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Single-payer model actually inhibits improved health care

There is one point about a single-payer health-care system on which Dr. Oliver Fein and I agree — there's not enough of a definition for the public to make an assessment about what a single-payer health-care system really is. In a recent MinnPost piece ["Medicare 2.0: Doctors group urges health care for all," by Casey Selix], Fein, president of Physicians for a National Health Care Program, provides a set of six principles that "really define what single-payer is." Indeed they do. But when one examines logically the six principles Fein lays out, one realizes that as well-intentioned as is his desire for universal health care, the single-payer model can't get us there, it actually inhibits improved health care — and, ironically, to establish a manufactured "right" to health care a single-payer system destroys the unalienable right of individuals to make their own health-care decisions.


Let's look at Fein's principles in detail, contrasting them with a free-market health-care system, keeping in mind that the health care system we have today is NOT a free-market system but a heavily regulated managed-care system — single-payer-lite.

Fein's principles Nos. 1, 2 and 3 define the classic trade-off among access, quality, cost. His first principle of a single-payer system is "automatic enrollment, which would lead to universal coverage." His second principle is that "benefits ought to be really comprehensive … going from prevention, doctor, hospital, pharmaceuticals, to dental, metal health — all medically necessary services." Principle three is that "these things should be publically financed."

Every system — whether a manufacturing system, a sales system, the education system or the health care system — has the same three (and only three) outputs and addresses the same three questions: "How many of what kind at what cost? In health care, those three questions are expressed, "What quality of care (kind) can we provide at what cost to how many people?" Trade-offs are necessary to achieve the optimum (not perfect) system.

In a free-market health-care system, the optimum solution is determined by the pricing mechanism and individual choice. Each of the three variables is truly variable — that is given a market where physicians determine service and price and the individual is responsible for his care costs, a person might choose to have his annual check-up done by a local clinic rather than the Mayo Clinic. Given his family history, his doctor might decide he needs a specific procedure at a different interval than "the average patient." It is these kinds of individual decisions made by millions of individuals that create an optimum health care system.

'Variables' aren't variable
In Fein's single-payer model, the "variables" are not variable at all. One of the three variables is fixed (universal coverage); consequently, the other two must be consciously managed from outside the system. Everyone cannot receive comprehensive health care (however "comprehensive" is defined) except at very high cost (or with very high taxes). If costs are fixed (as they must be at some level) then all that remains to be managed is the definition of "comprehensive." That is why the Obama health plan calls for creation of a third-party board to determine the cost-effectiveness of specific medical treatment for specific classes of people and decide if the treatment will be covered. "Comprehensive" medical care means "quality" medical care is what government says it is, not necessarily what the patient wants.

Whereas in a free-market system millions of medical decisions are made with immediate cost and quality information available to doctors and patients, in a single-payer system, health-care decisions are governed by a relative few individuals necessarily making aggregate assumptions about individual patient situations because they cannot possibly have instant access to data required to make a decision about any individual patient.

That would be "you."

Trade-offs among access, quality and cost in a health-care system are inevitable even if Fein does not acknowledge them. In a single-payer system with universal coverage, at some point, someone other than you and your doctor will be making decisions that materially dictate and limit treatment options available to you and your family.

Fein's principle No. 4 is that single-payer eliminates "administrative waste" that results from having multiple payers. His principle No. 5 is that single-payer maximizes choice compared to "our present private insurance system." Before we can discuss those two principles it is necessary to debunk the misconception Fein implies — that our "present private insurance system" is equivalent to "free-market health care" and that the present managed-care system is the same as a "private health insurance system."

In free market, patients control the money
In a free-market health-care system, patients control the money that is spent on their health care. That money might be theirs, it might come from an insurance settlement, it might be a health-care voucher by a government program, but in each case, the patient decides how his money will be spent. In turn, in a free-market system, doctors determine what services they will provide and at what price. Doctors compete for individual patients on price and quality of care. Finally, in a free-market health-care system, insurance companies offer policies that meet the differing resources and tolerance for risk of individual consumers. They also have control of products and price. Insurance companies compete for customers based on price and comprehensiveness of coverage.

