Arnold Kling  

Arlo's Single Payer Plan

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Medicare, the U.S., and France... You Can Do Anything You Put Yo...

A commenter on a previous post challenged me to design a single-payer health care system. OK, here goes. We can call this the Arlo health care plan (Arlo is my analogue to Tyrone, Tyler Cowen's evil twin).

1. I am most worried about how to set prices for medical services under a single-payer system. If we do not have a market, then there is no basis for price-setting. Accordingly, what I would create is a system of managed competition. I would design a health insurance plan and then let private insurance firms compete to offer this standard plan.

2. I would design a somewhat bare-bones health insurance plan. It would have a high deductible and a means-tested co-payment rate (is having a co-payment cheating? It's supposed to be single payer. If single-payer means we have to do without co-payments, the plan will require a higher tax increase). It would be slow to adopt coverage for expensive new technologies. It would take a narrow view of medical care--no "alternative medicine," no fertility treatment, mental health coverage limited to severe cases, cosmetic care limited to victims of serious birth defects and accidents, etc.

3. Private insurance companies (really, they would be more like health network organizers) would assemble networks of providers and then compete to offer coverage. So insurance company X might use a different heart specialist than insurance company Y, and the fees paid to heart specialists under the two plans might differ.

4. The government would cost out each plan based on a standard, pre-determined utilization pattern. X number of pediatric visits, Y number of heart surgeries, etc.

5. Individuals would by default be enrolled into the lowest-cost plan in their area. However, an individual could pay extra to be in a higher-cost plan. For example, if the doctor you want is in a plan that costs $500 per year higher than the lowest-cost plan, you could pay $500 a year to get into the plan that has your doctor. In addition, individuals would be free to buy supplemental health insurance and supplemental health care of their choosing.

6. Insurance companies would be paid a fee for each enrollee. However, they would not be involved in paying or processing claims. The government would do that--it is single-payer, after all. The insurance companies are just there to assemble the provider networks and to negotiate fee schedules.

7. I would try to finance this plan by cutting spending on other programs, but my guess is that it would require a huge tax increase--think of your income tax being 10 percent higher, probably more if we don't use co-payments.

If you held a gun to my head and forced me to implement single payer, that is how I would do it. But my preferred approach to health care reform would probably be the one described in the latter part of this essay.


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COMMENTS (4 to date)
Mark writes:

I would try to finance this plan by cutting spending on other programs, but my guess is that it would require a huge tax increase--think of your income tax being 10 percent higher, probably more if we don't use co-payments

However, this would be at least partly offset, for many people, by not having to pay insurance premiums or have them withheld from paychecks.

jw ogden writes:

I am against a single payer system but here is my least harmful design for a single payer system.
First note that I assume that a family of 4 can live in the USA on $20,000/year and that everyone should have a deductible of at least $300/year. So the Government give everyone a health insurance policy that with a deductible equal to the grater of $300.00 or the yearly income minus $20,000.00. So if family income was less than $20,000 the deductible would be $300.00. If family income was, say $80,000.00 the deductible would be $60,000.00. Of course before I did this I would reduce execute licensing in the medical fields, reform the legal system and deregulate the practice of medicine.

quadrupole writes:

My pet solution, not for single payer health care, but for universal coverage goes like this.

First, untax dollars spent on health care regardless of who spends them. This eliminates the tax bias towards employee health care, one of the most serious problems.

Second, we have to find reasonable ways of forming pools. My solution is to go state by state. You describe a bare bones level of coverage nationally (much as what you lay out above). Any insurance company can offer any plan that they wish that covers at least the bare bones level (or significantly more if they wish), subject to the following constraints:

1) The only allowable pool discriminators are:
a) Deductible
b) Smoker/Nonsmoker
c) Percentage of body fat ranges
(ie, things that impact health that people can control, plus deductible).
2) A policy must be offered at the same price to all comers who meet the pool criteria within the state.

Third, HSAs with no contribution limit, but you cannot take out a policy with a deductible higher than your HSA balance.

Fourth, you require everyone, and I mean everyone, to carry health insurance. Down to it being a condition of entry to the country that you pick up a policy for the duration of your stay.

Fourth, for those who meet a means test and cannot afford health insurance, the government subsidizes the premiums for the cheapest policy in the state for which the individual meets the pool criteria. Please note, in terms of deductible this means the highest deductible pool for which they have HSA funds to back it.

Fifth, since age is *not* a valid pool discriminator, move medicare recipients into the plan.

The expected result will be a rapid movement towards people putting money in their HSAs and seeking hire deductible policies. One can also expect an improvement in health habits at the margin. I further expect there to be *very* fierce competition to offer the cheapest bare bones plans, as it becomes a winner take all game at the state level.

SheetWise writes:

I would like to to take this space to agree with all you said -- and inform you it was painful to read.

Your mixture of Roman and Gothic type, besides being in bad taste, is enough to induce vertigo (which is why it's in bad taste [and has been for several hundred years]) -- but your choice of a serif font for primary text, in a low resolution format, is just plain painful. For pdf's -- ok, for the hypertext -- NO.

I LOVE your content -- I HATE your presentation.

And ... I would UP the deductible.

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