1. ECO 440 Research Paper
Reasons the U.S. Should Not Implement a Single Payer Health Care System
Nick Niesen
April 14, 2016
Professor Leslie Muller
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2. Recently, many politicians have brought up the fact that the United States is the only
developed country to not guarantee its citizens at least basic health care. Some go on to say that a
single-payer, Medicare for all system is the only way to counteract the increasing growth rate of
health care prices. After all, the United States is guilty of spending by far the largest portion of
GDP on healthcare compared to all other countries. One might think that this spending would
translate to overwhelmingly higher quality of care in the United State, but this simply is not the
case. Although a single-payer system may seem like a viable solution, the evidence shows that it
would cause further inefficiencies in the health care market and be a huge burden economically.
The current health care system in the United States has many flaws. Under the newly
adopted Affordable Care Act (ACA), for example, millions of people now find themselves in a
coverage gap where they make too much to qualify for public insurance programs but make too
little to qualify for subsidies for private insurance. The ACA has helped to reduce the number of
uninsured, but the coverage gap continues to be a ‘black eye’ on the policy. Another problem
with public insurance in the United States stems from the baby boomers. Now that the baby
boomer generation has reached retirement, there is an increased strain on the system unlike any
experienced in the history of the program. In 2008 there was more money being drawn out of the
program than being paid in through taxes for the first time in the history of Medicare. As a result,
current estimates show that the trust fund for Medicare will run out by about 2030. With this date
approaching, the urgency to come up with an alternative is becoming more and more important.
Some people suggest a single-payer program would be a legitimate fix, but, although I support
everyone having access to care, I do not agree that a single-payer system is the correct solution
for the situation in the United States.
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3. Before addressing the reasons why a single payer health care system should not be
implemented in the United States, it is important to have a clear understanding of what single-
payer is and is not. According to Dr. Paul J. Feldstein, a renowned health care economist, a
single-payer system is when the government pays for all health care expenses, but it does not
mean that the government owns the health care provider (Buerhaus, 2010). Basically, everyone
receives health care and the government dictates the reimbursement levels to hospitals for the
services they provide. Other countries have implemented single payer systems of their own with
relatively low degrees of success. The only countries in the world with true single-payer health
care systems are Canada, North Korea, and Cuba. Proponents for single-payer point to Canada as
a successful example of the system. However, Canada’s system has an abundance of
shortcomings.
In the United States and most countries, health care is rationed through price. This means
that people who have the ability to pay for care are able to receive care immediately. In Canada,
single-payer health care has removed the provider’s ability to ration care through price because
all citizens pay the same amount for care. The alternative rationing method in a single-payer
system is by wait times which have been relatively high in Canada. In the United States, only 5
percent of people have to wait more than four months for a procedure. In Canada, this number
soars to 27 percent (Graboyes, 2005). Some doctors’ offices in Canada take an assembly line
approach and rush through 100 patients per day. Also, doctors in Canada are often overworked
and under-compensated as compared to doctors in the United States (Taylor, 1994). For example,
the average income of self-employed physicians was two-thirds of the average income of a self-
employed physician in the United States (Ridic et al., 2012). There are also cases of people who
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4. have been denied coverage in Canada coming to the United States to receive care. In one such
example, a 64 year old Canadian man was given 9 months to live after being denied a bone
marrow transplant due to his age. He is now in good health after selling his home to pay for the
transplant in the United States (Papp, 1993). Due to long wait times, there have been instance of
avoidable deaths in Canada. A lawsuit filed by Dr. Ciaran McNamee in 1998 stated specific
evidence proving that people were dying while waiting in line for medical care (Waldman,
2015). The supply of health care resources in Canada simply could not keep up with the demand
for medical care by people who were waiting for government approved procedures. The long
wait times coupled with the heavy workloads being placed on physicians are leading to a decline
in the quality of the health care system in Canada and are reasons why the United States should
look elsewhere for a solution to its healthcare problems.