True health insurance (as opposed to prepaid medical care) has little to do with access to actual medical treatment. Health insurance, like any other insurance product, is concerned with asset protection. The purpose of health insurance is turning unpredictable and unaffordable expense into predictable, affordable expense. Insurance companies offer a variety of policies at different premium levels and deductibles that consumers will buy depending on their needs, resources and tolerance for risk.

In today's prepaid managed-care system, insurance companies control (via government regulation) which services will be covered and how much physicians will be paid for those services. Even Fein acknowledges that in today's regulated environment consumer choices are limited. Because a single entity controls both demand and supply of health care, there is no competitive pricing mechanism and consequently no accurate regulator on prices. Cost can't be controlled if there is no mechanism for determining price and demand at a price.

Three outputs, three questions
Recall that any system has the same three outputs and addresses the same three questions — "How many of what kind at what cost? In a private health-insurance system, those three questions are expressed as "How many policies can be written, covering which situations at what cost?" In the current system, by law, "covering what situation" is mandated. Minnesota has more than 60 insurance mandates requiring specific coverage, for example. When one variable is fixed, the other two must be consciously managed from outside the system. Hence, on top of necessary administrative costs, we get unnecessary administrative costs imposed by regulation.

Because a third party, government, has fixed the extent of coverage, private companies are limited as to the policies they can provide and the price at which they can provide them. To keep costs down, they must either limit service provided or reduce payments to service providers. That does not change with the advent of a single-payer system. A single-payer system is not essentially different from the managed-care system we have today. The only difference is eliminating the regulated private health-care insurers and replacing them with a regimented bureaucracy.

That brings us back to Fein's single-payer health care principles Nos. 4 and 5: eliminating administrative waste and maximizing choice.

I'll forgo arguing with Fein's statistics on administration costs other than to say determining administrative cost depends a lot on what is included as "administration" and what isn't, and  Fein's numbers are based on some fairly biased assumptions — as would be my assumptions to the contrary. However, the fundamental irony, as the Cato Institute's Michael Tanner points out, is that folks like Fein praise one of the greatest failings of socialized medicine, lack of administration, as if it were a virtue.

Administration is key
Economist Tyler Cowen notes administrative costs like monitoring, marketing and overhead costs of private insurance companies are what enable those companies to offer coverage for expensive medical treatments. Competing insurance companies spend money evaluating claims and setting pricing structures so that there is an accurate measure of what coverage actually costs relative to need. Without that review mechanism, it is impossible to limit health-care costs without reducing service. Without the consulting function of insurance agents, individuals will either buy more coverage than they need and pay more for it than they should, or find themselves underinsured and taking on more financial risk than warranted.

Tanner adds, "If European health-care systems appear to have lower administrative costs, it is because, rather than scrutinizing claims, they limit the overall amount they will spend on medical services. Of course, that just means they shift costs to patients who either must pay for medical services themselves, or deal with the costs of waiting." Going back to the access, quality, cost triumvirate, if claims are not reviewed then cost must be shifted or care limited, or "administrative saving" or the consequences of lax oversight must be passed to taxpayers.

In his principle No. 5, as he did with the definition of "comprehensive," Fein obscures the concept of "choice" in health care. "The program in the country with the most choice is Medicare," he writes. "You have the choice of physician, a choice of hospital; so, again, single payer would lead to increased choice."

Indeed, as Fein envisions single-payer, it would lead to increased choice compared to today's system. But remember, the system we have today is not a free market system, which by definition requires that patients control their health care dollars and choose their own physicians and by extension hospitals and other treatment facilities. The system we have today, thanks to government regulation, is a managed care system where different costs for "in-network" and "out-of-network" care are unavoidable because doctors are competing for pools of patients provided by health plans based on how little reimbursement they will take; doctors are not competing for patients based on value to the patient.

