A ‘Single Payer’ Health Care Reform We Can Live With

James A. Montanye

Americans operate for the most part in a single-payer world. Our lives are cluttered with
goods (food, clothing, cars, electronics, etc.) and facilitated by services (fast food, dry cleaning,
car repairs, etc.) that are the result of single-payer transactions. We have met those payers, and
they are us. Little of what adults consume privately is paid for by third parties. The upshot is an
efficient market process through which consumers economize on purchases and demand value
for money. Producers, in turn, are led by self-interest to design and price their wares accordingly.
With health care costs and expenditures increasing nationally as the quality of care
deteriorates, the prudent policy course is to restore a system in which individuals are responsible
for choosing, and paying for, the care that suits their individual needs. This is a practicable
‘single payer’ reform that is wholly absent from the present mix of policy alternatives.
The prospect of individuals economizing on health care, as they did perforce before the
Great Society became ascendent, unsettles suppliers, insurers, and politicians, whose demagogic
references to abstract groups of individuals as ‘the poor’ and ‘the uninsured’ evinces shameless
self-pleading. The concern of these factions is not for health care per se, but for income
redistribution legitimized through ‘moral imperative’ rhetoric.
Individual members of these political factions face the same private economic incentives
as Adam Smith’s butcher, brewer, and baker. Health care and its ostensible political reform, like
our dinners, are not outcomes of private and public benevolence. Rather, they are consequences
of the same self interest that has caused health care to become increasingly costly and
unresponsive over the last five decades.
If the factions presently engaged with health care ‘reform’ were seriously concerned
about the welfare of the ill, lame, dying, and uninsured, then they could have no principled
objection in the main to a transparent government program that doles cash payments to society’s
least well-off individuals with the stipulation that the money be spent (or saved) without
restriction. Recipients, in other words, could purchase insurance or health care if they chose, but
would be equally free to purchase any other goods and services of greater subjective value.
Marginally better-off individuals and families might, as now, be granted favorable tax treatment
instead of cash payments in order to mitigate the private burden of self-insurance saving plans
and out-of-pocket health care purchases. Under such a program, everyone except mentally
incapacitated individuals would be deemed sufficiently wealthy and appropriately self-interested
to bargain and exchange freely in health care markets without government interference.
A redistributive program of this sort admittedly would create morally hazardous
incentives for individuals living at the margins to race for the bottom (both in fact and in
appearance) in order to capture cash payments and tax benefits. It also would fuel the political
market in which factions and legislators bargain privately to lower entitlement thresholds and
raise payments in exchange for cash and electoral support. These problems are characteristic of
all income redistribution schemes. They nevertheless are outweighed in this context, both fiscally
and ethically, by two spontaneous and highly desirable results. First, the legislative wedge
between the cost of health care services and the demand for them is removed, thereby stimulating
individuals to economize on consumption and to practice healthy lifestyles. Second, health care
services are placed into competition with all other goods and services, thus compelling insurers
and health care providers to innovate and price in response to undistorted market demands.
The incentives and rhetoric that drive political economy tragically, albeit predictably, have
corrupted the first-best ‘single payer’ concept. Rather than designating the recipient of health
care benefits as the responsible payer, today’s reformers propose instead to effect supply-side
changes alone. They expect to achieve revolutionary change through a combination of
jawboning, administrative fiat, and pseudo-market solutions that entail a mix of tax-funded
subsidies, illusory cost shifting, unfunded mandates, and outright coercion. These proposals
imply more bureaucracy, more systemic corruption, more total expenditure, and more arbitrary
decisions about life and death issues. They also would serve to cast patients as supplicants and
billing assets, and to promote a health care industry whose creative energies are geared in
perpetuity toward bleeding the payment system and chiseling on care.
The first-best meaning of ‘single payer,’ under which individuals pay directly for the
insurance and health care services they choose to consume, and so have an incentive to demand
value for money, must lie at the heart of health care reform. Conversely, the proposals now under
consideration logically cannot generate long term economic, fiscal, and public health benefits,
and are likely to worsen an already grave and irresponsible situation.