The current system in Canada provides no incentives for hospitals to innovate or invest in
new equipment or technologies. An excellent illustration of this is the low number of MRI
machines in Canada. Per capita, Canada has the same number of MRI machines as countries like
Colombia and Mexico (Gratzer et al., 2001). Most MRI machines run on a limited schedule and
were sometimes rented out to veterinarians after hours. For years, dogs and cats often received
MRIs faster than humans because of this provision. This problem was solved by simply not
allowing hospitals to rent out MRI machines after hours. Since 1994, waits for MRI, ultrasound,
and CT scans have increased by 40% because of their limited availability (Ridic et al., 2012). In
an effort to minimize and consolidate costs in a single-payer system, government officials dictate
the locations of high-tech medical equipment which has resulted in inefficiencies. Allowing the
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5. government to dictate the placement health care resources ultimately leads to a decrease in the
quality of care received by consumers.
In the United States, the Veterans Administration (VA) Hospital System operates similar
to a single-payer system with the government controlling supply and demand for care. The VA
system is a useful example of how effective or ineffective a government controlled, single-payer
system could be in the United States. From 2013 to 2014, scandal rocked the VA when it was
shown that long wait times led to the unnecessary deaths of many veterans who were in need of
care. According to the Center for Investigative Reporting, claims take an average of 272 days to
be processed by the VA. The 2013 data also showed an error rate of around 14 percent and a
backlog of nearly 900,000 people waiting to receive care (Reno, 2013). The VA shows the
government’s inability to distribute an adequate supply of care in an efficient way. If the
government cannot get it right on a relatively small scale of the VA system, they will be even
more likely to fail when implementing a similar system on a national scale.
The payment method for a single-payer system will unavoidably involve raising taxes.
Proponents of single-payer argue that the increase in taxes will go towards paying for health care
which most people currently pay for anyway. They argue that essentially, the increase in taxes
will be cancelled out by an overall savings in health care expenses per individual. A tax increase
is not necessarily a reason to disagree with single-payer, but, as was discovered when Vermont
recently tried to implement a single payer system, the extent of a tax increase will likely be more
than expected. Before the plan for single-payer in Vermont was abandoned, it was shown that the
program would require $2.6 billion in tax revenue above the expected 2017 tax revenue of $1.7
billion (Roy, 2014). This translates to a roughly 150% tax increase which would cripple Vermont
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6. economically and is not practical. On a national scale, a tax increase of this magnitude would
likely paralyze economic growth.
Advocates of single-payer argue that it is a superior system because it promotes the most
equity. However, the facts show that, even in countries with a single-payer system, well-off
groups still experience higher quality care and better access to care than other, less well-off
groups of society. For example, Inuits receive less access to care as compared to non-minorities
in Canada (Graboyes, 2005). There have also been reports of members of Canadian government
using their status to queue jump or cut to the front of lines for care. When confronted about
queue jumping, Senator Sharon Carstairs contested that she would never queue jump, but instead
she admitted to paying $15,000 out of pocket to receive care in the U.S. (Gratzer et al., 2001).
Even in systems designed to promote equality of service, money and status still allow certain
groups to receive care more quickly than less privileged people in Canada as will likely be the
case with a similar program in the United States.
Giving hospitals incentives to provide an efficient level of care should be at the center of
any health care related initiative. On the other hand, health care initiatives should also provide
incentives for people to receive efficient levels of care or, in other words, disincentives the
overuse of health care resources. A single-payer system does just the opposite. In a single-payer
system, people are further separated from the cost of care which leads to overconsumption of
health care resources. An argument could be made that providing everyone with health care will
reduce the amount of emergency room visits (inpatient care) because people will have better
access to outpatient care. The expenses of emergency room visits are much greater than that of
outpatient care, so it makes sense to want to provide people with the ability to access less
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7. expensive outpatient care as well as limit the use of inpatient care when applicable. Research
showing how increased levels of coverage affect the amount inpatient and outpatient care
consumed has been conducted in Oregon. In 2008, Oregon decided to increase their Medicaid
enrollees by 9,000. Over 90,000 people applied for these spots and plans offered comprehensive
medical benefits with no cost sharing. Randomization was used to select a group of 30,000
people to have an opportunity to apply for Medicare. Of these 30,000, 18,000 people actually
applied and 9,000 were enrolled. Utilization of both inpatient and outpatient care was tracked for
this newly enrolled group. Researchers expected to see a decrease in emergency room visits and
a dramatic increase in outpatient care for this group. However, this was not the case. The study
showed that, although there was an increase in doctors visit and increased access to care
compared to uninsured, Medicare also increase emergency room use (Baicker et al., 2013). The
increased usage in a single-payer program would drive up wait times and overall costs while
basically eliminating any expected savings in opportunity cost alone.