However, what Fein calls "choice" turns out to be anything but, as his principle No. 6 illustrates.

In his sixth principle, Fein again tries to reassure with the idea that a single-payer system really delivers health care through a "nonprofit, privately controlled system." Doctors, he says, "would not be employed by the government; hospitals would not be owned by the government. What you would have is public financing and collection of money by the single payer, but the private delivery system would continue."

Sort of like General Motors, I guess.

Choice, but not much of a choice
What Fein doesn't make clear is that while patients in a single-payer system might choose from among private doctors and private hospitals, there will be little difference among doctors and hospitals in the procedures and treatments they are allowed to perform. There is a big difference between choosing among McDonald's, Burger King and Subway (a free market) and "choosing" any (but only) McDonald's. Again, in a single-payer system at some level, medical choices for the individual must be made by a third party based on aggregate rather than individual considerations — you just can't get "a flame-broil Whopper Jr. for a buck" at Subway.

A second point Fein ignores in his choice argument is that with a single-payer system there is little to no motivation to innovate. Using Fein's Medicare analogy, the single-payer determines both service descriptions and reimbursement rates. Innovations, by the definition of "innovation," are not in the system. Medical innovations by their nature are, in initial stages, very expensive, and until perfected, produce unpredictable results. Where is the motivation to innovate if a) one must buck the system at one's own expense to put the procedure on the service schedule, and b) one will be able to price the innovation to compensate for developing it.

Removing the profit motive stifles innovation; that reduces choice, it does not increase it.

Concluding, Fein provides us with the single-payer analogy of Medicare for all. "So what we talk about is Medicare 2.0," he writes, "an expanded program of Medicare for all and an improved program that deals with many of these other programs. That would be the way a single-payer program would operate in the United States."

OK, let's assume Medicare provides "comprehensive" medical care at affordable cost (a debatable point). Why is that so? It is because the private health-care market picks up the tab for subsidized, below-market Medicare patient care; non-Medicare patients pay much more for the same services. When you extend Medicare to everyone, who is left to pick up the slack?

The dirty little secret today is that increasing numbers of physicians are simply not taking new Medicare patients. They continue to provide care as their patients age into Medicare, but the reimbursement rates for Medicare are so low that private physicians simply cannot afford to take on new Medicare patients. We're not talking the ever-available criticism of "greed." We are talking government reimbursements that are so low that they do not cover the cost of treatment and overhead, let alone any expectation of profit.

This situation points out another consequence of a single-payer system that Fein ignores: A Medicare-for-all scenario necessarily requires a nonvoluntary requirement on physicians to provide care irrespective of their own interests. The individual sovereignty of health-care providers, an unalienable right, must be sacrificed for the manufactured "right to health care." As must the patient's unalienable right to make his own health-care decisions.

Trade-offs would be imposed from on high
In his MinnPost interview, Fein has given us a clear picture of a single-payer system. What he has not offered is the trade-offs such a system must necessarily impose from on high by boards and bureaucrats, unlike in a free-market health care system where trade-offs are determined by individuals and their doctors. A single-payer system is a classic example of the dichotomy between freedom and perfection: A free society can never be perfect; a perfect society can never be free. The ultimate trade-off offered by a single-payment health care system is between the unfulfillable promise of perfection and the frustration of imperfection engendered by individual freedom.

In a true free-market system, not the heavily regulated managed-care health-care system we have today, individuals and their doctors decide how trade-offs will be made based on their individual situations. In a single-payer system, third-party government boards must necessarily make cost-based decisions about individual medical care based only on aggregate data. A free-market health-care system encourages innovation because innovators reap the rewards of their effort; a single-payer system discourages innovation because the system doesn't know how to value innovation. A free-market health-care system establishes an optimum (not perfect) relationship among access, quality and cost; a single-payer system providing universal coverage distorts market signals by the necessity to system control costs, and consequently misallocates costs and redefines "quality."

