The Fantasy of Single-Payer Healthcare in the States

by John R. Graham, Independent Institute, June 28, 2016

One of the defining characteristics of Bernie Sanders’ socialism is single-payer healthcare, a fully taxpayer-funded universal medical system. Single-payer healthcare has long had a following in the United States, but it is unlikely to become federal policy. Obamacare’s setbacks have made Americans less confident than ever that the federal government could operate such a system.

So single-payer advocates are focusing on individual states. This November Coloradans will vote on single-payer healthcare. A couple of years ago, Vermont’s governor tried to institute it, but gave up short of the finish line. Other states will surely try. I would put Oregon and (maybe) Hawaii at the top of the list of states to watch.

If successful, this would be a Canadian-style roll-out of single-payer healthcare, which began in individual provinces in the mid-20th century and subsequently won federal support. However, there are significant obstacles to any state instituting true single-payer healthcare in 21st-century America, even if the people or politicians choose it.

First, Medicare (which covers most senior citizens) is already fully federal. States have no role in either financing or organizing its care. 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, who are highly unlikely to ever yield power to state counterparts.

Second, Medicaid (which covers most low-income residents) is also largely federal, with over half the money coming from Washington. Although it is operated by the states as part of their welfare bureaucracies, states deliver benefits under strict federal constraints.

Any change in the program, such as in how care is delivered to disabled patients at home, even if desired in 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.

Block grants of federal funds to states’ Medicaid programs (which would significantly reduce federal involvement) would be similar to the way the Canadian federal government subsidizes provincial single-payer systems, and it would make it easier for a state to migrate to single-payer. The irony is that federal block grants are proposed by Republicans in Congress and opposed by Democrats.

Third, most private health insurance is offered as group coverage through employers. Employers with more than 100 or so workers almost always take advantage of the federal Employee Retirement Income Security Act (ERISA) to self-fund these benefits, which preempts state insurance laws.

So a state could not simply institute a single-payer system as the Canadian provinces did decades ago. It would have to get Congress to approve a transfer of both finances and statutory authority over these three groups (the elderly, the poor and those working for large businesses), which constitute the majority of the population.

Such congressional approval is extremely unlikely in the foreseeable future. Both parties are solidly committed to federal control of seniors’ access to healthcare, as executed by the federal Medicare office.

America’s seniors are famously resistant to change. When House Speaker Paul Ryan proposed reforming Medicare for future beneficiaries who at the time were then under age 55, current beneficiaries (who were at least 65) got riled up and protested.

Further, 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 healthcare would retreat 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.

Even if Coloradans vote for single-payer healthcare in November, the obstacles to it or any other state actually instituting it are overwhelming.

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John R. Graham is a Senior Fellow at the Independent Institute.