The Dagger In The Heart of Socialized Medicine in the US

Megan McArdle has an excellent post-mortem on the death of Single-Payer Healthcare in Vermont. In it she points out some of the difficulties the single-payer advocates face in implementing the solution in the United States. The main issue isn’t the explosive growth of health care costs in the United States today; it’s the growth of costs in the past. “The problem, as I wrote previously, is that America doesn’t have a health-care cost-growth problem; we had a health-care cost-growth problem. Right now, our health-care cost growth is right in the middle of the OECD pack. Our spending is indeed high compared with the rest of the world, but that’s because it started high.”

To put this another way, imagine you rack up $35,000 in credit card debt over a period of time. You finally wake up and realize that you can’t keep spending that way so you start using the card more carefully. You cut back to the point where you only purchase about $650/month – roughly the monthly average credit card spending of Americans. But doing so there is no way to reach the average American credit card debt of $7,500 because in the past you didn’t spend like an average American; you spent like a 16 year rich girl handed her daddy’s plastic. So while you may spend like an average person today, there is no easy way to achieve that $7,500 average by spending cutbacks. You’d have to cut spending to zero and hope for a bailout from the parents or the government.

As McArdle notes, in order to reach the level of health care spending that would allow us to consider a single-payer system like the Europeans have today we would need to cut entire swaths of health care system employment, and doing so would be politically impossible. “Health-care jobs are steady and well-remunerated compared to whatever else those workers could be doing. And that’s not just true of the much-derided “specialists” who do too many procedures and charge too much; it’s true of everyone in your hospital and doctor’s office, from your beloved family physician to the woman who draws your blood. All those people have spent long years working to get where they are. If you suddenly change the rules and take that all away, their rage will burn with the righteous fire of a thousand suns,” McArdle writes.

In 2014 the US spent 17.9% of its GDP on healthcare according to the World Bank. The UK spent 9.4%, France 11.7% and Canada 10.9%. If the US wanted to institute a Canadian-style single payer system, it would have to cut it’s health care spending by roughly 40%.

Think about that. Every doctor, nurse, and medical assistant would receive a 40% pay cut. Every paramedic, home health worker and dietician would do the same. Ditto every insurance claim processor, HMO CEO and malpractice attorney. Every worker who received at least part of their salary due to health care would see that part cut by 40%. And this wouldn’t be a one off event, no. It would be a permanent pay cut.

Nurses wouldn’t be able to pay their mortgages. Insurance claims reps wouldn’t be able to pay for their kids’ tuition. Physicians wouldn’t be able to repay their student loans. The ramifications would reverberate through our economy like an economic earthquake as banks failed, service industries collapsed and other businesses that relied upon that income from the healthcare system evaporated. I have no idea how much GDP would be lost through kn0ck-off effects of such a change. Of course our economy would suddenly have 7% of its GDP freed up, a massive amount of wealth that could eventually lead to some amazing things in our economy. Just hope you don’t get sick during the first several years of adjustment.

Anyone who claims that they know how to fix our system is either an idiot or insane. As someone who both consumes health care, and is married to a health care provider who works long hours under the constant threat of lawsuits dispensing health care to the entitled then laboriously documenting the encounter in electronic medical record systems designed by lawyers and health insurance bureaucrats, I have no idea what the solution is.

We need one, but single-payer isn’t it.

 

 

8 Comments

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  6. Dave Schuler:

    Every doctor, nurse, and medical assistant would receive a 40% pay cut. Every paramedic, home health worker and dietician would do the same. Ditto every insurance claim processor, HMO CEO and malpractice attorney.

    That’s not exactly right, Scott. A more correct statement is that wages throughout the healthcare sector would need to be 40% lower. Some wages, for example those of certain medical specialists, would be cut by much more than 40%. Other wages would need to be cut less.

    If total wages in the healthcare sector had risen at the same rate as other sectors since 1970, they’d be about 40% lower than they are now. Those wage increases are the result of the subsidy provided by Medicare and Medicaid.

  7. Scott Kirwin:

    Dave
    Can you explain? I’ll admit math is not one of my few talents.
    My point is to reach the GDP spending level of Canada, so I assumed an across the board cut of 40% would achieve that.
    Thanks,
    Scott K

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