Ultimately the question that the public must answer vis-à-vis single payer health care is "Who do you want making decisions about health care for you and your family — you and your doctor, or somebody else?

Craig Westover, a senior policy fellow with the Minnesota Free Market Institute, is a contributing columnist to the Pioneer Press Opinion Page and a contributor to MinnPost.

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Comments (23)

Really, where are the bureaucracies that are making the decisions? In the cubicles of our insurance companies. They are the ones now making our decisions; not the patients nor the doctors.

1st: Under your free market system we have already lost the choice to make decisions about our own health care. If we are lucky enough to have employee coverage we use whatever company they tell us to. Once our employer chooses our payer, then the insurance company tells us which doctors we can see. Once the insurance companies tell us which doctors we can see, some back room auditor tells our doctors which procedures they can perform. the idea that you are preserving choice is truly only the case for a sliver of society, and they would still be able to afford that choice.

My biggest question for you is, why is health care better in 36 nations? Why do we have the worst health care in the advanced world at an enormous price? The percentage of Candaians that would like an American system is always in the low single digits.

If the rest of the modern world can do single payer and have better health outcomes for a cheaper price, why can't we? Are we less competent than the French or the Canadians?

On some individual measures we have better health outcomes, but overall we are 37th in the world. We are better than that

"Had we but world enough, and time" to explore the extent of Mr. Westover's free-market fantasies in yet another context. Let's ignore theory for a bit and consider history and the reality of today.

At no point in U.S. history has the full range of health care services been universally available. Barriers have always existed, including geography, staffing, training and finances, among many other factors. Many of these factors are directly linked to free market forces.

A free market is premised on what the market will bear. What the market will bear freqently exceeds what all members of the market can afford to pay. In the past, this has resulted in free clinics, charity hospitals and other private attempts to offset the disparity inherent in free market medical services. These attempts failed, for a variety of reasons.

The private health insurance market got a huge boost during WWII, when employers sought to avoid wage controls by providing health care benefits and unions saw value for their members.

That, too, failed, as unions declined in numbers, strength and, in some cases, restraint, and employers sought to cut costs by reducing the scope of the plans offered to their employees.

Meanwhile, medical costs exploded, fueled by a number of factors: new technologies, new drugs, rising expectations, to name a few. Changes in the legal arena, made it easier to sue medical professionals and medical technology companies (including drug manufacturers).

All of which leads us to today's patchwork quilt of medical services, something so badly stitched together as to make it impossible to call it a system. Large numbers are uninsured and unable to afford the "sticker price" charges that only they pay. (Those of us who are insured pay a lower, negotiated rate or the lower rate approved for governement payment. These discounts are substantial.) A percentage of these uninsured are eligible for government paid medical care. Waste is endemic, on the part of both users and providers, with some users seeking unnecesary care and some providers offering unnecessary services.

We cannot dismantle overnight what has taken decades to evolve. There are too many vested interests in play, including those of many who find the free market mantra convenient to their purposes for the moment.

To my mind, there is nothing inherently wrong with a single-payer system or with a public system which parallels the current Rube Goldberg device we call our health care system. As always, the devil is in the details.

One last point: If Mr. Westover's primary concern is freedom of choice, he might take note of the fact that 70% of the American people are prepared to choose a public health care system. While it may not be his preferred choice, it is a rational choice.

Industry apologist Craig Westover claims "It is because the private health-care market picks up the tab for subsidized, below-market Medicare patient care; non-Medicare patients pay much more for the same services."

I counter the statement's validity with a single, gigantic example called Medicare Advantage. MA plans were invented in 2003 by said private market to draw beneficiaries into a completely privatized "parallel universe" of Medicare. One category of MA plan is called private-fee-for-service (PFFS), which has "no network" of providers; in short I call it faith-based health insurance. You give up your assurance of Medicare and get a company's card instead.

Since 2006 launch, PFFS plans drew a healthier population off Medicare with the attraction of very low premiums, modest co-pays and often health-club memberships. Great, right?

