is from CMS’s report “Recovery Auditing in Medicare for Fiscal Year 2013.”  It is now 2017 as I write this, so the report is somewhat dated, but it still gives us some ballpark numbers.  According to the executive summary, Medicare handles more than one billion claims per year, and these claims are submitted by more than one million healthcare providers.  So we’re talking about a heckuva lot of businesses submitting a heckuva lot of requests to be paid.  This seems to me like a recipe for fraud.

And we do read news stories about people who fraudulently bill Medicare and other third party payers.  To illustrate my point, an Associated Press article from my local paper told of 111 doctors, nurses, and physical therapists who were arrested for illegally billing Medicare for more than $225 million.  I suppose that no news story tells of the people who didn’t get caught.

Another Associated Press article titled, “Medicare fraud busters unveil high-tech command center” told of a $3.6 million command center built by the Federal government to hunt down medicare fraud.  When I read the story, I had recently sold our medical business.  I recall thinking how nice it would have been to have just a fraction of that money to spend on actual patient care.  For example, perhaps we could have spent this money on hiring more medical assistants to answer phone calls from patients.

So, my point is that “single payer” doesn’t create operational efficiency.  In fact, it creates administrative burden, and reduces marketplace competition.  It’s a third party payer system, so it promotes waste.  The single payer system would process zillions of claims from millions of providers, which would make it a golden opportunity for rip-off artists.