Single Payer Wouldn’t Be Simple Either: A Fractal Story

A two-page bill could have extended Medicare and provided universal coverage,” writes Franklin Foer in The New Republic, contrasting Progressives’ preferred single-payer system with modern liberals’ 20,202 page Obamacare legislation. Unfortunately, it’s not true.

Here is one of a zillion reasons why. Say that Grandma Mildred goes to the hospital with pneumonia. Medicare will pay the hospital based on her Diagnostic Related Group (DRG): one fixed payment for Grandma’s stay based on her diagnosis of pneumonia, no matter how long or short her stay, no matter how many tests she gets. This is so the hospital won’t give Grandma an extra X-ray to collect more taxpayer money.

Okay. So why not just extend that payment system to the under-65s? The problem is figuring out how much the DRG payment should be for them. Right now, MedPAC figures out how much to pay for each DRG, using cost and care data for Medicare (over-65 or disabled) patients they have been collecting for years. They would need the same data (and much analysis) for the under-65s for the expansion. And we would need to decide whether DRG payments vary by age and if so, how. 

But wait! I lied about DRG payments. It’s actually more complicated. Imagine that Grandma Mildred has kidney failure while in the hospital, spirals into other problems and is still in the hospital after 250 days, with no end in sight. If the hospital only receives payment for the kidney failure DRG (it gets to charge Medicare for whichever DRG, kidney failure or pneumonia, pays the most), the hospital will face financial ruin unless Grandma dies soon. To avoid giving the hospital a choice between killing Grandma and financial ruin, Medicare pays hospitals what are called outlier payments. These have their own rules and algorithms, based on yet more data and analysis. So, universal expansion means figuring out outlier payments for the hundreds of DRGs for all the under-65s too.

I could go on—endlessly—but you get the point. In fact, this was the simplest-to-explain, easiest-to-solve example I could think of.

The truth is our present US health care system—actually, it’s more a phenomenon than a system—is like a fractal. For those of you who didn’t hang out in nerdy circles in the 1980s, a fractal is a mathematical algorithm used to create what, at the time, were impressive computer-generated images. This is the basic idea: you see a fractal image that is complex. So, you magnify part of it to “understand” it. But the magnified image is equally complex. You magnify some part of it and it’s still equally complex. Ad infinitum.

Fractal Image, not magnified

Fractal Image, not magnified

Fractal image magnified by six

Fractal image magnified by six

Fractal magnified by 100

Fractal magnified by 100

Fractal magnified by 2000

Fractal magnified by 2000

Every time I need to understand the institutions and processes of some part—private or public—of US health care, I investigate further but am left with at least as many questions as I started with. That’s why it’s a fractal.

To expand Medicare to everyone, we don’t just need to figure out what to do to Medicare itself. We also need to figure out what would happen to the rest of health care and the economy—and deal with those effects too.

Health care is about one sixth of our GDP—everything that we produce. That means that it is also roughly one sixth of everything that we earn. Think of all the X-ray technicians, orthopedic surgeons, medical billing contractors, human resource health insurance specialists and so on. (How may people do you know who are paid, directly or indirectly, from work in health care or health insurance?) We go to universal Medicare, the human resource specialists, many of the billing contractors and no small number of others will lose their jobs. And others, like the orthopedic surgeons, will earn less. Even if we create some new jobs and raise some salaries too, that is a lot of turmoil to the economy.

When Medicare was created in 1965, health care was only about one twentieth of our economy. And with a few exceptions, like insurers who sold a few plans to the elderly, moving to Medicare didn’t take away anyone’s income. Everyone who points to how easy it was (leaving aside political battles) to start Medicare in 1965 should remember that health care was different then.

If we were to make Medicare universal now, think of all the questions we would need to address. Will we allow employer-provided insurance to continue? Individually purchased private insurance? If not, how do we transition? Will Medicaid always be supplementary? Will all doctors be forced to keep their current patients but accepting Medicare payments? Will we allow the under-65 into the private Medicare Advantage Plans instead of traditional Medicare?

So, no, universal Medicare is highly unlikely to be done in two pages of legislation. And in the unlikely event it was, leaving out so much, the fights over and uncertainty about the many administrative decisions would be incredible.