Excapt the MA plans can't do this without a gigantic subsidy FROM THE GOVERNMENT WALLET to the tune of ~$650 per month per beneficiary enrolled in an MA plan. That's a direct pipeline of Medicare funds flowing on a regular basis into private coffers. But wait, there's more.

It's the private Medicare Advantage plans pay the providers startlingly low below-market Medicare rates. The proof is in the pudding: entire clinic-hospital systems now refuse to take PFFS patients, because they can't afford to. Among them, Park Nicollet, Mayo, MeritCare in Fargo, SMDC in Duluth. They happily take Medicare.

Mr. Westover, of the "Free Market" institute ignores a hole in his own argument that's large enough to drive the size truck they use in the pit mines on the iron range through - the profit motive will ALWAYS push insurance companies (as it already, clearly is) in the direction of writing policies only for those whom they believe will never get sick, and discontinuing coverage (often retroactively) for anyone who does get sick.

Under profit (and even non-profit, but high executive salary) models, there's no money to be made in providing the kind of universal coverage that we need and that the general public is demanding. By it's own bedrock operating principles, the "free market" has no motive, no interest, and therefore, no ability to meet our current needs.

Craig, if your goal was to enlighten Minnpost's readers with a thoughtful, factual article that leads the thoughtful reader to conclude that socialized medicine will lead to a marked decline in the quality of the care they recieve, you're doomed to fail.

Leftists know socialized medicine will lead to a third class system; how could they not? Every country that practises it is going broke while their citizens are left to hoik out their own, rotting teeth.....your intended audience simply doesn't care.

See, their goal isn't universal, quality health care; it's government control at any cost. Anything that doesn't come with a unionized government employee shuffling papers is a moot point in these parts.

Craig Westover eventually gets to the bottom, and the bottom is that ol' GOP line:

"Ultimately the question that the public must answer vis-à-vis single payer health care is "Who do you want making decisions about health care for you and your family — you and your doctor, or somebody else?"

That is EXACTLY what can be asked now, with the current system. So, let's do just that! "Who is smack-dab in the middle between you and your doctor "right" now? The answer, of course, is the insurance company (if you're fortunate enough to have it)."

Personally, I'd much rather have a system with a government run, VA type of system (and as a veteran from a family with veterans, I got experience) than the current, Bill McGuire/United Health system where the incentive of the insurer is NOT the same goal as the incentive of the patient.

And finally, that disclosure at the end of Mr. Westover's piece? IMNSHO, it's incomplete. It should read:

"Craig Westover, in addition to being an Alternate to the Republican Party Central Committee, is a senior policy fellow with the Minnesota Free Market Institute, a contributing columnist to the Pioneer Press Opinion Page, and a contributor to MinnPost."

This is the most long winded, convoluted, non-sensical, irrational, obscure Community Voices ever published by Minnpost. Huh?

I often hear about how Medicare is because their admin costs are so low. Granted they are low, but there is a reason people don't often cite.

To be on Medicare you must be disabled or 65 years old or older. These population typically have very high health care costs. Health plans have a much more broad population base so they tend to have lower per claim costs. If it costs both Medicare and the health plan $50 to process a claim, of course Medicare admin percentage will be lower because the claim cost was likely higher.

Classic example of twisting facts to serve ideology instead of allowing ideology to follow facts. The problem of third party non-medical boards interfering with medical decisions is invented by the author in regard to government proposals (and the status quo with insurers as the author admits); what third party boards might do however is decide that there are too many hospitals in a small region offering the same service and that the doctors practicing within each are therefore not having enough repetition to ensure competence and quality -- that's where expenses are saved and how free market produces worse quality. Furthermore, there is ample record of major medical innovation coming from single payer countries as well as better health outcomes. Saying that wouldn't happen here with single payer is a fiction from conservative ideologists who are funded for the purpose of preserving profit to the detriment of our collective well being.

