Single-Payer Healthcare Wastes Money and Time – Part III

 

In Part I and Part II of this series, I discussed two of five reasons to oppose Senator Sanders’ Medicare For All Act, which calls for single-payer healthcare, from economist Chris Conover’s point-of-view. Today we will look at the third of his reasons.

Healthcare Rationing

Rationing of healthcare treatment occurs in all known single-payer healthcare systems including Canada, Great Britain, and Sweden. Conover says this occurs in two different ways:

  • Deliberate administrative decisions – to deny certain expensive medical technologies and medicines.
  • Inevitable shortages – created by a system that imposes price controls that underpay providers.

 

Deliberate Administrative Decisions

In any single-payer healthcare system there is an administrative body empowered to make decisions regarding the availability of healthcare treatment. These bureaucrats, frequently not physicians, concern themselves with the cost of treatment and measure that cost against the likely outcome. They then arbitrarily deny those treatments considered too expensive or too unlikely to produce significant improvement in health, or both.

This administrative body in Great Britain is known as the National Institute for Health and Care Excellence (NICE). Advisory committees to NICE use a threshold for recommending treatments of between L20,000 and L30,000 (British pounds) per quality adjusted life year (QALY). Since 1 British pound currently equals $1.29 (American), that translates to roughly $26,000 to $39,000 per QALY.

To see how this is put into practical usage, consider Medicare currently spends approximately $88,000 per year on kidney dialysis for each patient with end-stage renal disease. Without it these patients will die unless they get a kidney transplant. So Americans evidently are willing to pay $88,000 per year to keep people alive. But this would equal a cost/QALY of $185,000.

In Great Britain this would greatly exceed the NICE cost-effectiveness threshold. If the greater U.S. GDP per capita (34%0 is mixed into the equation, the cost/QALY could rise to as much as $52,000. But this is still far below the true cost of kidney dialysis. Therefore NICE would deny the kidney dialysis treatment – and people would die.

Rationing by Waiting

The second form of rationing, caused by shortages, is rationing by waiting. Insufficient numbers of providers (doctors and hospitals) and diagnostic technologies (CT scanners, MRI scanners, Ultrasound, Radiation, etc.) leads to long waiting times for routine services and surgery, even for non-elective procedures like cancer treatment.

The Fraser Institute of Canada reports, “The median wait time in Canada in 2016 was 20 weeks – the longest ever recorded – and more than double the 9.3 weeks Canadians waited in 1993, when the Fraser Institute began tracking wait times for medically necessary elective treatments.”

This problem is getting worse, not because of significant growth in the population, but because of significant decline in the number of physicians. The evidence coming from studies of the Canadian system shows that physicians deliberately reduce the supply of their services, but working fewer hours, retiring early, or moving to other countries. Thus waiting times are due to a combination of excess demand (see the impact of free care in Part II) and shrinkage of supply.

A study by Wharton Business School professor Patricia Danzon concluded: “In Quebec, in the two years immediately after the introduction of universal health insurance, home visits dropped by 63 percent, telephone consultations fell by 41 percent, physician time spent per office visit declined by 16 percent, and office visits rose by 32 percent.” There is no reason to believe American physicians would react any differently if that system were imposed on our country.

Time spent waiting is not limited to physician services. In Canada, hospitals are paid a fixed budget per year giving the perverse incentive to fill their beds with low cost “bed-blockers” (to prevent more expensive patients from filling those beds). To illustrate the impact of this, consider that Canada has the same supply of beds per capita as the U.S. (2.7/1000 population) but the average length of stay in Canada is 36% higher. The consequence is suffering that is avoidable as patients wait months rather than weeks for various types of surgery.

What is the cost of such rationing if Medicare For All is enacted here?

It is difficult to measure the cost of lives put on hold until proper treatment can be given. Who knows the economic impact, let alone the human cost of such delays?

Danzon concluded that patient time costs under a single-payer health system likely amounted to anywhere from 10 to 110 percent of spending on physician services. Government actuaries project we will spend $717 Billion on physician services in 2017, meaning Medicare For All would impose anywhere from $72 to $789 Billion in hidden costs not included in the Urban Institute estimates of the cost of the Sanders plan.

Conover calculates the grand total hidden cost associated with rationing typical in the Canadian single-payer healthcare approach proposed by Sanders would range from $152 to $914 Billion per year. He considers these to be extremely conservative numbers because they do not attempt to account for the adverse effects on health and longevity from the exclusion of high-priced medicines and treatment likely under a single-payer system.

So far, we have three reasons to oppose single-payer healthcare:

  • Deadweight Losses of $1.1Trillion
  • Additional Wasteful Spending of $524 Billion
  • Additional Rationing Costs of $152 to $914 Billion

 

Altogether, that’s between $1.7 Trillion and $2.5 Trillion in additional hidden costs in the first year alone with single-payer healthcare! (Remember, these costs are not including the obvious costs of just paying for the healthcare!)

For more reasons to oppose this system, tune in next time.

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