Government run programs and efficiency have never gone hand in hand. Giving the
government the responsibility of controlling what is essentially the supply and demand of the
medical industry is reckless. The insurance industry is politicized enough as it is, but moving to a
single-payer system will result in the use of health care as just another budgetary issue that
politicians will use to further their own short term agendas. According to David Gratzer, M.D.,
this politicized decision making along with a lack of accountability by administration are major
problems (2001). It is difficult to find official data on usage and wait times in Canada and when
people run in to problems it can often take an excessive amount of time to resolve the issue.
Think of how current U.S. government agencies such as the Department of Motor Vehicles, or
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8. Internal Revenue Service operate. Getting anything done often involves large amounts of paper
work and long wait times. Trying to get accurate information regarding existing Federal program
costs can be very difficult if not impossible. With a single-payer system, decisions related to
health care will be politicized like never before. Budget concerns will likely result in a
downward adjustment of reimbursement rates to doctors and a decline in quality of care.
The economic benefits of competition were once thought of as being non-existent in the
health care industry. Research regarding competition in the health care industry has been
conducted as it pertains to hospitals. It is likely that other health care sectors such as insurance
would have similar outcomes to these studies. Experts were under the impression that increased
competition between hospitals led cost increases and a decrease in quality of care due to the
higher administrative costs and the inability of hospitals to coordinate care. However, this theory
has been discredited. Just as a monopolistic market puts consumers at a disadvantage, an
insurance market with only one provider will not experience a need to provide customers with
competitive rates to gain market share. Increased competition in the insurance markets will force
insurers to control administrative costs more carefully and limit profits to a reasonable level so
that they can remain competitive. In the hospital and inpatient care markets, competition has
been proven to decrease costs (Dranove & Ludwick, 1989) while large hospital conglomerates
operating as monopolists in their area have not been shown to improve quality of care. A single-
payer system decreases competition to the point where you have one party, the government,
setting physician compensation levels and dictating the approval of potentially lifesaving
procedures. The non-existent competition in a single-payer market provides incentives for
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9. hospitals to provide minimum levels of care and to put off innovation. The result, as mentioned
thoroughly above, is long wait times and low quality care.
The benefits of healthcare operating in a similar way to traditional markets are depicted
through Medicare Part D which is currently being implemented in the United States. Medicare
Part D expanded prescription drug benefits to seniors through a system of competitive bidding by
private insurance providers. The federal government then takes the bids along with geographical
information and calculates a distribution amount. The results of Medicare Part D have been
extremely positive. Over 60 percent of those enrolled in Medicare are enrolled in Part D and 90
percent of them are happy with the outcomes (Dayaratna, 2013). The Medicare Part D example
illustrates how forcing insurance companies to compete over price can be a positive thing for
consumers. In addition to Medicare Part D, the very insurance issued to current and past federal
government employees, FEHBP, is based on a competition driven insurance market where
federal employees can choose their plans (Dayaratna, 2013).
Many factors contribute to a single-payer system being a step backwards for the United
States. The single-payer systems currently in place illustrate the long wait times, low
accountability of healthcare administration, decreased levels of competition, and decreased
access to high tech treatment options as compared to non-single-payer programs. Plans to
implement a single-payer program in Vermont also provide an example of the high costs of this
type of health care in the United States. A single-payer system would lead to increased usage of
both inpatient and outpatient care which would also raise costs along with wait times, while
putting all physician reimbursement levels in the hands of the government only further
politicizes healthcare. Programs in the United States that operate similar to single-payer have
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10. lacked success which strengthens the case against the system. For all these reasons, it is apparent
that single-payer is not an efficient or economically sound way to solve the problems of the
current health care system in the United States.
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11. References
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from http://www.americanthinker.com/articles/2014/12five_strikes_against_singlepayer
_healthcare.html
Dranove, D., & Ludwick, R. (1999) Competition and pricing by nonprofit hospitals: a
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12. Ridic, G., Gleason, S., & Ridic, O. (2012). Comparisons of Health Care Systems in the United
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