"in a single-payer system, health-care decisions are governed by a relative few individuals necessarily making aggregate assumptions about individual patient situations because they cannot possibly have instant access to data required to make a decision about any individual patient."

I got to this section and couldn't read any more of this nonsense. The system we currently have in place, as others have mentioned, is to profit from those who remain healthy and to deny, deny, deny claims as much as possible to ensure their profit margins are retained in the interests of the shareholders, NOT the patient. Anyone forced into HMO's threw up in their mouth a little bit when reading this "opinion piece." Fewer and fewer decisions are left up to policy holders at present. Your "clinic" is pre-determined, the procedures and treatments are approved by the insurance companies, not any public health agency. It is estimated that $40-60 BILLION dollars is spent each year on the bureacracies that stand between you and your doctor as they deny claims and make decisions to ensure the most profitable outcomes- not the most appropriate course of treatment. Couple this with the growing ranks of the uninsured and how policy holders are forced to pay for everyone's ER visits, how can it be said that our system isn't currently "Universal" -except that it is regressive and on an emergency basis? Further complicating things will be cuts made in State budgets in light of the economy that will further strain the system and once again policy holders will be forced to make up for this funding vacuum as well.

When I buy a vehicle, I understand what I am buying--or not buying. The same cannot be said for health care.

When I visit my doctor, I don't know if I am going to get a test, three tests, or whatever combo you can come up with. Then they call the "customer service rep" (now THAT is an oxymoron) at the insurer whose medical experience is probably limited to watching every available episode of "House" and they are told what they can and cannot do based on what is and isn't covered.

And I am 100 percent with Mike....the insurance companies are more concerned with keeping shareholders happy instead of policyholders.

Or patients.

Insurance exists because of the decreasing marginal utility of income: most people would rather have a 100% chance of paying $300 a month than a 1% chance of paying $30,000 a month.

In fact, our hypothetical customer let's call him Thomas, who might very well accept a 100% chance of paying $400 a month rather than take 1% chance of having to pay $30,000, which he might not be able to afford. This is true even though Thomas will lose $100 on this deal in an average month.

There's nothing wrong with this arrangement the customer has improved his marginal utility and the insurance company has made $100. It's a win-win.

The thing is, though, that the insurer hasn't had to work particularly hard for his $100. He hasn't had to figure out how to cook up tastier fries or save you a few bucks off the cost of your next flight to Orlando. All he has to do is to have a bunch of money pooled together, such that he has a different marginal utility curve than you do. He has the luxury to accept the risk of unlikely outcomes, particularly if he can hedge his position by making the same deal with other customers.

Now, what's supposed to happen in the free market is that another company will come in and offer Thomas a better deal: they'll offer him the same coverage for $350 a month, accepting a smaller profit, and Thomas will happily take the deal. There are at least a couple of reasons, however, why this may not be happening in the insurance industry.

The first is that Thomas might not realize he's paying $400 every month for insurance. That's because if he's like the majority of Americans, he's getting his insurance through his work, and except when the HR lady gave him a shiny brochure on his first day at the office, he's probably never thought very much about what this insurance is costing him in terms of foregone salary.

This is particularly so because health insurance benefits, unlike other types of income, aren't taxed, and so Thomas is less cognizant of them if it shows up on his paycheck at all. Not only, then, is the free market maxim of perfect information violated, but it's violated in such a way that creates artificial profits for the insurance industry: the government is effectively subsidizing every dollar that Thomas's company is willing to spend on his insurance benefit.

The profits the insurance industry is making, of course profits artificially boosted by an enormous backdoor tax subsidy don't seem to be buying the customer much of anything in terms of improved service or cost savings. On the contrary, health care costs are rising by as much as 9-10 percent per year, without any concomitant increase in the level of service. If JetBlue were raising the cost of its fares by 10 percent per year, they'd be out of business.

