Fraser Forum

The primary obstacles of single-payer health care in American states

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Canadian Medicare did not start out as a national institution. It started in one province, Saskatchewan, and spread to others over the years. Some American politicians believe they can replicate this in the United States.

Prof. Steve Globerman recently wrote about Colorado’s referendum on a single-payer health system. A couple of years ago, Vermont’s governor tried to institute single-payer, but failed when resistance to the proposed (and necessary) tax increase proved too hard to overcome. Other states will surely try. I would put Oregon and (maybe) Hawaii at the top of my list of states to watch.

However, there are significant obstacles to any state instituting single-payer health care, even if the people or politicians choose it. Three come immediately to mind, all of which will sound strange to Canadian readers.

First, Medicare (which covers most senior citizens) is fully federal. States have no role in either financing it or organizing its care, which is provided by private providers under increasing federal constraints. The system is moving from fee-for-service to managed care delivered under arrangements whereby groups of providers bear financial risk for patient outcomes. Different models have different labels (“Accountable Care Organizations,” “Bundled Payments for Care Improvement,” “Alternative Payment Models,” “Merit-Based Incentive Payment System). The models are designed by federal bureaucrats in an office in Baltimore.

Second, Medicaid (which covers most low-income residents) is also largely federal. The federal government funds over half the program. Although it’s operated by the states as part of their welfare bureaucracies, states deliver benefits under strict federal constraints. Any change in the program—for example, how care is delivered to disabled patients at home—even if desired within only one county or city, requires a federal waiver which is only won after lengthy, strained and complex negotiations between state and federal bureaucrats. And, the waiver will be limited to a few years.

Third, most private health insurance is offered as group coverage through employers. Employers with more than one hundred or so workers almost always take advantage of the federal Employee Retirement Income Security Act (ERISA) to self-fund these benefits, which pre-empts state insurance laws. (By the way, the Canadian Embassy in Washington, DC counts itself among such employers, voluntarily complying with ERISA with respect to employee benefits.)

So, a state could not simply institute a single-payer system the way former premier Tommy Douglas did in Saskatchewan in days of yore. It would have to get Congress to approve a transfer of both finances and statutory authority over these three populations (the elderly, the poor, and those working for large businesses), which comprise the majority of the population.

Such Congressional approval is extremely unlikely in the foreseeable future. First, Republicans hold majorities in both the House of Representatives and the Senate. While this may not persist through the next election, as long has Republicans have at least 40 Senate seats, they could block such approval.

Second, America’s large employers are extremely attached to the status quo. They have their own association, the ERISA Industry Committee, which protects their current benefits. Even states that might otherwise consider single-payer health care would shirk when faced with employer opposition. A prime example would be Washington State, which might go for single-payer if not for firms like Microsoft and Boeing.

Finally, America’s seniors are famously resistance to change. When Paul Ryan, Speaker of the House of Representatives, proposed reforming Medicare for future beneficiaries who, at the time, were under age 55, the current beneficiaries at the time (who were at least 65) got riled up in protest.

Simply put, the obstacles to any single U.S. state instituting single-payer health care are overwhelming.

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