None of this means that a simpler system with less choice of plan and less means-testing, incrementally moving towards single-payer, doesn’t look better after the troubles with healtcare.gov. It does, as several have said. Choice and means testing do complicate what government and private sector have to do. We could have moved towards a simpler system.

We could have had a public option, even made it the default plan. With a default, the web site would not have been so critical. Everyone could go into the default plan on Jan. 1 and switch later. Or we could have at least arranged to have some default, say a randomly chosen plan meeting some standards. Or we could have done more Medicaid expansion (if the Supreme Court had allowed it). Or we could have incrementally lowered the eligibility age for Medicare, say from 65 to 64 in 2014, to 63 in 2016 and so on.

Those who say that Obamacare’s roll out shows problems with modern liberalism have a point. But don’t fool yourself that even moving incrementally towards a single-payer would be simple. And moving, in one fell swoop, to universal Medicare would be anything but simple.

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2 thoughts on “Single Payer Wouldn’t Be Simple Either: A Fractal Story

  1. You’ve explained a lot and raised many questions. The one you haven’t raised is if insuring a country is so complicated, why did Obamacare even attempt to do it in one fell swoop…it was bound to fail, or at best have significant problems. A step by step approach would clearly have avoided some of the current problems. Medicare works well for most people. Administratively it is simpler than private insurance systems with which I have dealt. The staff is unfailingly polite and helpful. Even if Medicare as it is now could not have been implemented for all, couldn’t we have used some of the processes developed for Medicare in the current system?
    I am not concerned with a realigning of jobs with a single payer system. We no longer have blacksmiths…clerks no longer file catalog cards in libraries. People find other jobs. It seems like the insurance companies and their CEO’s are receiving a huge part of the healthcare budget…is this true? Wouldn’t this money be better spent on an efficient, phased in, Medicare type system for all? Even if it took several years to implement.
    Why is there no public discussion of what it would take to develop a single payer system? Or, perhaps a system like the one in Switzerland or others in industrialized countries. You mention the increase in the portion of our budget that goes to healthcare..shouldn’t there be a discussion of how this increase occurred…what is necessary…must we have so many MRI’s and the like…should we allow doctors more time to talk with patients. You raise many questions. They all lead me to the conclusion that even if the current new system works eventually, a little more time and patience would have saved the country from the current confusion and possible backlash against the idea of universal healthcare for all our citizens.

    • You too raise a lot of issues. With proper respect for how hard the IT problem was and a willingness to be more open about problems, flexible, and perhaps rewrite some rules about government bidding, they could have avoided this.

      Regarding other countries: People (researchers, analysts, etc.) have spent a LOT of time looking at other countries. In fact, Obamacare is very, VERY similar to Switzerland. Switzerland has private health plans that compete, with the government providing information in ways that allow comparison shopping. They have a mandate and the government subsidizes poor people unemployed people, etc. And what you pay for insurance is a premium, not a percentage of your salary, and it cannot depend on health status. Insurers who get more than average sick people get transfers from insurers who have fewer than average sick people, so that they don’t try to avoid the sicker people; this is known as risk adjustment and it too is part of Obamacare. (Of course, that last part is still a work in progress everywhere.) It’s worth mentioning that Switzerland is a lot smaller than we are. Germany’s system is also similar to the US, being heavily employment based, with your insurer determined by your industry, but unlike the Obamacare and Switzerland, what people pay is like a pay-roll tax, a percentage of earnings (although to the insurer).

      The thing is, we have to start with what we have and that is complicated, which means that how it plays out varies depends on where you are.

      While they could have rolled out the website, Obamacare is an incremental reform, in many ways. It is not changing the insurance status of many people, everyone with employer provided insurance (although in the long run, employers could change), everyone who already had Medicare and Medicaid. And because changing one piece of the health care system affects so many others, it is hard to change one thing at a time. The reason not to use a bit of Medicare is/was the desire to have private plans competing. You can think this is good or bad, but that is why it was done this way. And there is no way that any kind of expansion of any part of Medicare would have gone anywhere politically.

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