The reason the insurers are staying in business, though, is because barriers to entry in the health insurance industry are in practice quite high. Insurers benefit from pooling risk. The larger the pool, the better in terms of the insurer's ability to hedge its risk and build negotiating leverage with its providers. That makes it very difficult new type of start-up to compete: they'll have trouble getting together enough customers to pool their risk adequately, and even if they do, they won't have as much negotiating leverage as the big guys. Health care providers may demand a better deal or refuse to accept them. As such, they'll never get off the ground.

Insurance, in other words, is a volume business, the main requirements for which are that (1) you have a lot of money pooled together and that (2) you've been around for awhile.

CIGNA and Aetna have a lot of money pooled together and they've been around for awhile but they don't have as much money, nor have they been around as long, as the federal government. It's possible, certainly, that the profit motive in the insurance industry has driven more innovation than we're giving it credit for. But that isn't my bet.

There's no obvious reason that the government couldn't provide more for less. And if we are wrong, we would find out soon enough: if the public option can't deliver more bang for the buck than private insurers, it wouldn't gain much market share from them, and Mr. Westover will have nothing to worry about.

What Mr. Westover's position reflects instead is ideology: who cares that the federal government could build a better mousetrap? They're the government and that's bad. His argument is really no more sophisticated than that.

If a libertarian conservative wants to make this argument, more power to them, but they absolutely should not be turning around and suggesting that a public option would raise health care costs. They're saying, rather, that they're morally opposed to the cost savings that would ensue.

It's my belief that private industry is usually able to deliver more efficient outcomes to the consumer than the government could.

But usually isn't always. And health insurance is one of those exceptions.

Those interested in this subject might want to take a look at Dr. Michael Belzer's piece, posted 6/12/09.

http://www.minnpost.com/community_voices/2009/06/12/9460/uninsurance_is_...

Richard --

Thanks for posting a reasoned response. Refreshing.

Your analysis of the reason for insurance is spot on. However, in your conclusion you don't take into account one of your own observations -- that insurance is subsidized by the government in the form of tax deductions for business. As noted in my piece, we do not have free market health insurance today, which is the model you so accurately describe. Tax deductible insurance should go.

In today's market, "insurance" providers compete for pools of customers collected by others -- business organizations. They compete based on what they can provide the business, not the individual consumer. In a free market system, insurance companies would compete for customers one-by-one and would not benefit from any subsidy.

Second, in terms of price, an insurance company doesn't necessarily accept a lower profit by lowering prices. It may be able to offer lower rates (at even higher margins) because it has better actuarial models. It might be more efficient administratively. It might have a better investment strategy. It might also be answering the "How many of what kind at what cost?" question differently than its competitors.

The point is, even if government could deliver health care better than today's system (which I really do doubt), today's system is a far cry from a free-market. In a free market, an insurer earns his money, not by making tastier fries, but creating a better insurance policy that meets the needs of a specific "Thomas" better than the competition.

Nonetheless, thanks for the thoughtful response and the excellent analysis of how true insurance actually works.

I just don't understand how it is that single payer-like systems work everywhere else but for some reason are doomed to catastrophic failure here in the US? To listen to Westover you'd think the Brits must be dropping like flies for want of a simple and affordable bottle of aspirin.

And again, this idea that we're going to control costs by being better consumers is simply absurd. Even if we did somehow manage to obtain the necessary medical degrees that would allow us to second guess our doctors; even if we know better which tests, procedures, and medications we should be using. Even if we did know which doctors and hospitals are the best of the best- we would still be limited by our plans. Knowing that Abbot Northwestern has the best cardiac department does me no good when my private plan requires I go to Fairview Southdale. Ironically, this consumer choice thing only works in a single payer environment that allows patients to go wherever they want, and obtain whatever treatment they want.

These market guys continue to ignore the fact that health care is not consumer electronics. For one, it's a buy or die situation, you don't walk away from your heart attack to wait for a sale or look for a coupon. The idea that consumers would lower costs is likewise absurd because it assumes people will trust their lives and well beings to the cheapest rather than the best doctors and hospitals, or the cheapest will for some bizarre reason be the best. Westover's assumptions all run contrary to common sense and basic economic principles.

"There's no obvious reason that the government couldn't provide more for less. And if we are wrong, we would find out soon enough.."

I agree; how's about "now"?

Hat's off to the New York Times for this timely news flash:
http://www.nytimes.com/2006/02/28/international/americas/28canada.html

Canada's Private Clinics Surge as Public System Falters

"The country's publicly financed health insurance system — frequently described as the third rail of its political system and a core value of its national identity — is gradually breaking down. Private clinics are opening around the country by an estimated one a week, and private insurance companies are about to find a gold mine."

Canada spends $.40 of every tax dollar on socialized medicine....but despite cruel rationing, the system is going broke nonetheless.

Canadians are stuck in the same rut we are with SSI and public education. Everyone agrees it's unsustainable; everyone agrees they're getting fleeced, but everyone is so heavily invested in the system no one with enough clout to make a difference has the courage to be the first to stand up and say "no more".

I fully expect to lose every dime I've paid in to SSI, and I've been planning and preparing to deal with that loss. But I, and most people my age simply cannot afford to lose untold income on top of a substantial portion of my accrued retirement nest egg.

As I said; the people that favor socialized medicine either A) are wholly ignorant of the issue or B) are in favor of government control at any cost.

Well, I've lived to see the day that T. Swift uses the NYTs, his arch liberal rag of socialism as a source for an argument in his favor. I guess we can all abandon any further research or argument. Why go to all the trouble when all we have to is read the NYTs?

Westover's response to Schulze ("we do not really have a free market system") is totally reminiscent of Milton Friedman's response when his Chicago School of Economics model failed in every single country it was tried.

His response always was, The Capitalism he introduced there was not "pure" enough...and was an adulterated version; thus the failure (not the model was wrong).

The private insurance offered us today is as "pure" as I want to see it; BCBS has been in business since the 1920s, and look what it has gotten us. I say enough -- a time for a new direction.

The fact that many people are without insurance, the fact insurance is not portable. Those problems all stem from a single cause. Which is that we rely on private insurers to provide health insurance. That's a failed business model effectively for this enterprise.

The private insurance companies imperative is to not sign up as clients, people who need medical care. They want to find healthy people or people who won't need medical care.

Much of their budget is devoted to identifying who is going to need care and then taking steps to exclude those people from their policy rolls.

Another major part of their budget is based on aggressive efforts to deny reimbursement claims, so if you do have a policy and you do get a procedure and then you seek reimbursement for it. They have experts who get extra salary if they deny a higher proportion of claims.

That is a failed business model for providing health care. That is called the adverse selection problem.

That is why no other major economy provides health care along the lines of that model. Every other country has a universal access system that is roughly speaking a single payer system.

I think the Obama administration will include a vigorous public plan. There will be a lot of uproar I'm sure if a bill comes out without one. Then there will be a chance for the public to choose.

It will be a public plan that will take all comers, that you can carry with you where ever you go. A public plan that will not charge you a heavy premium if you have previous conditions. If people have access to that plan and for reasons of their own choose not to buy it, well and good.

As long as that is part of the mix, I can think that the health care reform effort can be said to have done its job.

We provide health care in the least efficient way on any modern industrial country. On average most countries spend half as much per capita as we do.

People complain there are waiting lines in those countries and that's true, in some there are. Then we could spend three quarters as much if we did it more efficiently and have no waiting lines.

It's up to us on how we want to spend the money. With a more elaborate plan with shorter waiting lines, or a cheaper plan with longer waiting lines.

We have waiting lines now in effect. There are a lot of people who are denied care forever and that's a waiting line.

@ Mr. Swift

You can't retire from being alive. While you're alive you do things.

At least two Nobel laureate economists, Kenneth Arrow and Paul Krugman, have published pieces explaining why market principles are a bad fit to the current health care industry. Mr Westover, however, has a hammer and seeks nails wherever he can find them. Good luck with that.